DataPro has advised banks to begin portfolio reviews and strengthen data gathering processes to meet the Central Bank of Nigeria’s stress testing directive.

Idris Adeleke, a member of the firm’s rating team, gave this recommendation during a webinar on the new policy, according to a statement issued on Tuesday.

The CBN, on March 6, directed banks to conduct stress tests to identify vulnerabilities arising from credit risk exposures. The directive, which took effect from April 1, followed the conclusion of the banking sector recapitalisation.

Mr Adeleke, also an enterprise risk management expert, said the policy signals a shift to a risk-based capital framework aimed at strengthening the financial system. He advised banks to commence detailed portfolio analysis once their March 31 financial positions are finalised.

He added that effective coordination across risk, finance and compliance teams would be critical to completing the exercise.

According to Mr Adeleke, board-approved stress testing reports are expected to be submitted to the CBN by April 30.

Mr Adeleke explained that stress testing assesses banks’ resilience under adverse economic conditions, including recession and market shocks. He noted that the directive introduces strict assumptions that may affect banks’ Capital Adequacy Ratio, including staged migration, sector sensitivity and the classification of insider-related exposures as defaults.

Mr Adeleke said the policy aligns with Sections 13 and 63 of the Banks and Other Financial Institutions Act 2020.

Mr Adeleke added that strong capital positions could still be exposed if asset quality weakens, noting that the exercise is designed to ensure that newly raised capital is not eroded by non-performing loans. He said both on- and off-balance sheet exposures would be considered in the assessment.

According to Mr Adeleke, the outcome of the stress test will determine whether banks’ capital buffers are sufficient to absorb potential losses and define capital requirements until the next supervisory cycle.

Mr Adeleke added that while recapitalisation focuses on size and solvency, stress testing emphasises stability and risk sensitivity.

Mr Adeleke noted that the framework also supports Nigeria’s long-term economic objectives, including the drive toward a one trillion-dollar economy by 2030. He said strong and resilient bank balance sheets are critical to financing large-scale infrastructure projects.

(NAN)