Investor Verification Delays Bank Recapitalisation Share Allotments
The recapitalisation efforts of several Nigerian banks are facing delays as the Central Bank of Nigeria’s (CBN) investor verification process stalls the allotment of shares. Following the CBN’s announcement of new capital requirements in March, major banks, including Guaranty Trust Holdings Plc, Zenith Bank Plc, Access Holdings Plc, Fidelity Bank Plc, and FCMB Group Plc, have been actively raising funds through public offers and rights issues to meet the new thresholds. Collectively, these banks raised approximately N1.26 trillion ($770 million) over the past two months.
Investor Verification Process
The share allotment process has shifted to the CBN for verification, with particular attention paid to investors who have acquired significant stakes. Ayokunle Olubunmi, Head of Financial Institutions Ratings at Agusto & Co., explained that the verification process is thorough but lacks a set timeframe. He noted that previous verifications by the CBN have taken up to six months, although efforts have been made to expedite the current process. The CBN is tasked with ensuring that investors are “fit and proper” to hold significant stakes and that their funds come from legitimate sources. This process may require banks to provide additional information and documentation, which can also contribute to delays.
Stringent Regulations
Oluseyi Owoturo, President of the Institute of Capital Market Registrars, emphasized that the CBN’s capital verification process for banks is stringent, especially regarding the source of funds for significant shareholders. Once cleared by the CBN, the process moves to the Securities and Exchange Commission (SEC) for final approval. According to a framework issued by the SEC in June 2024, allotment proposals will not be approved without a CBN capital verification report. The framework also explicitly prohibits preferential allotments.
Anti-Money Laundering Measures
The CBN and SEC have been vigilant in curbing illicit funds in the banking recapitalisation efforts. A March circular issued by the CBN, signed by Haruna Mustafa, Director of Financial Policy and Regulation, emphasized that the apex bank, in collaboration with law enforcement agencies, would rigorously monitor recapitalisation to prevent the influx of illicit financing. The CBN’s anti-money laundering regulations are being strictly enforced, with banks required to conduct extensive due diligence, including Know Your Customer (KYC) checks and monitoring suspicious transactions.
Conclusion
While investors await the final share allotments, the delay is largely attributed to the extensive verification process aimed at maintaining the integrity of the financial system. Both the CBN and SEC are committed to ensuring that only legitimate funds and credible investors participate in the recapitalisation efforts. Despite the delays, analysts expect the process to be completed within the coming months.
The recapitalisation efforts of several Nigerian banks are facing delays as the Central Bank of Nigeria’s (CBN) investor verification process stalls the allotment of shares. Following the CBN’s announcement of new capital requirements in March, major banks, including Guaranty Trust Holdings Plc, Zenith Bank Plc, Access Holdings Plc, Fidelity Bank Plc, and FCMB Group Plc, have been actively raising funds through public offers and rights issues to meet the new thresholds. Collectively, these banks raised approximately N1.26 trillion ($770 million) over the past two months.
Investor Verification Process
The share allotment process has shifted to the CBN for verification, with particular attention paid to investors who have acquired significant stakes. Ayokunle Olubunmi, Head of Financial Institutions Ratings at Agusto & Co., explained that the verification process is thorough but lacks a set timeframe. He noted that previous verifications by the CBN have taken up to six months, although efforts have been made to expedite the current process. The CBN is tasked with ensuring that investors are “fit and proper” to hold significant stakes and that their funds come from legitimate sources. This process may require banks to provide additional information and documentation, which can also contribute to delays.
Stringent Regulations
Oluseyi Owoturo, President of the Institute of Capital Market Registrars, emphasized that the CBN’s capital verification process for banks is stringent, especially regarding the source of funds for significant shareholders. Once cleared by the CBN, the process moves to the Securities and Exchange Commission (SEC) for final approval. According to a framework issued by the SEC in June 2024, allotment proposals will not be approved without a CBN capital verification report. The framework also explicitly prohibits preferential allotments.
Anti-Money Laundering Measures
The CBN and SEC have been vigilant in curbing illicit funds in the banking recapitalisation efforts. A March circular issued by the CBN, signed by Haruna Mustafa, Director of Financial Policy and Regulation, emphasized that the apex bank, in collaboration with law enforcement agencies, would rigorously monitor recapitalisation to prevent the influx of illicit financing. The CBN’s anti-money laundering regulations are being strictly enforced, with banks required to conduct extensive due diligence, including Know Your Customer (KYC) checks and monitoring suspicious transactions.
Conclusion
While investors await the final share allotments, the delay is largely attributed to the extensive verification process aimed at maintaining the integrity of the financial system. Both the CBN and SEC are committed to ensuring that only legitimate funds and credible investors participate in the recapitalisation efforts. Despite the delays, analysts expect the process to be completed within the coming months.