Amid efforts to raise minimum capital in line with new regulatory thresholds, experts have insisted that building banks that are supportive of economic growth goes beyond money.
According to analysts, there is more than throwing money into banking sector in the desire to turn the financial system into a driver of economic growth.
Coordinated public and private sector plans, involving policies and processes are as important as money. At Proshare’s third Tier 1 Banks Report presented in Lagos, the analysts stressed the need for banks to pay more attention to macro and microeconomic risks that could lead to poor asset and liability management (ALM) as they embark on the recapitalisation exercise.
They noted that the problem of poor asset management was a major contributor to the failure of several Silicon Valley Bank, First Republic Bank and Signature Bank last year.
The experts stated that bank equity sizes have grown over ten times or by 1,150 per cent from N2 billion to N25 billion between 2000 and 2005.
According to them, this implied that for a decade and a half, banks had used ten times more equity in their businesses than before 2005, yet the country’s GDP growth was on a modest note.
They categorically stated that many banks would get cut at the knees by lacking a deliberate strategy to transition from cash flow to value creation.
“Recalling the challenges faced by banks during the Charles Soludo-inspired in 2005, a few bank executives would have more money than business skills, resulting in a terrible waste of additional capital.
“Banks are like bulls in a pen; they are stuck behind bars that are difficult to escape. Banking, on the other hand, is free-spirited, agile, and capable of reinterpreting economic reality. Over the last two decades, the financial payment and settlement business has increasingly grown on the back of cloud-based blockchain technology, which may be destined to improve the efficiency of financial transactions and the quality of person-to-person (P2P) and business-to-business (B2B) relationships,” the report said.
The report placed Access Holdings at the forefront in the race to recapitalisation alongside other prominent institutions such as Zenith Bank, FBN Holding, Ecobank, UBA, and GTCo.
In addition, the analysts also observed that banks were pursuing increasingly aggressive approaches to acquiring digital market share while supporting lower operating costs.
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