“The idea ‘too big to fail’ is actually a global phenomenon,” Adesoji Solanke, Sub-Saharan banking analyst, Renaissance capital told CNBC Africa.
The First Bank of Nigeria Limited, Guaranty Trust Bank, Zenith Bank, United Bank for Africa, Access Bank, Skye Bank Plc, Ecobank Nigeria and Diamond Bank were named by the Central Bank of Nigeria as, ‘too big to fail’.
“The central bank looked at a couple of criteria, the size of the bank, how easy it is to substitute those banks, how interconnected those banks are, and also how complex it would be to dissolve such institutions. Based on that criteria, it ranked the banking system and then it chose the big eight,” he explained.
Solanke believes that the important to note that this is the first list of the top banks that has been presented since the central bank plans to review the list every six months depending on where the banks rank.
“There’s a possibility that one of those banks could actually fall out and another one will replace it,” he said.
The sector has 75 per cent in terms of earnings, profitability, assets, customer deposits and branch networks which are accounted for by the eight banks alone.
“If you control more than five per cent of the total assets, you are classified as a bank that is ‘too big to fail’,” he added.