Job Losses Imminent: Banks may face mergers, acquisitions to escape stringent guidelines

As the banking sector prepares to kick-start a new banking year today, there are strong in­dications that the sector may experi­ence job loss.

This is because banks that may not be able to comply with the stringent implementation of the new account­ing standards set by the Central Bank of Nigeria (CBN) may have to merge with other banks or face outright ac­quisition.

As was the case in the past when banks merged or are acquired by an­other bank, staff of the weaker party in the merger and acquisition tend to lose their jobs.

From the beginning of the new banking year, banks in the country are expected to begin implementing spe­cific guidelines from Basel III, as put forward by the CBN. The guidelines were originally set to kick off in 2020, but the regulator re­scheduled the implementation given the impact of COVID-19 on the banking sector. ­

The Basel Accords (‘Basel I, II, III’) are sets of regulations for the banking sector estab­lished by the Basel Commit­tee on Banking Supervision (BCBS) which is a committee of banking supervisory au­thorities established by the cen­tral bank governors of various jurisdictions.

The Bank for International Settlement has identified the overall aim of Basel III, which is to strengthen the regulation, supervision, and risk manage­ment measures of banks.

Basel III is already opera­tional in some countries, al­though the transition window is open till 2028.

In Nigeria, the adoption of Basel III which was to com­mence in November 2021 will run concurrently with the pre-existing (Basel II) regula­tory framework for a period of six months, extendable by three months if banks perform satis­factorily.

The implementation of Ba­sel III started globally in Janu­ary 2013 and places importance on strong liquidity and capital for financial stability.

In its latest banking sector report, Afrinvest (West) Afri­ca Limited observed that this adoption would strengthen banks’ stressed capital level, improve capital quality (as risk levels are reduced with the ex­posure restriction) and main­tain a strong liquidity position.

However, this is no good news for banks below par as capital is rising to meet up, this could cause a weakening and affect dividend payout.

Reacting to the possibility of job loss in the sector as a result of the Basel III implementa­tion, Anor Anyanwu, a former bank executive director, said, “Though the implementation of Basel III is meant to give us a strong banking sector but there are no way some banks will not be consumed by the implemen­tation and hence, there will be job loss”.

Stephen Iloba, an econo­mist, said the reason why most banks will struggle to meet up with the implementation of Basel III, is as a result of weak banking supervision by the CBN in the past.

He said, “I think the CBN has been treating issues regard­ing strong banking supervision with kid gloves in the past but now, the apex bank seems to have woken up from slumber with the implementation of the Basel III.

“My sympathy goes to those Nigerians that may lose their jobs due to the backlash of the implementation of the ac­counting standard.”

A top management bank­er with Access Bank, a Tier 1 bank, who prefers anonymity, told Daily Independent that his bank is not afraid of the Basel III implementation as it recent­ly shored up its capital.

He said, “Ahead of time, Ac­cess Bank has raised additional tier 1 capital.”

Given its success, other banks, according to Daily In­dependent investigation, could follow suit.

The key highlights of the CBN’s adopted measures include: Fortifying capital positions: previously, Nigeria banks classified as interna­tional banks and/or domestic systemically important banks (mostly tier 1) had to meet only a minimum total capital ade­quacy ratio of 15 percent, while national banks met 10 percent. With these new rules, there will be minimum requirements at several levels of capital, and all banks will be required to hold a capital conservation buffer of 1 percent, in the form of com­mon equity capital.

For systemically important banks, an additional 1 percent of common equity capital is required for higher loss absor­bency.

In recent times, the CBN has not clarified which of the banks are deemed ‘systemi­cally important’, but analysts at Tellimer said: “We take an educated guess and include the five tier 1 banks – Access Bank, GTCO, Zenith Bank, FBNH and UBA. Including the buffers, the prospective framework will require these banks to have a common equity tier 1 ratio of 12.5 percent and a total capital adequacy ratio.”