A high-level tripartite committee of the three major regulators of the financial services sector has been formed to scrutinise new funds being raised by banks under the ongoing recapitalisation in the banking sector.

Members of the committee are drawn from Central Bank of Nigeria (CBN), Securities and Exchange Commission (SEC) and Nigeria Deposit Insurance Corporation (NDIC).

Three banks – Fidelity Bank Plc, Guaranty Trust Holding Company (GTCO) Plc and Access Holdings Plc – have already concluded their offer periods.

They are expected to submit the key details of funds raised and subscribers to the committee for verification.

Under the guidelines for the recapitalisation exercise, capital verification is a major requirement before the clearance of the allotment proposal and release of the funds to the bank for onward completion of the offer process and addition of the new capital to its capital base.

Multiple sources yesterday confirmed that the three banks that had concluded their offer periods might have raised more than N1 trillion in new capital from existing shareholders and new investors, the first cluster of funds that will go through the tripartite committee’s capital verification.

Investment banking sources said the banking sector’s recapitalisation got off to a good start as investors showed strong appetite for banking shares.

Fidelity Bank started its hybrid offer with a N127.1 billion rights issue of 3.2 billion ordinary shares of 50 kobo each at N9.25 per share and a public offer of 10 billion ordinary shares of 50 kobo each at N9.75 per share. It subsequently secured approvals to issue additional 8.2 billion ordinary shares to absorb potential oversubscription.

The rights issue size was doubled with additional 3.2 billion shares while 5.0 billion shares were added to the public offer, bringing the bank’s offer size to N205.45 billion.

GTCO floated a N400.5 billion public offer of 9.0 billion ordinary shares of 50 kobo each at N44.50 per share.

Access Holdings sought to raise N351 billion through a rights issue of 17.773 billion ordinary shares of 50 kobo each to existing shareholders at N19.75 per share.

Sources said the three-party committee would be scrutinising the newly raised funds on five key parameters of basic Know-Your-Customer (KYC) requirements, anti-money laundering and illicit financial flows protocols, anti-terrorism rules, fit-and-proper assessment of a major investor in bank and general compliance with extant rules, including fairness and spread of allotment and inclusivity among others.

Under the KYC requirements, the committee will seek to pinpoint sources of funds by matching names and other personal details such as bank account details, telephone number and address to valid national identity, Bank Verification Number (BVN) and other databank, including the Nigerian Interbank Settlement Systems Limited (NIBSS) BVN validation portal. Corporate applicants are also expected to provide relevant details of incorporation, signatories and funding source.

The committee is expected to “lift the veils” on the sources of funds, by both individual and corporate subscribers, to forestall money laundering, illicit financial flows and proceeds of criminal activities such as kidnapping and banditry.

The funds will be screened against the provisions of the Capital Market Operators Anti-Money Laundering, Combating Terrorism Financing and Proliferation Financing Regulations, 2022, and the Money Laundering-Prevention and Prohibition Act 2022.

A source said the government was determined to ensure that criminal groups and individuals do not use the channel of banking recapitalisation to legitimize proceeds of their criminal activities.

In January 2022 officially declared bandit groups operating in any parts of the country as terrorists with the release of the Federal Government’s Gazette proscribing their existence and restraining any person or group of persons from participating in activities of any of the groups.

The directive also ordered verification of accounts, funds and other assets and confiscation of anything traceable to bandits and terrorists.

The CBN specifically conducts a fit-and-proper assessment for any major investor in the banking industry, in addition to proper notification required by extant capital market rules. CBN’s Rule 4.1 of the Guidelines for Licensing and Regulation of Financial Holding Companies in Nigeria stipulates that where shares amounting to five per cent of a holding company are acquired, there must be a disclosure and specific request for approval of such an investment.

The Nigerian capital market rules set a threshold of five per cent for “material” or significant shareholding, which must be disclosed to the regulatory authorities and the board of the affected company.

The committee will seek to ensure that investors do not bypass “material shareholding” disclosure by splitting their subscriptions or using insiders and related parties, whose shareholdings ultimately belong to the same portfolio of influence.

The Director-General, Securities and Exchange Commission (SEC), Dr. Emomotimi Agama, assured that the apex capital market regulator has undertaken necessary initiatives to ensure shorter time-to-market, which enables offers to be completed without delay.

Time-to-market refers to the length of time it takes for a company to complete the capital raising process and list its shares on a stock exchange.

In an interview at the weekend, Agama noted that SEC had in June 2024 issued a framework on banking sector recapitalisation programme, which outlines the guidelines and procedures banks are required to follow to raise capital during the recapitalisation period.

He said the guidelines provide a framework for a smooth, transparent, and efficient capital raising process.

According to him, the framework serves as a comprehensive guide for banks and holding companies and market participants on the requirements for capital raising and mergers and acquisitions, while assisting participants to navigate the recapitalisation programme effectively to ensure proper and timely review and approval of the transactions.

“The major highlight of the framework is the requirement for an e-offering platform to be provided by a securities exchange for the capital raising plan, which allows for end-to-end offering, subscription and payment process.

“This is based on our resolution to enhance time-to-market, efficiency, transparency and integrity of the recapitalisation programme. The use of e-offering platform eliminates multiple identities and reduce potential for unclaimed dividends among other benefits.”

Agama outlined that SEC has implemented various initiatives to reduce time to market with the aim of improving the efficiency and attractiveness of the Nigerian capital market, promote economic growth and development.

He said the initiatives include streamlined registration processes, introduction of an electronic filing system and enhanced regulatory frameworks among others.

He noted that shorter time to market can benefit capital market development in several ways like increased liquidity which will lead to faster listing allowing companies to access capital more quickly, increased liquidity in the market and enable companies to allocate resources more efficiently, thereby driving economic growth.

“Shorter time to market will also improve investor confidence because when the listing processes are Efficient, it can enhance investor trust and confidence in the market.

A shorter time to market can make a jurisdiction more attractive to companies and investors, promoting competition and growth,” Agama said.

He pointed out that SEC had in 2019 issued a new rule on electronic public offering (e-PO) system which streamlines the process of issuing new securities.

This he said, allows for faster processing of applications by automating various steps, reducing manual paperwork, and facilitating broader participation adding that the implementation of e-PO is part of a broader effort to make the market more efficient and reduce time to market.

“The Commission has been actively digitizing its operations, including the submission and processing of applications for securities registration, to reduce delays caused by manual processes. This involved the use of electronic platforms for document submissions and approvals, which not only speeds up the process but also improves transparency.

“We have undertaken regulatory reforms aimed at simplifying and streamlining the approval processes. These reforms include updating rules and regulations to reflect current market realities and adopting international best practices that enhance efficiency. For instance, the commission introduced checklist review for registration of fixed income securities, thereby shortening the review and approval timelines.” (The Nation)

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