Just in: CBN revokes Skye Bank licence, names Polaris as receiving bridge bank
The Governor of Central Bank of Nigeria (CBN), Mr. Godwin Emefiele, this Friday evening, September 21, 2018, announced the immediate revocation of the operating licence of Skye Bank Plc, but maintained sealed lips on reasons behind the regulatory action.
While announcing the development in Abuja, he was quick to reveal that a bridge bank known as Polaris Bank, hurriedly created by the Nigeria Deposit Insurance Corporation (NDIC) has assumed the assets and liabilities of Skye Bank.
According to him, “The bridge bank will inject N786bn to recapitalise the bank and return it to stability and profitability before selling to interested investors”.
Reactions of industry analysts who spoke to Business Hilights Abuja Bureau chief shortly after the revocation announcement by the CBN, were mixed as many traced the development to the over-bearing negative influence of nonperforming loans (NPL).
Business Hilights recalls that the CBN had in July 2016 dissolved the bank’s board due to the inability of the bank to raise required capital and it being a systemically important institution. This means a collapse of the bank would have an adverse effect on the financial industry as a whole. Skye Bank was unable to raise the much-needed capital, despite being given over a year to do so.
Specifically, the bank’s Liquidity and Non-performing loan Ratios were below and above the required thresholds.
In banking, Liquidity ratio is the ratio of a banks liquid assets to its liabilities. In other words, a bank’s cash balance plus assets that it can easily convert to cash to the total liabilities owed by the bank, which is typically deposits. In Nigeria, banks are supposed to have a liquidity ratio of 30%.
The NPL is a ratio of a bank’s bad loans to their total loans. The Central Bank set an NPL ratio of 5%, and expects banks to stay within this range.
Analysts believed the challenge Skye Bank faced was mainly the unimpressive performance as recorded in its 2015 financial statements. According to them, the poor outing was as a result of high loan impairment charges due to aggressive loan growth combined with negative macroeconomic trends that have negatively affected its loan books as businesses in oil and gas, power, telecommunications, manufacturing and financial services face serious short-term challenges.
