Regulatory Alerts2012-07-25 | BSD/DIR/GEN/RFS/05/024Letter to Banks on Recapitalisation of Foreign Subsidiaries
The Central Bank of Nigeria (CBN) has expressed concern over the demands from various host regulators for Nigerian banks to recapitalize their foreign subsidiaries. These demands have caused financial pressure on parent banks due to limited capital market activity, reduced profit margins, and increasing competition. As a result, CBN will not allow any further outflow of capital to support these subsidiaries. Instead, the bank encourages Nigerian banks to consider options like mergers/acquisitions, sourcing fresh capital from host countries, or exiting jurisdictions by June 30, 2012. Additionally, banks with foreign subsidiaries need to submit recapitalization plans within 60 days of this letter's date, in anticipation of regulatory increases under BASEL II and III, as well as any other unexpected changes enforced by host countries. The CBN also prohibits parent banks from guaranteeing the deposits of their foreign subsidiaries.