Banks Recapitalization: SEC Unveils Guidelines

Banks Recapitalization_ SEC Unveils Guidelines

The Central Bank of Nigeria (CBN) announced on March 28, 2024, an increase in the minimum capital requirements for Banks as part of its banking sector recapitalization initiative. To support this, banks are expected to leverage the capital market for fundraising and explore various business combinations.

In response, the Securities and Exchange Commission (SEC) released a framework on June 21, 2024, to ensure a smooth, transparent, and efficient capital-raising process for Banks. This framework outlines the guidelines and procedures for raising capital through Rights Issuances, Private Placements, and other approved methods during the 2024–2026 recapitalization period.

Key points from the framework include:

  • Capital Raising Methods: Banks can raise capital via rights issuances, private placements, or other SEC-approved methods.
  • Application Procedures: Detailed steps for registration and penalties for incomplete applications. An incomplete application will incur a penalty of ₦1,000,000 and a re-filing fee of ₦100,000.
  • Documentation Requirements: Guidelines on necessary documents and fees for securities registration, including IPOs, subscriptions, rights issues, and private placements. The initial filing fee is ₦100,000. Registration fees are structured as 0.275% for the first ₦500 million, 0.225% for the next ₦500 million, and 0.15% for amounts thereafter.
  • Mergers and Acquisitions: Filing and processing fees for mergers and acquisitions are set at ₦100,000 and 0.3% for the first ₦500 million. Subsequent amounts follow the same percentage structure as IPOs.

Mandatory requirements by SEC include:

  • An affiliate Registrar of a Bank or its Holding Company cannot manage the register of shareholders or act as the registrar for an offer involving the bank or its holding company.
  • Banks are encouraged to use a registered e-offering platform for capital raising. Subscribers without internet access can use registered Receiving Agents.
  • Allotment proposals must be approved by the CBN following a capital verification report.
  • Incomplete applications will be rejected.
  • A Bank Verification Number (BVN) is mandatory for all applicants.
  • No preferential allotments will be allowed.

This framework aims to facilitate a structured and efficient recapitalization process, ensuring compliance and transparency in the capital market.


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