Bankers: Liquidation, Mergers and Capital Adequacy Options Signal Impending Restructuring of Sudan’s Banks

Khartoum – Sudanhorizon

Bankers said the renewed focus on the three options outlined by the Central Bank of Sudan for the future of Sudanese banks – options first introduced before the war and most recently reiterated in February this year – has become a serious matter that could lead to a major shake-up and restructuring of the country’s 38 banks.

The options require banks to either merge, meet capital adequacy requirements, or undergo administrative liquidation by the end of the year, leaving only those most capable of withstanding financial and technological pressures and meeting the challenges of economic recovery and reconstruction.

Bankers who spoke to Sudanhorizon said the options have placed banks in a “bottleneck” due to the pressure they create, which could threaten their continued existence.

Banking expert Dr. Loay Abdel Moneim told Sudanhorizon that the deadline for implementing the options has transformed the Central Bank’s decision from a regulatory measure into an existential pressure on banks. He said it could reshape the banking sector within a few months rather than years, turning capital increases into an option available mainly to the strongest banks, mergers into a forced choice, and liquidation into a realistic possibility for distressed banks.

He explained that the deadline significantly narrows banks’ room for maneuver in raising capital, making capital increases almost impossible for the banks most severely affected and effectively limiting this option to the stronger institutions.

He added that the decision is pushing small and medium-sized banks toward compulsory mergers. The tight timeline makes mergers the most realistic option, but they could shift from being voluntary to becoming necessary out of fear of administrative liquidation. Stronger banks may also use the limited timeframe to impose unequal merger terms on weaker institutions. Some banks could enter poorly planned mergers simply to avoid liquidation, creating larger but financially unstable entities. This could result in bigger institutions that lack financial cohesion or compatibility, although this does not diminish the importance of the decision.

The Central Bank’s move comes at a time when the banking sector is facing severe pressure and erosion of its capital base as a result of runaway inflation, declining asset values, and the systematic looting and destruction of bank premises and properties during the war. The monetary authorities seek through the decision to strengthen banks’ financial positions, protect depositors’ funds, restore the sector’s ability to provide credit and finance the national economy, and reduce systemic risks that could threaten the stability of the banking system as a whole.

Strategic planning and digital transformation expert Dr. Marwa Qabbani told Sudanhorizon that the deadline set by the Central Bank for banks to regularize their positions represents the beginning of a process of screening and restructuring the Sudanese banking system.

She stressed that the existence of 38 banks does not necessarily mean that they are equal in strength or ability to absorb risks and finance the economy. Therefore, the new capital directive could serve as an entry point for redrawing the map of the banking system, rather than simply increasing capital figures.

Qabbani noted that a bank capable of meeting the requirements and continuing operations should be provided with an appropriate environment for growth. A bank that needs to increase its capital should present a clear plan outlining its funding sources, while a bank unable to meet the requirements independently may find a merger to be a more economically realistic option.

She explained that banks should not be assessed based solely on ownership. A state-owned bank is not necessarily stronger than a private one, and a private bank is not necessarily more efficient. Likewise, foreign ownership does not automatically indicate institutional strength. The true criteria should include asset quality, capital adequacy, liquidity, governance, risk management, technological capacity, service quality, and the ability to finance the economy.

She stressed the importance of conducting genuine due diligence before any merger, covering asset quality, non-performing loans, provisions, liquidity, liabilities, governance, technological systems, human resources, and legal obligations. This would prevent problems from simply being transferred from one bank to another rather than resolved. At the same time, she said restructuring should not be merely an accounting exercise, but rather an opportunity to redefine the role of banks in Sudan’s new economy.

For his part, banking expert Dr. Saleh Jibril said major banks have substantial assets that can be reassessed. If their capital is found to be insufficient, the Central Bank may reduce the number of banks and strengthen their financial positions. He said this is not a new approach, but the circumstances created by the war have made its implementation inevitable.

Dr. Jibril also stressed the importance of merging banks with similar profiles. If any bank is unable to raise its capital or merge after its financial position has been assessed, he said administrative liquidation would be the better option to prevent it from becoming a burden on the banking sector and the wider economy.

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