Anxiety as CBN beams searchlight on more banks

In a move that generates anxiety among banks customers, the Central Bank of Nigeria (CBN) has disclosed that it is monitoring activities of some commercial lenders.

This development came on the heels of change in the management of the Skye Bank by the CBN, after the bank had failed to meet prudential ratios.

Last year, the CBN gave three commercial banks until June 2016 to recapitalise after they failed to hit a minimum capital adequacy rate of 10 per cent.

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

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

Skye Bank’s shares on Friday on the Nigerian Stock Exchange (NSE) dropped by 8.42 per cent, following investors continued reaction to the removal of the bank’s board and executive management.

The bank lost 8k to close at 87k per share.

The bank’s shares had depreciated by 9.5 per cent on the previous Monday, forcing it to close at 95k per share.

However, Martins said that the central bank was working with the banks to restore their ratios and reassured 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, adding that the banking industry was healthy.

“We have our eyes on all banks. After replacing Skye’s executives on Monday (last week), depositors rushed to withdraw their funds. Skye was able to meet its obligations and the central bank is providing support until the new management can bring in fresh funds.

“Skye’s problems worsened after it used short-term funding to acquire Mainstreet Bank in 2014 but failed to attract fresh funds.”

“The whole banking sector is under pressure in Nigeria, given the slow 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.

The CBN, in a swift response through its Acting Director, Corporate Communications, Mr Isaac Okorafor, said that 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.

It reiterated that no bank in the country was in distress, reassuring bank customers that their deposits were safe.