CBN Cracks the Whip: Banks Given 10-Day Deadline to Submit Capital Restoration Plans

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Olori Uwem

Well-Known Member
Mar 18, 2024
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CBN Cracks the Whip: Banks Given 10-Day Deadline to Submit Capital Restoration Plans

In a bold move to reset Nigeria’s post-COVID financial landscape, the Central Bank of Nigeria (CBN) has issued a directive to all banks to submit a comprehensive Capital Restoration Plan within 10 working days after the close of each quarter, starting from June 30, 2025. ️

This development is part of a broader transitional framework aimed at phasing out the regulatory relief measures introduced during the pandemic and restoring long-term macro-financial stability.

What’s Driving the Policy?

According to a CBN circular signed by the Director of Banking Supervision, Dr. Olubukola Akinwunmi, the move marks a significant pivot toward risk-sensitive supervision, stronger capital buffers, and better transparency.

The apex bank has now terminated all COVID-19-related regulatory forbearance—including waivers on Single Obligor Limits (SOL)—effective June 30, 2025. This, it says, will reintroduce discipline in credit risk management and improve capital quality across the banking sector.

What Must Banks Do Now?

Under the directive, each bank must submit a detailed Capital Restoration Plan, clearly outlining how they will:
• ✅ Return to full prudential compliance
• Cut operational costs
• Improve asset quality
• Transfer significant risks (if needed)
• Revise business models for long-term resilience

The CBN emphasized that these plans must span the full duration of recovery—until capital adequacy and asset quality metrics are fully normalized. All plans will be reviewed and monitored by the Banking Supervision Department.

What’s Changing in Regulatory Rules?

To aid transition and clean up bank balance sheets, the CBN has introduced several relief measures—but with clear limits and a deadline:

1. Write-Off Window Opened:
Banks can now write off fully provisioned loans immediately, instead of waiting a year, to quickly reduce their Non-Performing Loan (NPL) ratios. This is key for banks still burdened by pandemic-era credit exposure.

2. Tier 1 Capital Relief Temporarily Expanded:
The cap on Additional Tier 1 (AT1) instruments in the Capital Adequacy Ratio (CAR) calculation has been temporarily lifted—valid until March 31, 2026. But the CBN warns: this is not a replacement for the March 2025 recapitalisation programme.

3. Dividend Suspensions & Governance Limits:
Banks under transitional support must suspend:
• Dividend payouts
• Bonuses to directors/senior management
• New investments in foreign subsidiaries
These measures stay in force until capital positions are fully restored.

What Banks Must Report (Quarterly):

To ensure transparency, banks must now submit quarterly disclosures, including:
• Provisioning status for affected credits
• CAR computations (with and without reliefs)
• Loan classification changes for restructured accounts
• AT1 instrument disclosures, including terms and usage

These are due no later than 10 working days after each quarter’s end—starting Q2 2025.

Why This Matters

The CBN is drawing a clear line between emergency support and long-term accountability. While it provides temporary room to breathe, the tone is unmistakably firm: banks must act fast to restore stability, or risk tighter scrutiny.

This directive also underscores a deeper truth: regulatory leniency has expired, and banks must now stand on solid capital footing in an increasingly complex and interconnected financial system.

Final Word from the CBN:

“We expect all affected banks to stay closely engaged with the Banking Supervision Department and fully embrace strong risk management practices. This transition is critical to rebuilding confidence and safeguarding financial system stability.”