September 26, 2022

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CBN HAMMER ON SKYE BANK: WHY EXPERTS ARE WORRIED

3 min read

imageFinancial industry watchers have continued to ponder over the sudden resignation of the key Board members of Skye Bank and the appointment of new ones by the Central Bank of Nigeria and the verdicts of top level bankers is that the development portends a dangerous and disturbing signal for the financial industry.

A senior management staff of one of the first generation money deposit banks who expressed worries in an interview with our correspondent said: ‘I think Central Bank’s move is not the best in the circumstance. Let’s assume that truly Syke Bank has liquidity issue and is beset with capital inadequacy challenges, what would it have caused the CBN to provide the necessary life line while the investors/shareholders put their house in order. If the CBN had taken this measure, the bank would have been able to swim out of this turbulence and this would have ensured stability in the financial market.

“What I am talking about has precedent. When Wema Bank had a similar problem, the government, through AMCON moved in by pumping the needed lifeline into the bank and resuscitated it. The bank came back to life; the same happened to Unity Bank. That unity bank continues in business today was as a result of such quiet intervention.

“The authorities did not have to over dramatize the challenges of these banks by wielding the big hammer through the sacking of the board and management. The CBN action would create the impression in the minds of the banking public that all is not well, not just with Skye Bank but many other money deposit banks and this can lead to a run on depositor’s funds thereby compounding the woes of the Banking sector.

Another top official of a commercial bank with head office in Marina wonder why Skye bank was singled out. His submission: “the fact of the matter today is that since the Federal Government pulled out about N3 trillion from money deposit banks with the introduction of Single Treasury Account, TSA, and the delay in the payment of over N11 trillion owed local contractors by the government, there is hardly any bank in the country today that is not grappling with liquidity challenges and capital inadequacy issues. The situation of some are as acute, if not more acute than that of Skye Bank. So the question is why single out one bank, is Skye Bank the only bank that has made a consistent presence at the CBN window? Certainly not.

“Even when you talk about insider related loans, are the Skye Bank shareholders/directors the only culprits? The fear that has gripped the banks since CBN wielded the big stick is profound. Who is next is the big question. This certainly is not good for the health of the industry.

A former top official of AMCON who spoke to us last night wondered why the CBN was in a hurry to apply the maximum measure. He said: “I am aware that through a letter to Skye Bank, the CBN gave the directors up to December 31st 2016 to recapitalize the bank and made their obligations. The directors were in tune with the CBN in respect of this deadline. Why then the haste to descend on the bank six months ahead of the deadline. Six months would have offered the directors the time frame within which to recapitalize and meet their various obligations. If they did not, then you may be justified with any action you would have taken subsequently.”

Last Monday the Governor of Central Bank of Nigeria, Mr. Godwin Emefiele announced the resignation of the chairman and managing director of Skye Bank, Dr. Olatunde Ayeni and Mr. Timothy Oguntayo respectively and some other directors of the Bank. The Apex bank went ahead to appoint a chairman, managing director and board members in what the governor describe as a proactive step to save the health of the bank from further deterioration.

Since that announcement, panic has gripped the financial sector and the banking public.
Culled from thecapital

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