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Published On: Fri, Sep 21st, 2018

Experts blame shareholders as CBN revokes Skye Bank’s license

Godwin Emefiele, CBN Governor

FELIX OLOYEDE

The failure of Skye Bank shareholders to recapitalize the bank, which has been battling with acute liquidity challenges is responsible for the revocation of its operating license of Skye Bank by the Central Bank of Nigeria (CBN), experts have declared.

Prof. Joseph Ajibola, former President, Chartered Institute of Banking of Nigeria (CIBN) opined that there was an understanding by the public that the shareholders of Skye Bank including Lagos State Government would beef up the capital base of the bank to enable it operate profitably and meet the critical regulatory ratios.

“This was not to be as the bank continued to rely on borrowings from the CBN to remain in operation. Hence the decision of CBN to close its lending window against Skye Bank,” he noted.

The Central Bank on Friday revoked the operating Skye Bank, which has been under the management of apex bank’s appointed board since 2016.

Godwin Emefiele, Governor, CBN told pressmen in Lagos that the apex bank decided to pull the plug out of the lender after “The result of our examinations and forensic audit of the bank has, however, have revealed that the Skye bank requires urgent recapitalisation as it can no longer continue to live on borrowed times with indefinite liquidity support from the CBN. The shareholders of the bank have been unable to recapitalize it.”

“The reasons given by the regulatory authorities are difficult to controvert. If the existing shareholders are not able to inject additional capital even after the capital base of the Bank had been eroded by losses means that they have lost any claims on the Bank and therefore the withdrawal of the license is simply a confirmation of an existential condition. It is ill advised that a bank should operate only with borrowed money,” said Dr. Boniface Chizea, an economist and Managing Consultant, BIC Consultancy Services Ltd. noted.

He added that what CBN has done is to make it clear to the shareholders of Sky Bank that their investment has been completely eroded and therefore they no longer have any claims.

“What is left is for the regulatory authorities to embark on aggressive enlightenment program to unsure that all stakeholders are on board,” Chizea advised.

“Legally, Skye Bank has ceased to exist, it has been taking over by Polaris Bank. However, nothing has change yet until AMCON inject funds into the bank and that is expected to be done by next week.
“Moreover, this singular action of the Apex Bank will trigger a run on the bank in the next few weeks. However, I expect that the bank will be able to meet its obligations to customers courtesy of the fund that AMCON is expected to inject into it,” argued Moses Ojo, Head, Research and Business Development, PanAfrican Capital Plc.

He believes the revocation of the license by the Central Bank was simply a confirmation of an existential condition, adding that It was good that the Central Bank has taken steps to sustain the going concern of the Bank by protecting depositor’s funds while ensuring that jobs were protected.

“Therefore, to all intents and purposes, what CBN has done is to make it clear to the shareholders of Skye Bank that their investment has been completely eroded and therefore they no longer have any claims. What is left is for the regulatory authorities to embark on aggressive enlightenment programme to unsure that all stakeholders are on board,” he stressed.

Emefiele explained that after consulting with the Nigerian Deposit Insurance Corporation (NDIC), the CBN decided to setup a bridge bank, Polaris Bank, to assume the assets and liabilities of Skye bank. He said this would enable the Asset Management Company of Nigeria (AMCON) to capitalize the bridge Bank and begin the process of sourcing investors to buy out AMCON. By this decision.

“We wish to assure all depositors that under this arrangement, their deposits shall remain safe and that normal banking services shall continue in the new bank on Monday, 24th September, 2018, to enable customers to transact their businesses seamlessly.

“Thus, all customers of Skye Bank shall be automatic customers of the new bank and their accounts and records duly purchased by Polaris Bank,” the CBN governor mentioned.

He declared that the apex bank also decided to retain the intervention board and management it put in place in the defunct Skye Bank, due to their good performance, assuring that all employees of Skye Bank shall be absorbed by Polaris Bank under a new contract.

“We wish to assure the general public that the Nigerian banking industry remains safe and resilient and that the CBN will continue to live up to its responsibilities of promoting stability in the banking and financial system,” Emefiele concluded.

It was be recalled that the CBN removed the Tunde Ayeni-led board and the management of Skye Bank in July 4, 2016 after the bank failed several prudential benchmarks and was struggling with liquidity. Apex bank had to inject over fresh funds into the bank to keep it afloat.

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