SEC issues new guidelines on banking sector recapitalisation

The Securities and Exchange Commission (SEC) has released a framework to support the Central Bank of Nigeria’s (CBN) plan to strengthen the country’s banking sector.

Published on the SEC website on Friday, the framework aims to ensure a smooth, transparent, and efficient capital-raising process for banks and holding companies participating in the CBN’s bank recapitalisation programme.

The framework provides guidelines and procedures for banks to raise capital through rights issuance, private placements, or other approved methods during the 2024-2026 recapitalisation period.

The CBN had, on March 29, 2024, mandated an increase in the capital base for Deposit Money Banks (DMBs) to improve productivity, setting new minimum capital requirements with international banks required to raise their capital base to N500 billion, N200 billion for national banks, and N50 billion for regional banks.

The CBN urged these banks to expedite their capital base increases to fortify the financial system against potential risks.

In response to the CBN’s directive, the SEC developed the framework to ensure that the capital-raising process is conducted efficiently, transparently, and with the protection of all stakeholders in mind.

The SEC said, “Following prevailing macroeconomic challenges and headwinds occasioned by external and domestic shocks, the Central Bank of Nigeria (CBN) has mandated a recapitalisation programme for banks to strengthen their asset base and support economic growth in line with the Federal Government’s target of achieving a $1 trillion economy by 2030.

“Capital market has a significant role to play in facilitating the recapitalisation programme as the Banks are expected to leverage the market to raise the needed funds and /or engage in various forms of business combinations.

“As the regulatory institution mandated to regulate and develop the Nigerian capital market, the Securities and Exchange Commission (SEC), has the responsibility to ensure a smooth, transparent, and efficient capital raise process by the banks.

“This framework outlines the guidelines and procedures banks are required to follow to raise capital through rights issuance, private placements, or other approved methods during the 2024-2026 recapitalisation period.”

The SEC stated that applications/documents are filed electronically via offerapplications@sec.gov.ng email adding that documents forwarded will be reviewed, and where there are observed deficiencies, this will be communicated to the applicants electronically.

Timely completion of the application process is crucial for banks seeking to raise capital within the designated time frame. The framework also outlines penalties for incomplete applications, with a fee of N1,000,000 for returned applications and a re-filing fee of N100,000, to ensure banks submit complete and accurate information from the outset.

The SEC encourages banks and stakeholders to seek clarifications or inquiries through the dedicated email address, offerapplications@sec.gov.ng. The new framework builds upon existing rules and regulations and should be read alongside the relevant provisions of the Investment and Securities Act, 2007, and the Commission’s Rules and Regulations.

Additionally, the SEC reserves the right to request additional information as necessary but also allows for previously submitted documents (e.g., Memoranda and Articles of Association) to be referenced in subsequent transactions, provided no changes have been made.