N1,000,000 Fine: SEC Set to Sanction Nigerian Banks Over Incomplete Applications for New Capital

• The Securities and Exchange Commission has issued a new framework to help the CBN in its drive for new capital base
• This occurred after the CBN recently announced new minimum capital requirements for banks operating in the country
• "This framework describes the rules and processes banks must adhere to in order to raise capital through private placements, rights issuance

Legit.ng journalist Zainab Iwayemi has over 3-year-experience covering the Economy, Technology, and Capital Market.

A framework to help the Central Bank of Nigeria (CBN) in its efforts to strengthen the nation's banking industry has been made available by the Securities and Exchange Commission (SEC).

The framework, posted on the SEC website on Friday, attempts to guarantee a seamless, open, and effective capital-raising procedure for banks and holding companies participating in the CBN's bank recapitalization initiative.

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During the 2024–2026 recapitalisation phase, the framework will offer banks principles and processes for raising capital through private placements, rights issuing, and other permissible ways.

CBN instruct banks to meet new capital

To boost productivity, the CBN ordered on March 29, 2024, that the capital bases of Deposit Money Banks (DMBs) be increased. The new minimum capital requirements stipulated that international banks had to raise their capital bases to N500 billion, national banks to N200 billion, and regional banks to N50 billion.

The SEC created the framework to guarantee that the capital-raising process is carried out effectively, transparently, and with the protection of all stakeholders in mind in response to the CBN's order.

The SEC said,

“Following prevailing macroeconomic challenges and headwinds occasioned by external and domestic shocks, the Central Bank of Nigeria has mandated a recapitalisation programme for banks to strengthen their asset base and support economic growth in line with the Federal Government’s target of achieving a $1 trillion economy by 2030.

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SEC to ensure smooth exercise

Since the capital market is likely to be used by the banks to generate the necessary money and/or participate in various business combinations, the commission observed that the market has a major role to play in supporting the recapitalization program.

It stated,

“As the regulatory institution mandated to regulate and develop the Nigerian capital market, the Securities and Exchange Commission (SEC), has the responsibility to ensure a smooth, transparent, and efficient capital raise process by the banks.

“This framework outlines the guidelines and procedures banks are required to follow to raise capital through rights issuance, private placements, or other approved methods during the 2024-2026 recapitalisation period.”

According to SEC, Applications and supporting documentation should be submitted electronically by email to offerapplications@sec.gov.ng. It added that documents that are provided will be examined, and applicants will be notified electronically if any problems are found.

The commissiom also noted that for banks looking to acquire capital within the allotted time, completing the application process on time is essential.

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In order to guarantee banks submit accurate and complete information from the start, the framework also specifies penalties for incomplete applications, with a price of N1,000,000 for returned applications and a N100,000 re-filing fee.

The SEC invites banks and interested parties to contact offerapplications@sec.gov.ng, the designated email address, with any questions or clarifications.

Speaking on the new capital requirement, Charles Abuede, a financial analyst told Legit.ng,

"The move to increase banks' minimum capital requirement is not a bad idea, considering that it would have significant growth impact on the banking industry as a result of more investments, which could come in form of foreign direct investments or investments from the domestic front."

SEC Issues New Guideline to Cryptocurrency Dealers

Legit.ng reported that the Nigerian Securities and Exchange Commission (SEC) has amended the regulations pertaining to digital asset issuance, offering platforms, exchange, and custody.

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The SEC sent a formal notice to the public outlining its plans to alter these important rules.

The purpose of the amendment process is to improve the regulatory framework by making it more thorough and adaptable to the intricacies of digital asset markets.

Source: Legit.ng