NDIC: Bridge Bank Option for Skye Bank Saved Financial System from Contagious Risks
The Nigeria Deposit Insurance Corporation (NDIC) has said the use of bridge bank option to resolve the crisis of the defunct Skye Bank Plc was the best way to curtail the spread of systemic risks that could endanger the financial system and lead to loss of jobs and investment.
Managing Director, Nigeria Deposit Insurance Corporation (NDIC), Alhaji Umaru Ibrahim, said the establishment of Polaris Bank was in line with the corporation’s core mandate of guaranteeing deposit and resolving bank failure and illiquidity.
He outlined that while the corporation failure resolution measures such as purchase and assumption, provision of liquidity support, assisted merger, take over and management of ailing banks, outright liquidation, the bridge bank option allows unhindered operations of the bank while continuing efforts to source for investors and address other fundamental issues. Ibrahim said: "Unlike the other failure resolution options such as outright liquidation which could result in delays depositors' axe% to their total Tunis, the bridge bank guarantees depositors uninterrupted operation cf their amount. The same benefits apply to tie creditors of the killing bank whose Unifies are assumed by the bridge hank Or the whole, the Bridge bank ensures preservation and calamity of daily operations that were hitherto being undertaken by the failed bank throughout all its branches and guarantees all depositors immediate acces to their deposits. . It ensures that no jobs are lost in the resolution process. The adoption of the bridge bank as the resolution option of the defunct Skye Bank will save 6000 jobs and ensures continuity of banking services in the 300 branches of defund bank"
He said the stability of the banking system could not be over emphasised as the establishment of Polaris Bank Limited was done in the interest of depositors and protection of the ex-employees of the failed bank by preserving their jobs. According to him, although the establishment of Polaris Bank Limited immediately before the revocation of the operating license of Skye bank may appear spontaneous to the uninformed, *processes leading to the establishment of the bridge bank was actually very thorough and exhaustive as provided for under Part Sethon 39 of the NDIC Act (2W6) as amended. He noted that the key objectives of the bank failure resolution mdude maintaining public confidence, enhancing market discipline and minimising the use of tax payers' protection of the ex-employees of the failed bank by preserving their jobs. According to him, although the establishment of Polaris Bank Limited immediately before the revocation of the operating license of Skye bank may appear spontaneous to the uninformed, *processes leading to the establishment of the bridge bank was actually very thorough and exhaustive as provided for under Part Sethon 39 of the NDIC Act (2W6) as amended. He noted that the key objectives of the bank failure resolution mdude maintaining public confidence, enhancing market discipline and minimising the use of tax payers' which the name and bridge bank is incorporated and registered with the Corporate Affairs Commission (CAC) as a limited liability company with the objective of assuming the deposits and other liabilities of the failing bank along with the acquisition of its assets.
After incorporation, the CBN issues operating licence to the bridge bank to the enable it commence operations as a fully licenced bank. At the third stage, the NDIC transfers the entire assets and liabilities of the failing bank (i.e. Skye Bank Plc) to the bridge bank (i.e. Polaris Bank Limited) under a ‘Purchase and Assumption’ (P&A) Agreement executed between the NDIC and the Bridge bank.