Access Bank Tier-1 Capital Ratio Falls to 14% in Half Year, 2023

The total tier 1 capital ratio of Access Bank Plc, a Nigerian lender fell to 14.05% in the Half Year period to June 2023 (H1), from 14.74% a year earlier.

Access Bank’s tier-1 capital adequacy, expressed as a percentage of risk weighted assets slid as risk weighted assets jumped by 15.1% to N7.247 trillion in the H1 period.

Risk assets likely jumped on revaluation of foreign currency assets (such as loans), after a devaluation oy the Central Bank of Nigeria (CBN).

On 2nd September 2021, the CBN issued a Circular to all banks in Nigeria titled Basel III Implementation by all Deposit Money Banks.

The Circular aims to inform all banks of the issuance of Guidelines for the implementation of the Basel III standard which is a voluntary global regulatory framework that addresses bank capital adequacy, stress testing, and market liquidity risk.

Core requirements of Basel I, II and III

As highlighted by the CBN, banks are required to hold a capital conservation buffer of 1.0 per cent in addition to the minimum Capital Adequacy Ratio (CAR) of 15.0 per cent (international) and 10.0 per cent (national) with an additional one per cent of common equity capital for higher loss absorbency for Domestic Systemically Important Banks (DSIBs), in the form of common equity capital.

According to recent CBN , the recommendations contained therein will be implemented in a parallel run beginning November 2021 for a six-month period, which could be extended by another three months if supervisory expectations are achieved.

According to the CBN, the Basel III Guidelines will run concurrently with the existing Basel II Guidelines during the parallel run, and the Basel Ill Guidelines will become completely effective after the parallel run is over.