Two banks under close observation of CBN
Niyi Olaoye
The Central Bank of Nigeria (CBN) is monitoring one or two commercial lenders for liquidity after Skye Bank failed to meet prudential ratios, prompting it to replace its top executives this week, the director of banking supervision said today.
It will also be recalled that the banking supervision director, Tokunbo Martins, had said “one or two” commercial banks had failed liquidity tests but that they were not in the same situation as Skye.
Meanwhile, the CBN on Monday said Skye Bank’s liquidity ratio has been below the regulatory limit for a while and it had resorted to its rediscount window for support, prompting its top executives to resign.
Martins said the Central Bank of Nigeria was working with the banks to restore their ratios and sought to reassure depositors that there was no need to panic.
“We have our eyes on one or two other banks right now but they are not in a state of distress,” she said.
“We have our eyes on all banks.” After replacing Skye’s executives on Monday, depositors rushed to withdraw their funds. Martins said Skye was able to meet its obligations and that the CBN was providing support until the new management can bring in fresh funds. She added that the banking industry was healthy.
The Central Bank of Nigeria has the authority to remove bank executives, powers which it exercised during the 2007-2009 global financial crisis when it sacked nine CEOs at banks which were deemed undercapitalised.
Excessive risk taking and last year’s shifting of government funds from the banks into the Central Bank of Nigeria were partly responsible for the liquidity shortfalls, Martins said.
Skye’s problems worsened after it used short-term funding to acquire Mainstreet Bank in 2014, but failed to attract fresh funds, she said.
Last year, the regulator gave three commercial banks until June 2016 to recapitalise after they failed to hit a minimum capital adequacy rate of 10 per cent.
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