Since the CBN announced guidelines for banking recapitalisation in March 2024, many banks have been scrambling to raise capital to comply with the new rules. The recapitalisation exercise aims to bolster the banking sector’s resilience and ensure that Nigerian banks are better equipped to withstand economic challenges.

Several banks have already tapped into the capital market to raise the necessary funds. Notably, GTCO raised N400.5 billion, Access Holdings secured N350.1 billion, and Zenith Bank raised N289.1 billion, among others. However, for some banks like Wema, Polaris, and Keystone, raising the required capital is proving to be a challenge, leading them to explore merger options.

Wema Bank, currently at N68 billion in capital, is focused on raising N150 billion by the end of the first quarter of 2025. In addition to its capital-raising efforts, the bank has hinted at potential merger talks with institutions that share its business philosophy. However, Wema’s Executive Director, Tunde Mabawonku, emphasized that merger discussions are still in the early stages and that the priority remains to comply with regulatory capital requirements.

Similarly, Polaris Bank is also considering a merger, with sources close to the bank suggesting that the Central Bank is assisting the bank in exploring this option, especially after recent changes to the bank’s board. Polaris is looking to raise an additional N150 billion, but the management is contemplating a shift towards becoming a regional bank to meet the new capital thresholds.

Keystone Bank, on the other hand, is nearing the N200 billion required for a national bank license but remains cautious about its ability to compete effectively in the banking sector. Sources within the bank have indicated that a merger is a potential solution to strengthen its position and remain competitive in the evolving financial landscape.

As these banks continue to assess their options, the CBN has made it clear that mergers and acquisitions are viable options for institutions unable to raise the necessary capital. The deadline for meeting the new capital requirements is fast approaching, and for some, the merger route may provide the best chance of survival.

In a related development, the CBN has recently sanctioned nine Deposit Money Banks (DMBs) for failing to ensure cash availability through ATMs during the busy festive period. Each of the banks has been fined N150 million for non-compliance with the CBN’s cash distribution guidelines.

The CBN’s scrutiny of the banking sector highlights its commitment to maintaining a robust financial system, ensuring seamless cash flow, and holding financial institutions accountable for their actions.

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