Skye Bank takeover by CBN: What customers should know

INTRODUCTION 

No customer of Skye Bank should panic or be worried over the takeover of their bank by CBN. It is for their own good. 

Customers should know that their deposits are safe and should not engage in any panic withdrawals. 

Customers who should be worried are those that owe the bank but have refused to pay back their loans long after maturity. 

CBN will come after them. 

WHAT HAPPENED?

Simply put – Skye Bank had given out a lot of loans to their various customers who have refused to or could not repay hence making it impossible for the bank to meet depositors’ demands. 

It’s not a hidden fact that the law allows banks to create loan with about 40% of customers’ deposits. 

This is based on the study that less than 40% of funds deposited by bank customers are withdrawn by their owners at any given time. 

Should more customers than expected demand for their money than the bank kept in its vault  or invested in an easily convertible treasury bills, the bank will have to borrow from CBN or from other banks to meet the urgent large volume payments as demanded by the depositors. 

Loan repayment and conversion of the treasury bills to cash and recall of cash investment in other banks will usually restore normal loan to deposit ratio in the bank. 

In case of Skye Bank, inability of its borrowing customers to repay huge loans made it difficult for the bank to pay deposit customers. 

CBN has been watching the trend for some time now.  

WHY CBN HAD TO INTERVENE

CBN had lent Skye Bank so much money as a banker of last resort to enable it meet depositors’ demands and is now convinced  that the Skye Bank could no longer restore the acceptable loan to deposit ratio hence the need to act. 

CBN will now provide all funds needed to pay any depositor of Skye Bank upon withdrawal until the customers’ confidence is restored. 

Henceforth, the new management appointed by CBN shall manage the affairs of the bank as CBN has assumed control of the bank. 

We saw this during the time of Sanusi Lamido Sanusi as the CBN governor. 

LOSERS

The shareholders of the bank will save their investment if they can in a good time, raise more capital to refund the CBN and to meet the regulatory capital adequacy and liquidity requirements. 

The CBN has also removed the key figures of the former management and all the non-executive board members believing they should have managed the bank better. 

Some of the former owners and management of the bank will definitely have their days in court if CBN’s further but more thorough investigations show any corrupt or negligent practices by the former managers of the bank. 

Hard working staff of Skye Bank will not be sacked.  

The primary focus of the bank now will be to restore customers’ confidence and to recover bad loans. 

The Legal and Risk Management departments of the bank  shall be strengthened by CBN to ensure swift recovery activities. 

GOOD NEWS

Skye Bank customers should go to bed and have a sound sleep knowing full well that their savings are intact. 

CBN has further raised bank depositors’ confidence level by demonstrating its ability to ensure that no bank in the country fails. 

By Anayo Nwosu

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