FRC Plans Review Of Banks’ Books

As banks in Nigeria bring in new money to meet the capital raise ordered by its regulator, the Central Bank of Nigeria (CBN), the Financial Reporting Council of Nigeria (FRC) is putting plans together to review the books of the nation’s lenders to verify the source of the new funds in the system.

A banking review exercise was planned to check corporate governance infractions during the tenure of the immediate past executive secretary, Ahmed Shuaib. It was put off allegedly to avoid ruffling some of his friends in the industry.

The plan, coming after the verification of the new money by the CBN, InsideBusinessNG learnt is at an advanced stage, especially with the recent disclosures in First Bank and GTB where accusations and counter-accusations have been traded. It will verify the source of the new money coming into the banks via the various rights offers and private placements undertaken by banks to comply with the directives of the banking regulator on recapitalisation.

The CBN unveiled new minimum capital requirements for banks in March 2024 and pegged the minimum capital base for commercial banks with international authorisation at N500 billion, commercial banks with national authorisation at N200 billion, while the new requirement for those with regional authorisation is N50 billion.

It also set the new minimum capital for merchant banks at N50 billion, while non-interest banks with national and regional authorisations are N20 billion and N10 billion, respectively.

The Director of the Financial Policy and Regulation Department, Haruna Mustafa, in a 2024 circular, stipulated fresh equity capital through private placements, rights issues and/or offers for subscriptions, mergers and acquisitions (M&As) and/or upgrades or downgrades of license authorisation for the capital raise.

He also emphasised that all banks are to meet the minimum capital requirement within 24 months commencing April 1, 2024, and terminating on March 31, 2026.

Between April 2024 and January 2025, Meristem Securities Limited reports that Nine Nigerian Banks had collectively raised N1.70 trillion, and will need an additional N1.12 trillion to meet the N2.80 trillion to meet the minimum requirement of the regulatory body to avoid macroeconomic shocks such as depreciation in the value of the Naira (currency) and removal of subsidy of fuel which has significantly undermined business activities and squeezed consumer purchasing power.

If the Council undertakes this exercise successfully, analysts said it will erase the doubt on the FRC’s capacity to inspect the books of companies in the country, its core function which they alleged, has been jettisoned following the exit of some of its founding members.

Analysts blamed the FRC for the recent disclosures in First Bank regarding the alleged non-performing $225.8 million facility to General Hydrocarbons Limited, an oil and gas firm, and also the allegations that GTB falsified its accounts to declare a historic N1 trillion profit-before-tax in the first half of 2024.

“These allegations, if they were true, would not have happened if the FRC had performed to expectations as the financial statement regulator and premium regulator in the country”, stated a shareholder in one of the banks.

The council in pre-2017 reviewed the books of the telecom giant, MTNN and exposed the multi-billion-dollar scandal that led to the sanctioning of four banks namely Citibank, the then Diamond Bank, StanbicIBTC, and Standard Chartered Bank which were collectively fined N5.87 billion by the CBN. They were discovered to have used fake Certificate of Capital Importation (CCI) to illegally repatriate billions of dollars. The CBN also wrote to MTN, asking it to refund $8 billion.

The FRC, in its early years, also undertook major investigations that included Zenith Bank, GTB, Access Bank and StanbicIBTC. It was also on record that its investigation of the Bank of Industry (BoI) led to the recovery of several assets of the development institutions worth several billions of Naira that were diverted and stolen by its previous managers.