A liquidity stress test conducted by the Central Bank of Nigeria (CBN) has revealed that capital position of ‘three small banks’ have fallen below regulatory capital requirement.
The test, contained in the CBN Financial Stability Report released yesterday, showed the Capital Adequacy Ratios (CARs) of the affected banks were below five per cent regulatory threshold.
The three banks are.......
not among the domestic systemically important banks (D-SIBs), it said.
The report, which measured the lenders’ positions as at June this year, showed that the number of banks with CAR less than five per cent also increased from zero to three from December 31, 2014 to June 30, 2015. The CAR is a ratio of a bank’s assets to its risks
According to CBN’s Director, Financial Policy and Regulation Department, Kelvin Amugo, the liquidity stress test was conducted using the Implied Cash Flow Analysis (ICFA) and the Maturity Mismatch/Rollover Risk approaches to assess the resilience of the banking industry to liquidity and funding shocks.
He said the ICFA approach assessed the ability of the banking system to withstand unanticipated substantial withdrawal of deposits, as well as short-term wholesale and long-term funding over a 5-day and cumulative 30-day periods, with specific assumptions on the fire sale of assets.Commenting on the report, CBN Governor, Godwin Emefiele, said it captures the headwinds remain, given that oil exports from Iran and lower global demand will further dampen oil prices, thus portending continued decline in oil revenue accruing to Nigeria.
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