Nigeria: CBN Debits 12 Banks N499bn for 60% Loan Ratio Default

3 October 2019

The Central Bank of Nigeria (CBN) has deducted a total of N499,175,535,097 from the accounts of 12 banks under its supervision, over their failure to meet the September 30, 2019 deadline it had stipulated for them to maintain 60 per cent loan-to-deposit (LDR) ratio.

The banks are Citibank, FirstBank of Nigeria, FBNQuest Merchant, First City Monument Bank, Guaranty Trust Bank, Jaiz Bank, Keystone Bank and Rand Merchant Bank.

Others are Standard Chartered Bank, Suntrust, United Bank for Africa and Zenith Bank.

A one-page document by the CBN obtained by THISDAY last night, showed that the respective accounts of the affected banks at the central bank have already been debited.

A breakdown of the sum showed that while Zenith Bank was debited N135.629 billion; Citibank was debited a total of N100.743 billion; United Bank for Africa - N99.676 billion; FirstBank -N74.669 billion; Standard Chartered Bank - N30.027 billion and GTBank - N25.148 billion and FBNQuest - N2.697 billion.

Similarly, while FCMB's account with the central bank was debited N14.371 billion; Jaiz Bank - N7.525; Keystone Bank - N4.163 billion; Rand - N2.823 billion, and Suntrust - N1.703 billion.

The central bank had on Tuesday raised the minimum LDR to 65 per cent.

It had in the circular on the directive in July, stated that, "Failure to meet the above minimum LDR by the specified date shall result in a levy of additional Cash Reserve Requirement equal to 50 per cent of the lending shortfall of the target LDR.

"The CBN shall continue to review development in the market with a view to facilitating greater investment in the real sector of the Nigerian economy."

In a related development, the central bank yesterday disclosed that the total value of banking sector credit increased significantly by N829.40 billion or 5.33 per cent, from N15.568 trillion as at the end of May 2019, to N16.397 trillion as at September 26, 2019, since it announced the new LDR rule in July.

Therefore, the CBN pointed out in a letter to all banks, that in order to sustain the momentum and in line with the provisions of its earlier letter to the financial institutions, it decided to raise the minimum LDR target for all banks from 60 per cent to 65 per cent.

It said: "Consequently, all DMBs are required to attain a minimum LDR of 65 per cent by 31 December 2019 and this ratio shall be subject to quarterly review.

"To encourage SMEs, Retail, Mortgage and Consumer Lending, these sectors shall be assigned a weight of 150 per cent in computing the LDR for this purpose.

"Failure to meet the above minimum LDR by the specified date shall result in a levy of additional Cash Reserve Requirement equal to 50 per cent of the lending shortfall implied by the target LDR.

"Banks are required to continue to strengthen their risk management practices particularly with regards to their lending operations.

"The CBN shall continue to review developments in the market with a view to facilitating greater investment in the real sector of the Nigerian economy whilst promoting a safe, sound and resilient financial system. This letter is with immediate effect."

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