The Central Bank of Nigeria (CBN) has temporarily lifted regulatory caps on the recognition of Additional Tier 1 (AT1) capital in the computation of banks’ Capital Adequacy Ratio (CAR).

This measure, which is aimed at reinforcing capital buffers in the banking sector, takes effect from June 30, 2025, will remain in force until March 31, 2026.

The decision was communicated through a regulatory notice signed by Olubukola A. Akinwunmi, director of Banking Supervision, as part of a broader transition framework to facilitate a credible and orderly exit from the regulatory forbearance regime introduced during the COVID-19 crisis.

The CBN stated that the adjustment is designed to support banks in strengthening their capital positions without compromising long-term capital planning or regulatory integrity.

“The temporary lifting of regulatory caps on AT1 capital recognition is solely for the purpose of supporting capital adequacy and should not be seen as a substitute for the ongoing recapitalisation programme,” the apex bank said. The recapitalisation exercise had earlier been outlined in the CBN’s circular dated March 28, 2024 (Ref: FPR/DIR/PUB/CIR/002/009).

According to the directive, this temporary measure is intended to help banks maintain resilience and absorb potential shocks during the final stages of exiting the pandemic-era concessions. However, the CBN made it clear that the measure does not dilute the minimum capital requirements that banks are expected to meet under the new recapitalisation roadmap.

The apex bank has, in the same circular, imposed restrictions on the use of transitional reliefs provided to banks. Specifically, it suspended dividend payments, bonuses to directors and senior management, and new investments in foreign subsidiaries for banks enjoying the concessions. These restrictions, as outlined in a separate circular dated June 13, 2025 (Ref: BSD/DIR/CON/LAB/018/008), will remain in effect until capital and provisioning levels are fully restored to regulatory thresholds.

Furthermore, to promote regulatory transparency and ensure enhanced oversight, banks are now required to submit quarterly disclosures effective from June 30, 2025. These include detailed provisioning status, CAR computations both with and without the transitional reliefs, data on credit facility reclassifications, and comprehensive information on AT1 instruments, including terms of issuance, usage, and compliance conditions.

In addition to the relief on capital recognition, the CBN has directed all affected banks to submit a Capital Restoration Plan by the 10th working day following the end of each quarter. The plan must outline strategies to restore full compliance with prudential standards, covering areas such as cost optimisation, risk asset reduction, significant risk transfers, and necessary business model adjustments. Each bank’s plan will undergo regulatory review and will serve as a baseline for continuous supervisory engagement throughout the transition period.

The CBN urged banks to maintain active engagement with its Banking Supervision Department to ensure alignment and proper implementation of all transitional measures. The apex bank reiterated that these guidelines form part of a coordinated strategy to secure financial system stability and restore normalcy after years of post-pandemic regulatory accommodation.

“These integrated measures represent a firm but supportive framework for the final phase of exiting the regulatory forbearance regime, and reflect the CBN’s strategic focus on macro-financial stability, responsible banking practices, and alignment with global best standards,” the circular said. (BusinesDay)