LAGOS — The liquidity crisis ravaging the banking industry consumed its first set of victims, yesterday, with the resignation of 12 directors of Skye Bank Plc, including the Chairman, Dr. Olatunde Ayeni, and Managing Director/Chief Executive Officer, Mr. Timothy Oguntayo.
The CBN also, yesterday, announced the appointment of Mr. M.K. Ahmad and Mr. Tokunbo Abiru as the new Chairman and Chief Executive of the bank, respectively.
The directors of Skye Bank sacked alongside Ayeni and Oguntayo include three executive directors and seven non executive directors. The executive directors are Mrs. Amaka Onwughalu, Deputy Managing Director; Mr. Dotun Adeniyi, Mrs Ibiye Ekong. The non executive directors are Mr. Victor Adenigbagbe, Dr. Jason Fadeyi, Mr. Babajide Agbabiaka, Mr. Victor Odozi, Mr. Kunle Aluko, Mr. Abdul Bello and Mrs. Ammuna Lawan Ali.
Why Ayeni, Oguntayo resigned:The banking industry in recent times has been gripped with scarcity of funds, with some banks relying on loans from the CBN to fund their operations. Two weeks ago banks’ borrowing from CBN, through its Standing Lending Facility (SLF) skyrocketed by 230% to N929 billion, indicating that Skye Bank is not the only bank in the liquidity trap.
While announcing the reconstitution of the board of Skye Bank Plc, CBN Governor, Mr. Godwin Emefiele confirmed that the bank has been a regular customer of its lending facility, indicating deterioration of the financial condition of the bank.
Speaking at a press conference in Lagos, Emefiele said that the reconstitution of the board of the bank was due to persistent decline in the bank’s liquidity ratio and increase in its non-performing loans.
He said, “These proactive 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 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.
“To correct the anomalies in the bank, the CBN had several meetings with the management and board of Skye bank as part of our strategy of close engagement whenever a bank’s financial or governance situation poses potential threats to the overall stability of our financial system. Despite the expectation of relevant regulators, market watchers, financial analysts and interested stakeholders that Skye Bank should be doing much better than it is right now, we have seen about the opposite in reality.
Declining health of the bank
“Given the aforementioned issues and the fact that Skye bank is a Domestic Systematically Important Bank (SIB) with significant interconnectedness, the CBN would be failing in its duties if it does not take immediate action to nip the steadily declining health of the bank in the bud and correct the situation.
“In view of the long grace period allowed the bank to correct the situation, we came to the conclusion that, although the existing board had done its best to steer the ship it had come to a realization that it would be unable to bring the bank out of its present precarious situation. “Fortunately, and in the overall interest of the bank, the Chairman and some board members have decided to resign their appointments from the bank.
“Consequently, by virtue of the powers vested in the Governor of the CBN, we have decided to reconstitute the Board and Management of the bank, and appoint new members with the sole responsibility of ensuring the speedy restoration of the health of the bank.
“To this effect, the Chairman of the Board, all other Non-Executive Directors, the Independent Director, the Managing Director, the Deputy Managing Director and two longest serving Executive Directors have voluntarily resigned their appointments with immediate effect.
“In their place, we have selected industry experts and people of high integrity whom we believe can turn the bank around. In this regard, we have selected Alhaji M. K. Ahmad to be the new Chairman while Mr. Adetokunbo Abiru would be the new Managing Director. The more recent executive directors will be allowed to remain to ensure continuity and a smooth transition.
“It will be recalled that the medium-term vision of the CBN, which was unveiled in June 2014, indicated that the bank would proactively manage potential threats to financial stability, maintain zero tolerance on practices that undermine the health of financial institutions, and create a strong governance regime that is conducive for financial intermediation, innovative finance and inclusiveness. It is in furtherance of these commitments that the CBN has made the changes and assures the incoming Board and Management of its unflinching support during this transition period.”
Depositors of Skye Bank should not panic
Emefiele however assured depositors of Skye bank of the safety of their money in the bank saying there is no need to panic as the bank is not in distress.
He said, “It is important to reiterate the fact that Skye Bank is not in distress and remains a healthy bank in the system. The CBN hereby 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. It is our expectation that the shareholders and remaining Executive Directors will work seamlessly with the new team to ensure that the fortunes of the bank are restored in the shortest possible time.
“The three most important issues in every bank are NPL, capital adequacy and its liquidity situation. What we have seen since around late 2013 is that these prudential and adequacy ratios of this bank have been weakening and we thought it is not right for us to allow these to continue to weaken to a point where it gets irreversible or recovery situation and that is why we decide to take this action and nip it in the bud
“I repeat it has nothing to do with been distressed, and it is important that we take it that what we are trying to say is that we don’t want the prudential and adequacy ratios of this bank to worsened to the point where depositors funds get into risk and that is why we take this decision.
“The board themselves have come to realisation that they tried their best and it is about time for them to say, “Well lets bow out at this time so that a new team can come in and run the bank and improve the position of the bank.
“What we see is that by the time the recapitalisation values are recomputed, there is some weakening in value but it has not eroded the recapitalisation and values but we are just hoping that has the new team comes up, off course the values will definitely improve.
Banking industry not distressed
Speaking further, Emefiele dismissed speculations that some other banks are in distress saying the strategic health of the industry is good. He said, “As a regulator, we owe you current information, the strategic health of the banking industry remains good and when there is a need to inform general public about the strategic health of any bank, just as we have done in this case, we would do, but i want to assure everybody the strategic health of the banking industry is still good at this time.
No doubt there are, as a result of the global shocks, there certain weaning of certain ratios but those ratios have not weakened to the point where we can say the banking industry is distressed. We would like to appeal to all depositors to be calm; there is no need to live in the impression that any bank is distressed. We would be holding discussions with NDIC, and I want to assure all of us that no depositor, no deposit is at risk at this time. Customers should continue to do their business the way they have been conducting them in all the banks.”
The New Helmsmen of Skye Bank
The Chairman of Skye Bank, Alhaji M. K Ahmad, was the pioneer Director General, Pension Commission of Nigeria (PenCom). He was also a pioneer staff of the Nigeria Deposit Insurance Company (NDIC) where he rose to become a Director. He has also served on the Board of various companies and committees including banks and not-for-profit organizations. The Managing Director/Chief Executive of Skye Bank, Mr.Abiru was until recently an Executive Director in First Bank PLC. He was also Lagos State Commissioner of Finance from 2011 to 2013.