The governor of the Central Bank of Nigeria (CBN), Godwin Emefiele, has sent a stern warning to errant shareholders of deposit money banks, saying the apex regulator would not waste time to revoke the license of any bank where shareholders become a threat to the health and smooth running of the bank.
While threatening that CBN would rather dispense with shareholders if only to have depositors’ funds safe and secure, Emefiele insisted that banks belong to depositors whose deposits constitute over 90 percent of the funds in banks vault, and not the shareholders.
Hear him: “If you look at the balance sheet of an average five-year-old bank today, the size of depositors’ funds is at least ten times of shareholders’ funds. And that is why we come out very strongly when we find shareholders misbehaving in banks. We don’t spare them because we will continue to repeat that the banking license is a privilege and not a right. The banking license is the property of the CBN that can be withdrawn at any time once we find that the shareholders are misbehaving.”
Fielding questions from journalists at the end of the 290th meeting of the Monetary Policy Committee (MPC) in Abuja on Tuesday, the CBN governor assured the banking public on the health status of Nigerian banks as of today, insisting that banks’ health parameters are quite sound ahead of regulatory thresholds.
Responding to questions given the recent collapse of the Silicon Valley Bank (SVB) in the United States of America, and another bank in Switzerland, Emefiele said that Nigerian banks were not exposed to any contagion because no Nigerian banks made any direct investments in the collapsed banks.
More so, he explained that the apex bank had long before now put in place, a couple of prudential guidelines to insulate Nigerian banks from external shocks insisting that Nigerian banks remain very resilient compared with their peers in other climes.
“We have put in place a couple of prudential guidelines to insulate Nigerian banks, and we make bold to say that the financial soundness indicators in the banking industry show that Nigerian banks remain very resilient compared with what you find in other climes,” CBN governor stated.
With a Liquidity Ratio of about 43 percent, Emefiele said that banks have about N14 trillion in cash reserve deposits with the CBN which is meant to act as insulation in case of liquidity problems.
“Cash reserve today, apart from the TB that we are keeping, we are holding about N14 trillion in cash reserve deposits from banks. This is good liquidity that is meant to act as insulation just in case there are problems,” said the CBN boss.
According to him, banks’ Capital Adequacy Ratio (CAR) which is meant to be between 10 and 15 percent is about 13.7 per cent as of today, while Non-Performing Loan (NPL) ratio dropped to 4.2 percent.
He further stated that banks’ Loans Deposit ratio stood at 52.7 percent which means that they are not over-trading, instead “they are diversifying their portfolio to make sure that they have ample liquidity or ample zero risk investments in securities where they make money but at the same time, depositors’ funds remain protected”.
He concluded that banks’ Return on Equity (ROE) stood at least 21 percent which is considered quite reasonable, and therefore urged the investing public to be rest assured that their deposits and investments in Nigerian banks are quite safe and secure.
He vowed that the “CBN would never allow shareholders continue to have the right they used to have to continue to run banks anyhow, run them aground and make depositors lose their deposits. We will rather dispense with the shareholders to make sure depositors are protected,” Emefiele threatened.
