Central Bank of of Nigeria has said seven commercial banks in the country failed stress test conducted at the end of 2018, which is an indication that they lack some fundamentals to tide over adverse financial situations.
The regulator however did not name the banks fell below the stress threshold
A stress test is done by financial system regulators to determine the ability of a given financial instrument or financial institution to deal with an economic crisis. It is an analysis conducted under hypothetical unfavorable economic scenarios, such as a deep recession or financial market crisis, designed to determine whether a bank has enough capital to withstand the impact of adverse economic developments.
The CBN in its financial stability report published on its website the revealed that in less than 30-day period analysis, seven Nigerian banks were not adequately funded, while in the 31-90 day bucket, nine banks had funding gaps.
Overall the cumulative position for the industry showed an excess of N4.8 trillion assets over liabilities, CBN said in a report seen by Business Insider SSA.
Other highlights of the report:
Baseline capital adequacy ratio (CAR) for the banking industry at end-December 2018 was 15.26%, indicating a 3.18% points increase from the 12.08% recorded at end-June 2018.
The baseline banking industry NPL ratio was 11.64% at end-December 2018, showing a slight improvement of 0.81% points from 12.45% recorded at end-June 2018.
The stress test result revealed that after a one-day run scenario, the liquidity ratio for the industry declined to 34.69% from the 51.87% pre-shock position and to 17.55 and 13.48% after a 5-day and cumulative 30-day scenarios, respectively.
The result also revealed that under 5-day and cumulative 30-day run scenarios on the banking industry, liquidity shortfalls declined to N1.58 trillion and N1.98 trillion respectively.
