Emefiele Warns Shareholders not to Constitute Threat to Banks’ Health.
Central Bank governor, Godwin Emefiele, has warned shareholders of deposit money banks, not to Constitute themselves as threats to bank’s health and their smooth operations as doing so may attract severe sanctions including revocation of license.
The CBN boss noted that banks belong to depositors whose deposits make up over 90 percent of the funds in banks vaults, adding that CBN would rather dispense with shareholders if only to have depositors’ funds safe and secure,
“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 The banking license is the property of the CBN that can be withdrawn at any time once we find that the shareholders are misbehaving.”
Emefiele who spoke to journalists at the end of the 290th meeting of the Monetary Policy Committee (MPC) in Abuja , 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.
On 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.
He further explained that the apex bank had long before now put in place some 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,” he said.
He noted that with a Liquidity Ratio of about 43 percent, 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 Emefiele..
He also stated that 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.
