CBN: Only 1 Bank Rates Above ‘C’

The Central Bank of Nigeria (CBN) has said that only one out of the nation’s 24 banks has a rating that is above ‘C,’ when put on five points scale of ‘A’ to ‘E,’ with ‘A’ as the highest rating indicating very sound financial health condition and ‘E’ very weak standing. This fact was revealed in the CBN annual report for the year ended December 31, 2009 made available on the apex bank’s website yesterday. The CBN had in the past year evaluated the health of banks under a special examination, based on the CAMEL (capital adequacy, asset quality, management, earnings and liquidity) test. Although the CBN report failed to disclose the identity of the banks and their ranking, it said only one bank was rated ‘B’ and 11 were rated ‘C’ in 2009, compared with three and 18 achieved under the same categories respectively in 2008.

It also stated that three banks were rated ‘D’ and nine banks rated ‘E’ in the year under review, as against the two and one attained respectively under the same category in the preceding year. Efforts to get relevant officials of the CBN yesterday to explain the categorization further failed as they did not pick their calls. The report stated: “The assessment indicated that 12 banks did not exhibit serious weakness that necessitated supervisory concerns. However, 12 banks, as against three in the preceding year, manifested debilitating conditions that required supervisory attention. The computed Capital Adequacy Ratio (CAR) of banks indicated that 11 banks did not meet the stipulated ratio of 10 per cent, compared with two as at end-December 2008. The asset quality of the banks, as measured by the ratio of non-performing loans to industry total, deteriorated as it increased from 6.3 per cent in 2008 to 32.8 per cent. “This ratio was above the industry threshold of 20 per cent maximum prescribed in the Contingency Plan for Systemic Distress. The development was attributed to the CBN requirement that banks make full provisions for all non-performing, off-balance sheet engagements under new supervisory regime. The average industry liquidity ratio of 35.3 per cent was above the 25 per cent minimum requirement. Three banks, however, failed to meet the stipulated ratio, as against two in the preceding year.”

The report also showed that the regulator conducted on-site examinations on a total of 995 Other Financial Institutions (OFIs) in 2009, to ascertain the extent of their compliance with their business plans. The exercise, the apex bank explained, revealed that on the average, the institutions were well capitalised above the prescribed minimum level of N20 billion.

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