Banks Groan Under N481.96bn Regulatory Costs

Regulatory induced costs have been a contentious issue among shareholders of banks who argue that a reduction in these mandatory levies will boost their returns.

For instance, for the year ended December 2023, the largest banks collectively paid N481.96 billion charges or levies to Nigeria Deposit Insurance Corporation (Deposit Insurance Premium) and Asset Management Corporation of Nigeria (AMCON), according to data gathered by MoneyCentral.

The NDIC charges an insurance premium on bank deposits. On the other hand, AMCON charges banks a proportion of total assets remitted to a sinking fund to pay off AMCON intervention payments for acquiring toxic bank loans.

These twin charges are a pain in the neck of investors of financial institutions who are embittered that the regulatory authorities are insensitive to their grievances.

It is noteworthy these compulsory levies make up 22.30 percent of the combined other operating expenses of banks and 16 percent of total operating expenses. And the two charges are the second-highest operating costs of banks in the country.

Banks will be feeling the pinch of the fines/charges when the foreign exchange revaluation gains underpinning profit fades.

“We must again join other banks in making sure that this attitude will not continue. We need to do everything humanly possible to make sure that even if AMCON must continue to stay, the ratio that we pay to AMCON must also come down, otherwise, we might as well close all the branches and hand over the bank to AMCON,” said Nornah Awoh, the Chief Equity Analyst/CEO of Palesa Capital Markets Associates.

Drilling down into the numbers shows Zenith Bank Plc incurred N85.14 billion in AMCON and Deposit Insurance Premium; Access Bank, N104.45 billion; Fidelity Bank Plc, N34.20 billion; Guaranty Trust Holdings Company (GTCO) Plc, N44.32 billion; Stanbic IBTC Holdings Plc, N23.35 billion; FBN Holdings Plc, N79.44 billion; United Bank for Africa (UBA) Plc , N64.46 billion; Sterling Bank Plc, N17.50 billion, and Wema Bank Plc, N13.13 billion.

“There must be a discussion on the AMCON and the NDIC charges with a pathway to resolving the lingering issues around it. The most important issue is a plan that agrees on a cap on the amount chargeable to banks,” said Mustafa Chike-Obi, Chairman of the Bank Directors Association of Nigeria.

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