CBN Orders Access, Zenith, UBA, Others to Undergo Stress Tests as Recapitalisation Deadline Looms
- CBN mandates commercial banks to conduct financial stress tests starting April 1, 2026
- Insider loans must be treated as defaults during stress tests for greater transparency
- Banks face strict capital shortfall measures under new CBN directive to ensure stability
Pascal Oparada is a journalist with Legit.ng, covering technology, energy, stocks, investment, and the economy for over a decade.
The Central Bank of Nigeria (CBN) has directed all commercial banks in the country to conduct fresh financial stress tests as part of efforts to monitor the health and resilience of Nigeria’s banking system.
The directive, which will take effect from April 1, 2026, was contained in a regulatory letter dated March 6 and addressed to all banks.
Source: Twitter
The move comes at a crucial time for the banking industry, as lenders race to meet the recapitalisation deadline set by the apex bank.
Major lenders, including Access Holdings Plc, Zenith Bank Plc, and United Bank for Africa Plc, are among institutions expected to comply with the directive.
The CBN has repeatedly maintained that the Nigerian banking system remains stable and sound, but the latest move signals the regulator’s determination to ensure banks remain resilient even under extreme economic pressure.
What the stress test means
A stress test is a financial assessment used by regulators to determine how well banks can withstand severe economic shocks such as recessions, currency volatility, or sudden market disruptions.
Under the new directive, banks must evaluate the resilience of their credit portfolios over 12 months. They will simulate various adverse scenarios, including:
- Deterioration in asset quality
- Governance and insider lending risks
- Foreign exchange fluctuations
- Commodity price crashes
- Supply chain disruptions
- Declining market demand in key sectors
The results will help regulators estimate the possible impact on banks’ non-performing loans (NPLs), loan-loss provisions, and capital adequacy ratios (CAR).
Insider loans under severe scrutiny
One of the strictest aspects of the directive focuses on insider-related credit exposures.
The CBN said all director or insider-linked loans must be treated under a “severe stress assumption,” meaning they will be assumed to be in default during the stress testing process.
Banks will therefore be required to make full provisions for such exposures when calculating potential losses.
The regulator said the approach is necessary to address governance risks and ensure transparency within financial institutions.
Baseline assessment for banks
To conduct the tests, banks must first establish a baseline financial position. This will be based on the most recent risk assessment communicated by bank examiners.
However, where a bank’s financial returns indicate deterioration in specific exposures, those updated figures must be used as the baseline.
The baseline data must include several key indicators such as:
- Exposure at default
- Current provisioning levels
- Collateral value
- Risk-weighted assets
Banks will also classify their credit portfolios, including performing loans, watchlist exposures, substandard loans, doubtful loans, and lost loans.
Banks must cover capital shortfalls
After completing the stress tests, banks must submit detailed reports to the CBN showing their pre-stress and post-stress capital adequacy ratios.
Where a capital shortfall is identified, the regulator has issued strict instructions.
Banks will be required to raise 100 per cent of the stressed capital shortfall, or 50 per cent of the deficit calculated by the CBN, whichever is higher.
They will have 18 months to close the gap.
Once determined, the revised capital level will become the bank’s official risk-based capital requirement until the next stress testing cycle.
Deadline for submission
All banks must submit their board-approved stress testing reports to the CBN no later than April 30, 2026.
For banks that do not record any capital shortfall from the exercise, the regulator said they will continue with a 12-month stress testing cycle.
Source: Twitter
The directive comes just weeks before the March 31 deadline for banks to complete their recapitalisation plans, signalling heightened regulatory vigilance over the stability of Nigeria’s financial system.
Which Nigerian banks are safe, which is not?
Legit.ng earlier reported that with barely four weeks left before the recapitalisation deadline set by the Central Bank of Nigeria, anxiety is building across Nigeria’s banking industry.
While some lenders have comfortably crossed the new capital thresholds, others are scrambling to raise fresh funds, seal merger talks, or restructure their balance sheets to avoid regulatory sanctions.
The recapitalisation directive, announced earlier this year, is aimed at strengthening banks’ capacity to absorb shocks, fund large-ticket transactions and support Nigeria’s broader economic ambitions.
Source: Legit.ng
