Home Banking Big unanswered question about who ruined defunct Skye Bank

Big unanswered question about who ruined defunct Skye Bank


The Central Bank of Nigeria [CBN] recently announced that it had revoked the operating license of Skye Bank and the take-over of its operations by Polaris Bank Plc as a bridge bank. According to CBN Governor Godwin Emefiele, “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.”
As a bridge bank Polaris was created by CBN to take over the operations of Skye Bank until a suitable buyer is found for the latter. The adoption of bridge banks is one of the options adopted globally by banking sector regulators to manage crises that could arise when banks demonstrate signs of irredeemable failure and collapse, thereby imposing adverse consequences on the banking public. The bridge bank option is seen as a better approach to bank failure than outright liquidation which would imperil the entire industry. Hence in adopting the Polaris option, CBN was acting to safeguard the customers of Skye Bank and prevent a stampede on it and possibly on other banks as well.
Skye Bank was established in 2006 following the merging of former Prudent Bank Ltd with four other legacy banks of EIB International Bank. In 2014 Skye Bank acquired Mainstreet Bank, which itself was a bridge bank that took over the former Afribank. Many observers associate the problems of Skye Bank with the challenges it inherited from the takeover of Mainstreet Bank. That notwithstanding, the road to perdition for Skye Bank was defined by the failure of the management to adhere strictly to the fundamentals of bank management practice.
At the time it was taken over by CBN, Skye had a negative net asset worth of N1 trillion which constituted a sad commentary on the capital requirement of N25 billion for Nigerian banks. This implied that the bank had irredeemably lost any justification to exist as a bank and was operating as a mere drain on depositors’ funds. Nevertheless, the fall of Skye Bank is not without telling lessons for the country’s banking sector. For one the incidence of bad insider loans granted to recalcitrant debtors cannot be ruled out as a critical failure factor.
One report alleges that four individual and corporate insiders accounted for N446billion in insider related loans drawn from Skye Bank. They include a loan of N89 billion to a former director to acquire shares in a disco; another N190 billion loan to a company linked to a non-executive director, and three hefty loans amounting to N110billion which were given to a corporate body to invest in oil and electricity assets. The report said some of Skye Bank’s monies were also found in suspense accounts and millions of dollars were diverted to personal use, all obtained by insiders. They also include some jumbo loans that Skye Bank inherited from Mainstreet Bank which were earlier granted by Afribank.
CBN has not said whether it, Nigeria Deposit Insurance Corporation [NDIC] or the anti-corruption agencies are investigating the alleged insider loans that brought Skye Bank to its knees. By now, Nigerians are fed up with fat cat bankers engaging in shady insider deals and ruining banks, only for the hapless citizen to shell out billions or even trillions in public funds in order to bail them out. We still have trillions of naira invested through the Assets Management Company of Nigeria [AMCON] to buy up non-performing loans of banks which are yet to be recovered. We understand that CBN is now committing hundreds of billions of naira more to rescue Skye Bank so it is very important to identify those who contributed to the bank’s distress and visit them with exemplary punishment.


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