The Nigeria Deposit Insurance Corporation (NDIC) and the judiciary have affirmed their preparedness to fast-track the resolution of challenges that are likely to occur as banks prepare for mergers and acquisitions in the ongoing recaptalisation exercise.
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The Central Bank of Nigeria (CBN) recently announced a two-year bank recapitalisation exercise which commenced on April 1, 2024, and is expected to end on March 31, 2026.
The plan requires minimum capital of N500 billion, N200 billion, and N50 billion for commercial banks with international, national and regional licenses respectively.
Likewise, the CBN also raised capitalisation baseline for merchant banks (N50 billion) and non-interest banks (national: N20 billion and regional: N10 billion).
In line with this development, the Managing Director of NDIC, Bello Hassan, expressed confidence that no bank in the country would need to cease operations, considering the array of options provided by the CBN.
He spoke in Lagos during a sensitization seminar for judges of the Federal High Court organised by the National Judicial Institute with the theme, ‘Building Strong Depositors Confidence in Banks and Other Financial Institutions through Adjudication’.
The Chief Judge of the Federal High Court, Hon. John Tsoho, emphasised the judiciary’s readiness for the recapitalisation phase.
Represented by Justice Ayokunle Faji, he underscored the crucial role of courts, particularly in matters pertaining to the economy and financial stability.
He said: “We are going into yet another period of banking consolidation, so it is very imperative that judges are on top of their game and the role of the judges cannot be underestimated.
“There would be quite a lot of activities in the courts. There would be issues of banking, capitalization, there would be issues of restructuring, acquisitions, mergers, and all that, and, of course, some banks may also want to stop business because they may not be able to meet all the requirements.
“I am sure that the courts are going to be very busy and I want to assure you that the judges are adequately equipped for this.
“We have had quite a lot of experience in this area and I’m sure that at the end of the day, we’ll be able to add value to the process.”
On his part, Hassan expressed confidence that the recapitalization process would not necessitate the winding down of any bank.
He noted that with sufficient time provided, banks in the country would leverage the available options to meet the new capital requirements.
Highlighting the significance of collaboration between financial industry regulators and the judiciary, Hassan emphasised the crucial role they play in ensuring the stability and integrity of the financial sector.
He said: “Understanding of the concept and practice of deposit insurance would enable my lords to appreciate the legal issues involved where there are disputes, and to deal with the cases expeditiously.
“We therefore sincerely believe that your pronouncements on these issues will invariably set judicial precedents thereby contributing to the development of bank insolvency law and practice in Nigeria, which is an evolving area of legal jurisprudence.
“The challenge of liquidation-related litigations experienced in the past, which makes it difficult for the Corporation to wind-up banks whose licenses had been revoked by the Central Bank of Nigeria, and to settle depositors and other claimants promptly, has drastically reduced.
“As at date, the corporation has obtained winding up orders for 96 out of 183 microfinance and primary mortgage banks whose licences were revoked by the CBN in May 2023, in less than one year of revocation.”
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