Zenith Bank in trouble as Capital Adequacy Ratio falls below mandated threshold

Zenith Bank Plc is facing additional challenges in the wake of its failure to meet the required Capital Adequacy Ratio (CAR).

Concerns are intensifying within the financial sector, as recent findings from a stress test conducted by the Central Bank of Nigeria (CBN) reveal that GTBank, along with seven other prominent Nigerian banks—Access Bank Plc, Fidelity Bank Plc, First City Monument Bank Limited, First Bank of Nigeria Limited, Union Bank of Nigeria Plc, United Bank for Africa Plc, and Zenith Bank Plc—have also fallen short of the mandated CAR.

This revelation coincides with the CBN’s contemplation of a potential new round of bank recapitalization, a matter previously reported

Notably, in September 2021, the CBN had issued guidelines stipulating a prudential Capital Adequacy Ratio of 10 percent for National and Regional Banks, while banks with international authorization were obligated to maintain a 15 percent regulatory Capital Adequacy Ratio.

The recent report underscores a significant decline in the overall Capital Adequacy Ratio of the banking system, dropping by 3.0 percentage points to 11.2 percent. This figure falls notably below the mandated 15.0 percent threshold set for banks with international authorization.

The downward trend is attributed to the CBN’s review of foreign exchange policies, which initiated the devaluation of the Naira starting from June 14, 2023. GTBank’s failure to meet the CAR requirements adds another layer of complexity to the challenges faced by the bank and emphasizes the urgency for corrective actions to restore confidence in the stability of the Nigerian banking sector.