For many people who keep tabs on the Nigerian banking scene, Skye Bank is one of the banks to watch. Even with the lack of transparency, its progress is akin to the pulse and health of the banking system.
For many reasons, Skye Bank, Sterling Bank, Heritage and Unity Bank were on the brink in the hallmark of last year. However, Skye Bank’s case was peculiar. In the early session of the business day on the 4th of July, the Central of Nigeria’s banking supervision team marched into the headquarters of the bank to sack all the board of directors and management of the bank.
Apparently, the CBN had averted another collapse of a major bank that would have spelled doom for the banking system. The domino effect the collapse would have on the system might be catastrophic enough to push other fragile banks to the brink and eventual collapse.
For many people who are familiar with the banking system, Skye Bank was said to be operating a risk management model that was not only peculiar but unsustainable to say the least.
The bank was said to be over exposed to certain sectors of the economy that was badly hit by the crash in global crude oil prices and the plummeted consumer demand that greeted the early part of Nigeria’s economic recession. Analysts also attributed its troubles to a concentration of such risks in the hands of selected customers who were overtly exposed to the macro-economic risks troubling Nigeria.
The takeover of Skye Bank’s management and the immediate replacement with another team was commendable. However, the aftermath of the takeover has not been properly managed. In a crisis situation, stabilizing the status quo is not just enough. There must be a high degree of transparency from the crisis managers itself.
The CBN took several steps to shore up the bank’s cash positions to enable it withstand panic withdrawals that ensued after the hysteria generated by the management sack. However, the process was not done in way that we clear to Skye Bank’s shareholders, its customers, potentials and the general public at large.
To start with, The Central Bank did not communicate through its official channels the stimulus package giving to the banks. The aftermath of this move led to a series of speculation that the bank will collapse. This pushed the CBN into a defensive position. The same CBN had to release a new statement to defend the bank “Skye Bank is neither insolvent nor..” was the defense of the CBN.
Moreover, the new management of the bank have not helped matters as well. The bank had gone ahead to jettison its international banking license for national license. These were not also communicated to the financial markets. The bank is also reported to have sold off its assets across West African countries. This was not also communicated through the Nigeria Stock Exchange, NSE.
In the early trading session of at the NSE, Skye Bank purportedly shocked the markets that three of its executive directors had resigned. As random as the news seems, the position of the bank creates more room for rumours and anxiety. According to people familiar with the matter, the bank might be going through some restructuring via investment and equity holding which might warrant a change in leadership composition. It is still confusing how that should be shrouded in mystery of secrecy. Some analysts even suggest that that the bank is been teleguided by the its ‘deliverer’- the CBN. Therefore, folks in its headquarters who are supposed to be running the show and taking responsibilities for their actions are oblivious of their own decisions.
Whichever side is true, Nigerian publicly quoted companies and even a regulator such as the CBN have more convincing to do that they are transparent enough for the markets. Skye Bank can emerge from its crisis stronger and better if there is more openness in the way and manner things are run. The CBN, the NSE and the SEC owe the financial system that responsibility to instill transparency in the system.
More transparency gives investors, shareholders, customers, potentials and even ‘rumour-mongers’ a better perspective into things. It engenders confidence the capital markets. But an opaque system creates panic, uncertainty and resentment. Many Nigerian banks go for weeks and months without disclosing any information to to the markets about its dealings. This is the recipe the disaster that come afterwards.