Less than a week into the effective date of the exercise, the recapitalisation programme of banks may face its first acid test in the coming
days as influential bank owners and top bankers have started throwing spanners into the implementation...· Small banks contend with increasing anxiety, vendors fine-tune new credit policies
Whereas there is a consensus that the banking sector needs a recapitalisation, some owners of the banks who are wary of losing control of the institutions are said to have called for relaxation and reconsideration of the new share capital or include the consideration of shareholders’ funds as in the case of the 2005 recapitalisation.
Cardoso faces the pressure of admitting the huge component of shareholders’ funds as part of the total regulatory capital of banks, but reliable sources said the governor would not bow to the pressure. The sheer mention of M&A is stoking enormous tension in the industry. Players with less bargaining power are worried a round of acquisition would translate to annihilation while the dominant players think a merger could substantially dilute their controls. Merger, in practical terms, is radically different from a mere business combination as a brand could be submerged as somebody losing an executive position.
The timeline is two years, and that means 24 months. But talks about M&A are expected to start in earnest before the end of the year with new brands expected to be completed next year. Sources privy to the foreboding around the new regulation said most executives do not think they have as much as 18 months to close deals.
The recapitalisation comes at the same time the United States is debating a possible share capital of the 37 top biggest banks with a minimum of $100 billion assets in alignment with Basel III, the latest global banking regulation requirement. He told The Guardian, yesterday, that the inclusion in the previous exercise was a major error, which cannot be repeated in a regime that gives operators a choice from an array of categories with a ranking set of requirements.
Nigerian banks, indeed, have been contending with liquidity challenges. The Guardian had reported a week before the new capital requirement rule that the deposit money banks were battling low liquidity challenges, despite the ‘doing-well’ façade most of them have worn. But beyond rhetoric, a major social consequence of the exercise is the potential to crowd out other sectors. In the capital market, banking stocks are the toast of every investor. This raises questions on whether prospective shareholders would lift stocks of other sectors if two, three or four banks are offering their shares for subscription.
Lagos State Deputy Governor, Dr Kadri Hamzat, has stressed the need for the citizens to always pray for the governments at the federal, state and local council levels.
Olayemi Cardoso Recapitalisation
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