Nigeria and Kenya are spearheading financial sector consolidation by proposing to increase minimum banking capital requirements tenfold. In other countries, similar initiatives are emerging more timidly. This leaves many markets full of smaller players that lack the means to fund complex, growth-essential projects. How can central banks achieve consolidation without hurting MSME lending in the short term and creating a race for scarce capital that could hurt industry profits?
Key points:
- How can central banks optimise capital adequacy for commercial banks?
- Risk-based capital or increased minimum capital: Which approach best protects financial systems?
- Time for tailor-made capital adequacy frameworks for big fintechs and neobanks?