“Skye Bank gets new MD, chairman as CBN takes over.”. The report by Collins Nweze which dominated the financial news on that Tuesday ended weeks or even months of rumours and speculations that one or two banks were in distress.
Even the unsolicited comment by one of the rating outfits, last week, stating that Nigerian banks are sound only served to increase anxieties among stakeholders. With the Central Bank of Nigeria, CBN, announcement on Monday afternoon of July 4, 2016, clients of Skye Bank, at least have now had their worst fears confirmed.
The ripple effects in the banking sector are immeasurable but will certainly be considerable. CBN Governor, Mr Godwin Emefiele The take-over of Skye Bank had once again disproved the claim made by Professor Soludo in 2004/2005 when forcing banking con-Soludo-tion that he was creating banks which were big enough not to fail. Soludo’s favourite expression was “depositors can go to sleep with their two eyes closed.”
The failure of Oceanic, Intercontinental, as well as other banks had already disproved that assertion. Skye Bank clients cannot now go to sleep at all. The timing of the announcement by CBN was perfect. With the next two days, Tuesday and Wednesday already declared as public holidays, and now Thursday added, the new Board and management of Skye Bank has been given breathing space to map out their strategy to avert a run on the bank – which would certainly have occurred on Tuesday if banks were open.
Several bank users already had the impression that something was wrong with Skye Bank on Friday, July 1, 2016 when attempts to transfer funds from or to Skye Bank nationwide were unsuccessful. The problem continued on Monday morning with dire consequences for some of their customers or those dealing with Skye Bank account holders.
At UBA Molete branch at Ibadan, people attempting to send funds to, or receive funds from Skye Bank account holders for the Muslim festival were totally frustrated. The sad experience made what was expected to be a bleak Sallah even more distressing. By closing time many were already promising to close their Skye Bank accounts.
The CBN gave its reasons for the take-over – which some banking sector watchers considered too late and which will produce unintended consequences. According to CBN Governor Godwin Emefiele, “These pro-active moves have become unavoidable in view of the persistent failure of Skye Bank Plc to meet minimum thresholds in critical prudential and adequacy ratios, which has culminated in the bank’s permanent presence at the CBN’s lending window. In particular Skye Bank’s liquidity and non-performing loan ratios have been below and above the required thresholds, respectively for quite a while”.
Notwithstanding allegations of several other infractions by the bank warranting its take-over, the CBN Governor nevertheless Emefiele did what he had to do to reassure depositors by announcing that “the CBN assures depositors, shareholders and all relevant stakeholders that there is no reason for concern or panic as we seek their continued cooperation at this time”. The CBN Governor had said what he should. It would have been surprising if he said anything else. But, Emefiele might as well be talking to a wall.
Nigerian bank depositors and shareholders know when to be concerned. The older generation, especially, recognize banking disaster when it stares them in the face. At the back of the minds of depositors are the sad experiences they had with the failed banks in the late 1990s which resulted in the Failed Banks Decree of 1998. Most of their billions trapped in the banks were lost for ever.
Later the SAVANNAH and SOCIETE GENERALE banks controlled by those in the corridors of power again closed their gates on more billions till today. Depositors will not listen to the CBN, the new Board members and the management. This column is being written on Thursday, July 7, 2016, and there is one certainty regarding Skye Bank on Friday, July 8, 2016. There will be a long queue of depositors in front of every branch wanting to withdraw their deposits.
Nobody will bring in fresh deposits. Fools and sage rush when danger is imminent as it is now at Skye Bank. The shareholders are also in for shellacking. The share price, already one of the lowest in the sector, will head further into the basement. Those holding those shares might as well throw them away. What sort of cooperation can they possibly offer to the new team when the old team had destroyed the bank?
They can hold on to their shares and suffer the inevitable losses like those who bought OCEANIC and INTERCONTINENTAL banks shares at over N30 per share in 2008 before the roof caved in. The roof is caving in on Skye Bank Plc and there is very little the shareholders can do about it. Skye Bank is only the first victim of the Federal Government’s Treasury Single Account, TSA policy – it might not be the last.
The bank had operated largely on government deposits not on private funds and the managers had mismanaged the bank by allowing non-performing loans to escalate. Again, Skye Bank might not be the last. From information available to this writer, at least two other banks are knocking at deaths door.
Though unintended, the CBN’s announcement will induce a run on the bank from Friday, July 8, 2016. The last depositors will be left holding nothing. LAST LINE: In case you are too slow to understand what is going on, then remember this; Don’t accept a cheque….
Vanguard
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