SEC publishes framework for recapitalization of the banking sector

Applications for consideration, submitted electronically

In a move to support the Central Bank of Nigeria (CBN) recapitalization program in achieving its objectives, the Securities and Exchange Commission (SEC) yesterday published its framework for the banking sector recapitalization program.

According to the SEC, the framework sets out the guidelines and procedures that banks must follow to raise capital through rights issues, private placements or other approved methods during the 2024-2026 recapitalization period to ensure an efficient, transparent and effective capital raising process for banks.

In line with this framework, the SEC has directed submission of applications/documents electronically, adding that the submitted documents will be checked and if any deficiencies are observed, they will be forwarded to the applicants electronically.

The Commission also disclosed that if an application is returned due to incompleteness, there will be a penalty of N1,000,000 and a re-application fee of N100,000, noting that the fee is paid by the issuer without any option to approach the issuer or issuer’s income.

The SEC has stated that approval will be issued and provided in the event of notice of deficiency, rescheduling and in the absence of any deficiency.

The committee disclosed that the framework is an extract from the committee’s existing Rules of Procedure and should be read in conjunction with the relevant provisions of the Investment and Securities Act 2007 and the Committee’s Rules of Procedure.

‘The Commission may request other documents or information if necessary. If the issuer has already filed the necessary documents with the SEC (e.g., certificate of incorporation and articles of association (Memart) or certificate of incorporation or certificate of share capital increase, etc.), the issuer does not have to file these documents for subsequent transactions, provided that the issuer signs an undertaking that there have been no changes to documents already submitted to the committee since the previous submission. The affected banks/holding companies are required to regularize/update their corporate information with the CAC before submitting an application to the Commission,” he added.

The framework, published yesterday on the Commission’s website, serves as a comprehensive guide for banks/holding companies and market participants to effectively navigate the recapitalization program.

The move follows a recent directive from the Central Bank of Nigeria (CBN) requiring banks to raise additional capital to support the $1 trillion economy.

Under the CBN’s new capital requirement, international banks are expected to raise their capital base to N500 billion, domestic banks to N200 billion and regional banks to N50 billion.

The Commission said the framework will help ensure that the capital raising process is conducted effectively, transparently and in a way that protects the interests of all stakeholders.

It is expected to be a guide for banks/holding companies, issuers and capital market operators when submitting applications for capital increases and/or mergers and acquisitions.

Other objectives of the framework include guidance on ensuring full disclosure of material facts under the Investment and Securities Act 2007, the Commission’s rules and regulations and other relevant laws to ensure proper and timely review of transactions.