Liquidity: CBN Monitoring More Banks

Obinna Chima with agency report

The Central Bank of Nigeria (CBN) has disclosed that it is monitoring some commercial lenders for liquidity after Skye Bank failed to meet prudential ratios, prompting it to replace its top executives this week.

The Director, Banking Supervision, CBN, Mrs. Tokunbo Martins, said “one or two” commercial banks had failed liquidity tests but they were not in the same situation as Skye.

The central bank on Monday said Skye Bank’s liquidity ratio had been below the regulatory limit for a while and it had resorted to its rediscount window for support, prompting its top executives to resign.

But Martins said the central bank 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. We have our eyes on all banks,” Reuters quoted her to have said on Channels television.

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 central bank was providing support until the new management can bring in fresh funds.

She added that the banking industry was healthy.

CBN 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 under-capitalised.

Excessive risk taking and last year’s shifting of government funds from the banks into the central bank 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 ratio of 15 per cent

The CBN during the week reiterated that no bank in the country is in distress, just as it reassured bank customers that their deposits are safe.

The acting Director, Corporate Communications, CBN, Mr. Isaac Okorafor said the attention of the central bank was drawn to malicious rumours and unfounded speculations that some banks in the country might have gone or be going into distress.

Meanwhile, Bloomberg in a report yesterday, indicated that the ousting of top management at Skye Bank had continued to deepen concern over the health of the industry.

“There’s a chance we’re going back to several years ago when banks were taken over,” a frontier markets analyst at brokerage Auerbach Grayson & Co, Zoran Milojevic said.

“There are still way too many banks. Some of them have to go.”

While problems are mounting, Nigeria isn’t headed for the crisis it had in 2009, a Johannesburg-based executive director at business risk consultancy Exx Africa, Robert Besseling said.

“The whole banking sector is under pressure in Nigeria given slowing growth and average loan-book exposure to oil and gas of 30 per cent,” a London-based economist at Bank of America Merrill Lynch, Oyin Anubi said.