When the skies fell on Skye Bank

Finally, when the skies fell on Skye Bank there was hardly a whimper of surprise. Most stakeholders in the banking industry had seen it coming for long. If there is any surprise at all, it is the length of time it had taken the regulators to wield the big axe on the sick bank. Skye Bank was admitted into the sick bay of the Central Bank of Nigeria (CBN) in 2016 when it showed persistent liquidity challenges and other infirmities arising from not meeting obvious minimum banking thresholds. The bank was constantly sighted at the CBN’s lending window seeking for assistance which was a clear indication that something was horribly wrong.

When the regulators intervened, the Chairman and some key members of the Board of Directors of the bank were booted out and replaced with fresh appointees who were given a fresh mandate to recapitalise and return the bank to the path of progress. To assist the new management of the bank then, the CBN ploughed in some N350 billion to shore up its liquidity situation. For two years the bank tottered until last week when the regulators decided to pull out the life support and put an end to Skye Bank’s unending suffering.

The price was, however, stiff for the national treasury as some N700 billion had to shelled out this time as loans at a single digit interest rate to Polaris Bank, the bridge bank that took over the assets (if any) and liabilities of the expired Skye Bank. The rationale for this action is simply because the alternative price would have been stiffer. There would have been a run on the bank with the consequent systemic effect on the banking industry and the larger Nigerian economy.

For those acquainted with the pedigree of Skye Bank it is just a wonder that it should falter and fail. Formed during the heady days of recapitalization in 2006 when small banks with inadequate capital were encouraged to pool their resources together to reach the magic figure of N25 billion, Skye Bank came into being from the amalgamation of five banks: EIB International Bank Plc, Bond Bank Ltd, Reliance Bank Ltd, Cooperative Bank Ltd and Prudent Bank. The leadership of Skye Bank was rated highly as composed of seasoned bankers and business technocrats.

They did well initially with branches spread not only in Nigeria but also in many African countries. They were even said to be pacesetters by being the first to introduce a Naira-denominated debit Mastercard, the first of its kind in Nigeria. Then matters unravelled as greed sets in and the bank went down the slippery path until the regulators intervention. It was only when the regulators’ newly appointed board led by the highly respected M K Ahmed, a former Director-General of National Pension Commission, started functioning that the rot in Skye Bank became public knowledge. After a forensic investigation it was found that insider trading was essentially the bane of the bank. It was clear that the board that was touted to be composed of seasoned bankers and businessmen was actually a motley crowd of Ali Baba and whatever number of thieves helping themselves to depositors’ monies on such a grand scale that the bank’s existence was in jeopardy.

One individual who was said to be the Chairman of the bank cornered loans to the tune of N89.4b taken to acquire Ibadan and Yola Electricity Distribution Companies, as well as NITEL/Mtel, that were being sold out at the time. Another N29b was found in a suspense account that was traced to him, while $6.8m found its way into his law firm’s account and utilized for his personal use. A father of one of the directors took away N191b. And that infamous NNPC looter took away another N110b ostensibly to invest in Oil and Gas and also to buy the Abuja Electricity Distribution Company.

It was a wonder that despite all these non-performing loans Skye Bank went ahead to bid in 2014 to buy the Mainstream Bank whom readers will recall was also a bridge for AfriBank, one of the three banks that failed to capitalize and was thus bridged as Mainstream Bank in 2011. May be that was the nemesis that was awaiting to catch up with those who looted the deposits of Skye Bank. There were a number of issues surrounding the take-over of Mainstream bank by Skye bank. But they constitute part of the mud that would need to be dusted up sooner or later. Nevertheless, Skye Bank marched into 2016 a very troubled entity. It was the only bank reputed to have made a loss in 2015. Couple that with the other negative indices it was only a matter of time before the bubble would bust.

The tipping point came sooner than later when the Federal Government asked all banks to remit government monies in their vaults to the CBN in 2016 at the start of the implementation of the Treasury Single Account (TSA). It was a heavy blow for Skye Bank that along with most other banks in Nigeria relied on government institutions for deposits. The bank tried to hold on to the funds for some time and ended up attracting a stiff fine from the CBN for that infraction. Health indices of the bank kept on popping up worrying figures as matters worsened. In July 2016 the regulators had to sack the management and appoint a new one. It was the beginning of the end for a once prosperous bank that depositors trusted with their money but were wholesomely betrayed by those who were entrusted to handle them.

However, all is not lost going by the measures rolled out by the regulatory authorities. The first step in this kind of situation would be to stabilize the bank to give confidence to both depositors, staff and whoever is transacting business with the bank. This has been catered for by allowing the bridge bank, Polaris to take over the assets and liabilities of the defunct Skye Bank in a manner that would return it to the path of sanity. Umaru Ibrahim the Managing Director of the Nigerian Deposit Insurance Corporation (NDIC) in a widely circulated piece last week had been explaining what is a bridge bank, and what Polaris Bank will achieve as it replaces the defunct Skye Bank.

The Managing Director could so easily predict the outcomes because NDIC had successfully handled similar situations recently as in the case of Keystone, Mainstream and Enterprise Banks. This chest-beating is founded on the fact that since bridge banking was introduced there had never been a run on any bank even when they were on death throes. In effect no depositor has ever lost a kobo since bridge banks came on board.

However, we must put a check to the kind of mindless looting of depositors funds that took place in Skye Bank. There are harsh punishments in the statute books for these infringements. But the fat cats that have fleeced the banks know that it takes years to get justice in our courts. The NDIC must persevere and continue to find ways to bring the culprit to face the wrath of the law speedily.