THE DEMISE OF SKYE BANK( FINAL PART)
Suffice to say, that there are many factors that led to the demise of
Skye bank, but I want you to know that SkyeBank as a Company WAS NOT
LIQUIDATED. The CBN issues a license to a bank to operate.
The CBN revoked the license of Skye bank to operate as a bank. The CBN
did not dismantle the bank and nail the bank to the coffin or else that would
have been disastrous to our fragile economy because Skye bank has over 260
branches in Nigeria with thousands of workers.
Skye bank also owns subsidiaries banks in West African countries such as
Gambia, Guinea, Equatorial Guinea, Liberia, Angola and Sierraleon and imagine
the impact of liquidating the bank on these ‘small’ economies.
The spillover effect of the bank liquidation would have a multiplier
effect on all banks and financial institutions.
This might lead to panic withdrawals and erodes investor confidence in
the banking sector and more importantly will lead to massive unemployment and
loss of deposits by customers. CBN was incisive and immediately with AMCON
appointed a bridge institution-Polaris to take over the management of Skye
bank.
Having said that, it doesn’t mean
that investor confidence in Skye bank has not been dented. Let us look at two
reasons for the demise of Skye bank. The first one is low liquidity ration and
financial health/unethical practices by the company.
The bank has low liquidity ratios. Calm down! I will explain it to you.
Bank liquidity ratio: Any time you deposit to the bank, the bank collect
your money and keep it safe for you. Who owns the money? It is you, but to the
bank, that your money is a liability and anytime you come to the bank to
withdraw your money, the bank is obligated to hand over your money to you. All
the deposits in the bank are liabilities to the bank.
Liquidity ratio is the ratio of a banks liquid assets (cash or assets
that can be turned to cash) to its liabilities (Mostly your deposits in the
bank). In Nigeria's banks are supposed to have a liquidity ratio of 30%( The
bank totals liquid assets is expected to exceed all the liabilities by 30%)
Skye bank liquidity ratio was very bad and it was a worrying sign
because customers could want to withdraw their money and the branch WILL NOT BE
able to hand over the customer money to him/her. So they resort to borrowing
from the CBN to mitigate the embarrassment. The CBN governor said ‘’ The result
of our examinations and forensic audit of the bank has, however, have revealed
that the Skye bank requires urgent recapitalisation as it can no longer
continue to live on borrowed times with indefinite liquidity support from the
CBN. The shareholders of the bank have been unable to recapitalize it.’’
The financial health and position of a Company are very important. How
much profit is the Company making? How much cash does the Company have? How
much debt is outside and who owes them? Does the owner of the Company withdraw
money from the company at will? What is the level of drawings of the company
investment and assets? Is their growth?
The Fiscal health of the bank was really worse. The Company loss in 2015
of N40.726 billion.was really bad and the downtrend continues unabated.If you
are in a business like an ‘ajo’(credit thrift) business and you made a
persistent loss in 4/5 years, something is wrong somewhere?
Interestingly the bank did not
deem it fit to institute cost-cutting measures to buck the trend. The bank
employee benefits and emoluments increase by 95 per cent in 2015 and the
general and administrative expense increased by 17%. That year, bad loans jumped up by 47 per cent
to N27.53 billion from N18.99 billion in 2014. Just imagine that?
The lifestyles of the directors
and key men leave more saliva to swallow.
The then chairman of the bank, Tunde Ayeni was indebted to the bank in
excess of N70 billion. He used his position as the chairman of the bank to
obtain loans well above the regulatory limits. (You see why I wrote my book
‘PREVENT YOUR EMPLOYEES FROM DEFRAUDING YOU’’)
The massive unethical and fraudulent practices in the bank leave much to
be desired.
Blatant, Unethical, Criminal Mismanagement.
In 2017, despite Nigeria’s ailing recession and Skye bank woes and
despite the debt and corruption scandals supposed to be hovering over his head,
Tunde Ayeni threw a lavish 50th birthday party for his wife Biola Ayeni, filled
with many who’s who, lots to drink, lots to eat and lots of lavish gifts..
There are other reasons why the bank license was revoked but the
aforementioned issues outlined above shows that the CBN acted drastically to
save depositors money but the CBN retain the old management and directors to
continue to manage the company under the Polaris brand.
I am of the view that as CBN has
taken over the bank, it ought to have sacked both Board and Management and
reconstitute a new Board and Management. The Directors and management of the
bank were responsible for the collapse of the financial institution and so The
Directors of Skye Bank must be held accountable; their properties should be
sold to offset the debts and not the ordinary shareholders that entrusted the
companies to them.”
LESSONS TO BE LEARNT
-Do not live beyond your means. Skye bank as an entity tried to grow
beyond their means and it backfired.
-Workplace fraud is critical to the management of any company whether
big or small. Keep your eagle eye on your company and ensure that you conduct
an audit exercise on your financial operations on a regular basis.
-Spread your money. Do not deposit all your savings in one bank. Spread
the risk by banking with 2/3 banks.
-Be interested in the financial health of your bank. Don't display don’t
care attitude’.It will not help you. Contact me on my FB page(fb.me/baasinat)
on how to go about it.
-Shareholders will definitely bear the brunt of the demise of Skye bank.
Meet a professional stockbroker before making any decision to invest in shares
of any company.
-Do a thorough feasibility/business plan before embarking on any project
and ensure that the plan is followed systematically and any deviation must be
properly analysed.
-Do not steal from your business. Most entrepreneurs are found wanting
on this. They steal from their company. Remember the entity concept. Your
Company is a corporate person and you are different from your company...
Contact me on my FB page(fb.me/baasinat) on how to go about it.
Thanks for reading.
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