Skye Bank Directors Under Investigation, Says NDIC

• CBN signs MOU with African countries hosting Nigerian banks

Nume Ekeghe

Following the revocation of Skye Bank Plc licence by the Central Bank of Nigeria (CBN), the former chairman and another director of the defunct bank, Mr. Tunde Ayeni and Dr. Festus Fadeyi are currently under investigation.

This is coming as the Central Bank of Nigeria (CBN) has signed a Memorandum of Understanding (MoU) with other African countries where Nigerian banks are located to protect host countries.

The Managing Director/Chief Executive Officer, Nigeria Deposit Insurance Corporation (NDIC), Mr. Umaru Ibrahim, disclosed this on the sidelines of the International Association of Deposit Insurers (IADI) Africa Regional Committee(ARC) workshop in Lagos wedbesday.

The heavy borrowings by Ayeni and Fadeyi are largely linked to the insolvency of the defunct Skye Bank, which led to its being taken over by the CBN two years ago. Its licence was, however, revoked last Friday while its assets and liabilities were taken over by a bridge bank called Polaris Bank Limited. Records from the last financial results showed that Ayeni, and Fadeyi, had borrowed heavily from the bank. Ayeni and his partners were alleged to have taken loans to fund their acquisitions of the Ibadan and Yola Electricity Distribution Companies; NITEL/M-Tel; and an energy services firm, Ascot Offshore Nigeria Limited.

Also, Fadeyi, through Pan Ocean, took loans to fund the firm’s oil and gas upstream projects which were considered as one of the major non-performing loans amongst others.

On the board members who were responsible for the bank’s downfall, Umaru said: “They are being investigated and I can assure you that when the time comes, the necessary security and law enforcement agencies would do their work.”

He also said that on recent developments around cross border collaboration, the CBN had signed a Memorandum of Understanding (MoU) with other African countries where Nigerian banks are located to protect host countries.

Umaru said: “ There are many Nigerian banks that are operating in other parts of Africa and other parts of the world and that calls for collaboration and at various jurisdictions. CBN for instance has signed MoUs with the bank of Ghana, Sierra Leone and wherever our banks are so that in case of failure of a branch of a Nigerian bank a particular country outside Nigeria there can be a collaboration so as to ensure that the depositors of those host countries do not suffer.”

In his presentation at the forum the NDIC boss said:“The fabric of the global financial stability is constantly being threatened by one form of crisis or the other. The potential threats in recent times and currently, include monetary policy normalisation in some notable economies which may result into sharp volatility and disruptions in financial markets; another issue is the partial dis-intermediation of the banking system arising from proliferation of digital currency, such as Bitcoin, as well as the activities of FinTech in general.”

“The latter has the tendency to jeopardise the efficacy of safety-net arrangement and prudential roles of the traditional banking system, such that this function becomes available to a smaller segment of the banking system. Growing risk of protectionism and ongoing trade wars between the United States and the rest-of-the-world China, North America, and Europe could degenerate, with negative implications for the global financial system stability. Rising exposure of emerging market to reversal of foreign portfolio inflows and US Dollar appreciation also constitute risks to the global Financial system stability.”

“The aforementioned issues present potent downside risks to achieving financial stability and precursors to redesigning broad-based financial systems’ policies. How prepared are we as regulators and supervisors in managing a systemic financial crisis should they occur. Increasing financial inter-connectedness has shown that banking crisis can have contagion effects. A system-wide approach to crisis management, involving collaborative efforts of financial safety-net participants and regional deposit insurance systems is therefore imperative. I am optimistic that at the end of this Workshop, strategies for system-wide crisis preparedness and resolution options in promoting financial stability in the region would emerge..”

According to him, the NDIC as one of the resolution authorities in Nigeria, has adopted different resolution mechanisms in resolving the failure of distressed deposit-taking financial institutions in the country.

“The failure resolution mechanisms used by the corporation include: deposit pay-out; purchase and assumption; open bank assistance; assisted mergers; and bridge bank. Through these failure resolution mechanisms, the NDIC had so far closed 52 deposit money banks (DMBs), out of which 49 are currently in liquidation while the remaining are involved in litigations challenging the revocation of their licence by the CBN. In the case of other deposit-taking financial institutions, a total of 187 microfinance banks (MFBs) and 42 primary mortgage banks (PMBs) are currently in liquidation,” he said.