Rating agency Moody’s reacts to Skye Bank license revocation

Global rating agency, Moody’s has welcomed the decision by the Central Bank of Nigeria (CBN) and the Nigerian Deposit Insurance Company (NDIC) to revoke the operating licence of Skye Bank as well as the creation of Polaris Bank Limited.

Moody’s Vice President and Banking Analyst, Akintunde Majekodunmi, explained in a statement that the move by the regulators would help limit likely systemic failure in the banking system.

According to him:

“Taking away Skye Bank Plc’s licence and transfering its assets and liabilities to Polaris Bank, a newly created bridge bank, will limit the threat of contagion to Nigeria’s banking system from the failure of a Systemically Important Bank.

“This shift is credit positive in that it will contain systemic risks for the Nigerian banking system as a whole”.

Recall that the New York-based rating agency had earlier this year released a note on Nigerian Banks where the rating agency said it has a stable outlook for the banking industry.

Moody’s had also forecast that Nigerian economy would recover over the next few years but at a slow pace.

The Apex Bank on 4th of July 2016 took regulatory action on Skye Bank Nigeria Plc. This action led to the resignation of the Chairman, all Non-Executive Directors on the Board as well as the Managing Director, Deputy Managing Director, and the two longest-serving Executive Directors on the Management Team.

According to CBN, the performance of the bank has improved considerably compared to the pre-July 2016 era. However, the result of examinations and forensic audit of the bank revealed that 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 recapitalise it.

The apex bank has established a bridge bank, Polarise Bank, to assume assets and liabilities of Skye Bank. This will enable the  Asset Management Company of Nigeria (AMCON) to capitalise the Bridge Bank and begin the process of sourcing investors to buy out AMCON. Nigeria Deposit Insurance Company (NDIC)  has also injected N786 billion into the new bank.

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