23 Banks fail to meet CBN’s 65% LDR directive in Q4’19 – CBN

Banks fail to meet CBN's 65% LDR directive in Q4'19-CBN

The 23 commercial banks in the country have failed to meet the 65 percent minimum Loan to Deposit Ratio, LDR, directive of the Central Bank of Nigeria’s, CBN, in the fourth quarter of last year (Q4’19).

The apex bank  made this known in its Fourth Quarter Economic Report for 2019.

According to CBN, the combined LDR of the industry stood at  62.9 percent at the end of the quarter.

 

Last year July, The CBN in its bid to improve lending to the real sector of the Nigerian economy mandated all Deposit Money Banks (DMB) to maintain a Loan to Deposit Ratio (LDR) of 60 percent by September 30, 2019.

The CBN further stated that failure to meet the regulatory requirement by the stated date would result in charge of an additional Cash Reserve Requirement (CRR) equal to 50 percent of the lending shortfall of the target LDR.

Two months later, specifically in September, the CBN in a circular raised the minimum LDR to 65 percent with December 31st 2019 as deadline for compliance.

But the CBN Q4’19 economic report stated: “The loans-to-deposit ratio, at 62.9 percent, was 0.7 percentage point higher than the level at end-September 2019, but 17.1 percentage points lower than the prescribed maximum of 80.0 percent.

“Liquidity ratio was above the prescribed minimum, while the LDR was below the prescribed maximum in November 2019.

 “The total assets and liabilities of commercial banks stood at N40.87 trillion at end-November 2019, representing 3.2 percent increase above the level at end-September 2019.

“Funds were sourced, largely, from increased unclassified and foreign liabilities, and mobilisation of time, savings and foreign currency deposits. The funds were used, mainly, for acquisition of unclassified and foreign assets, and to boost reserves.

“Total specified liquid assets of the commercial banks were N14.67 trillion at end-November 2019, representing 60.6 percent of the total current liabilities. At that level, the liquidity ratio was 2.9 percentage points and 43.3 percentage points above the level at end September 2019 and the stipulated minimum ratio of 30.0 percent, respectively.”

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