Another bridge bank, Polaris Bank Limited, debuted in Nigeria's banking industry the other day, courtesy of the Central Bank of Nigeria (CBN) and Nigeria Deposit Insurance Corporation (NDIC). The nation was casually told that the new Polaris Bank had to be born to acquire the assets and liabilities of Skye Bank Nigeria Plc whose operating licence was revoked by CBN on September 21, 2018. Sorry CBN, the details of this corporate development are still too hazy to be absorbed in this age of transparency.
That Skye Bank had some challenges came to lime light in early July 2016 when CBN as a regulator, intervened in the bank. That intervention led to the resignation of the bank's Board of Directors' chairman, all non-executive directors, the managing director/chief executive, the deputy managing director and the two longest-serving executive directors on the management team. The intervention also brought about the appointment of a new board and management by CBN to ensure the bank's survival.
Then, the bank was fingered for "unacceptable corporate governance lapses;" "inability of the bank to meet critical prudential and adequacy ratios" and prolonged liquidity problems that occasioned the bank's ceaseless dependence on CBN Lending Window to remain in operations.
Godwin Emefiele, the governor of CBN, who announced revocation of Skye Bank's licence and the establishment of Polaris Bank, stated the main issues responsible for the present action of the apex regulator, thus: "the bank requires urgent recapitalisation as it can no longer continue to live on borrowed times with indefinite liquidity support from the CBN" and "the shareholders of the bank have been unable to recapitalise it." A derivative third reason must be CBN's unwillingness to continue to keep the bank liquid in order to operate.
The decision of CBN, in consultation with the NDIC, to address Skye Bank's distress via the establishment of a bridge bank is timely and remarkable. It is a persuasive sign that bank regulators and supervisors have learnt some significant lessons from previous bank distress resolutions, especially those of the 1990s, which centred on outright liquidation. That approach fostered colossal economic and social hardships, many of which still remain with us and are unlikely to disappear soon.
As Emefiele aptly captured in his announcement, the bridge bank option would, among many other things, ensure depositors' funds are protected and safe; employees do not lose their jobs thereby worsening the unemployment situation; maintaining and sustaining banking services which, will ensure customers' and consumers' confidence in the banking system.
Indeed, it will prevent a systemic crisis in the banking industry and of course, the economy that is struggling with serious threats of recession. As CBN stressed, Skye Bank was "systematically important in the banking and finance sector." Its outright liquidation would have had grave consequences for the Nigerian economy.
However, as the economy savours the birth of Polaris Bank, it is noteworthy that Skye Bank's fate was determined by the actions and inactions of individuals entrusted with its remaining an on-going and profitable business. Unfortunately, they ran the bank into the murky waters and got it ruined. What consequences are there for those responsible for the failure of Skye Bank? This newspaper believes that their mere resignation from the bank is not enough. What precedent is being set and how can executives of banks and other important institutions be deterred from following the path of those responsible for Skye Bank's untimely death?
The authorities must have by now noticed that the irreversible damage done to the defunct bank by its directors, managers and other collaborators has been inflicted on all Nigerians. The whopping N786 billion tax payers money the Asset Management Corporation of Nigeria (AMCON) is injecting into Polaris Bank to enable it to carry on with banking services is a clear evidence of the price being paid by the people. There must therefore be serious consequences for perpetrators of the financial and economic crime that ran Skye Bank aground.
Specifically, there should be no recourse to our growing culture of impunity. The least tax payers expect from officers of the law is urgent and diligent prosecution of all those identified to have contributed to the demise of the bank. That will serve as a deterrent and a boost to the ongoing war on corruption. Further, it will be a good signal that when individuals loot and destroy institutions entrusted to their care, they cannot just walk away without taking responsibility for their actions. Individuals should not be allowed to continue to celebrate their loots while impoverished citizens helplessly watch as they are even celebrated.
It is therefore gratifying to note that the Minister of Finance, Zainab Ahmed has hinted at the expediency of prosecuting those responsible for the corporate scandal that wrecked the Skye Bank.
Meanwhile, the regulators, CBN in particular should not be treated as an innocent by-stander. The apex bank needs to convince the nation that it was not its failure of regulation that gave rise to Skye Bank's distress. How effective, for instance, were CBN's on-and off-site supervisions on the bank? How thorough were audited financials of the bank examined before regulatory approvals were given for their publication? When did CBN observe the bank's "corporate governance lapses," "persistent reliance on CBN Lending Window for liquidity" and what actions did it take?
Although CBN in the licence revocation announcement never made reference to the bank's huge non-performing loans (whether insider or outsider), it cannot pretend to be ignorant of such a problem. CBN needs to justify to the nation what it did to address the malfeasance. In a milieu where corporate governance is taken seriously, there should have been a parliamentary query to the apex bank.
What happened to the relevant committees in Nigeria's complicated parliament, in this regard?
There is no doubt that the CBN has been economical with disclosing facts about the causes of Skye Bank's failure. CBN owes the public only full disclosures, in this regard.
There is therefore, the need for the citizenry to be informed of the roles played by various stakeholders including CBN itself, the government, directors, management and staff as well as external auditors in the shady transactions that led to the death of the bank. It is necessary for these and other pertinent matters to be interrogated and disclosed so that due lessons can be learnt with a view to preventing a recurrence.
All told, since the Federal Government's ownership of Polaris Bank through AMCON is not expected to be indefinite, AMCON should transparently undertake the responsibility of preparing and selling the bank to private sector investors. It is expected that all the bad loans will be recovered and suspended interests reversed to the profit and loss account of Polaris Bank. Aggressive promotion, backed by excellent customer relationship and services, will guarantee customer attraction, retention and patronage as well as profitability, growth and sustainability that will make Polaris Bank irresistible for private investors. Lest we forget, wreckers of Skye Bank are all criminals. They must not go unpunished!