N500bn recapitalisation: SEC outlines guidelines for banks

Onwubuke Melvin
Onwubuke Melvin

The Securities and Exchange Commission has released a framework to facilitate the Central Bank of Nigeria’s bank recapitalization initiative.

This framework, which was posted on the SEC’s website on Friday, intends to ensure a seamless, transparent, and efficient capital-raising process for banks and holding companies participating in the programme.

The framework defines the norms and processes that banks must follow to raise capital through rights issuance, private placements, or other allowed means during the 2024-2026 recapitalization period.

On March 29th, the CBN directed an increase in the capital base for Deposit Money Banks to improve productivity, setting new minimum capital standards, with international banks required to increase their capital base to N500 billion, national banks to N200 billion, and regional banks to N50 billion.

It urged DMBs to accelerate steps to increase their capital base, strengthening the financial sector against potential risk.

This framework would help to ensure that the capital raising process is conducted efficiently, transparently, and in a manner that protects the interests of all stakeholders,” stated the SEC.

It describes the particular standards and processes that banks must follow when raising capital through various channels, including as rights offerings, private placements, and other allowed options, during the 2024-2026 program period.

The SEC recognizes the reason for the CBN’s direction, emphasizing the need to improve banks’ asset bases and assist economic growth by the government’s ambitious goal of achieving a $1 trillion economy by 2030.

It acknowledges the capital market’s critical role in aiding this initiative by allowing banks to obtain the required funds and explore potential business combinations.

“As the regulatory institution mandated to regulate and develop the Nigerian capital market, it has the responsibility to ensure a smooth, transparent, and efficient capital raise process by the banks,” it stated.

The SEC through the guidelines encourages banks and stakeholders to reach out for any clarifications or inquiries through a dedicated email address, [email protected].

The Capital Markets Authority also stated that the new framework builds on existing rules and regulations. It should be “read in conjunction with the relevant provisions of the Investment and Securities Act, 2007 and the Commission’s Rules and Regulations.”

Furthermore, the SEC maintains the right to request any further information it deems essential. However, the framework also simplifies the process by allowing previously submitted documents (e.g., Memoranda and Articles of Association) to be referenced in subsequent transactions, as long as no changes are made.

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