Polaris Bank as alternative to ‘collapse, liquidation’

Polaris Bank. Photo/ Imbuednation

 By Chijioke Nelson, Asst. Editor, Finance/Economy

The emergence of Polaris Bank to take over the defunct Skye Bank has prevented the extreme situation and applications of two terminologies- “collapse and liquidation”, associated with unfavourable banking industry outcome. A bank is said to have collapsed when it is unable to meet its obligations to its depositors or other creditors, because it has become insolvent or too illiquid (without cash and near-cash asset) to meet its liabilities.
But liquidation follows almost immediately a bank has been declared collapsed, by bringing the business to an end, while distributing the remaining assets to claimants (depositors).

The troubles with the two situations are that depositors, workers and the entire financial system would get the hit, bothering on low confidence and suspicions against the rest, which may last for a longer period.
This is not good for any economy and a near-impossibility to any to carry on without the banking system in the contemporary world.
Polaris Bank, under the management of the Asset Management Corporation of Nigeria (AMCON), has a fresh N786 billion soft and long term financing, brokered at single digit interest rate, which also offers an opportunity for the bank to embark on seamless loan supports to small businesses.
At the inception of the intervention in Skye Bank’s challenges in July 2016, the Central Bank of Nigeria had injected N350 billion, to keep the bank afloat, which the new management used to stabilize the operations, before final takeover by Polaris Bank.
Since the resumption of operations on September 24, The Guardian investigations showed that there have not been records of transactional hitches, as customers withdraw and make deposits from their accounts.
Also, volunteered responses through the social media showed that the initial fears and rush to branches have waned, while some branches have worn the new brand identity.

CBN Governor, Godwin Emefiele, said the result of examinations and forensic audit of the bank revealed that the Skye Bank requires urgent recapitalisation and can no longer continue to live on borrowed times with indefinite liquidity support from the CBN, but the shareholders of the bank have been unable to recapitalise.
According to him, the first intervention in 2016 and the emergence of Polaris Bank now, were in considerations of imminent job losses, noting that if a liquidation option had been adopted then it would have been bad considering the state of the economy.
He added that the objectives have been fully achieved now and the bank has been able to meet customer obligations, having curtailed the liquidity hemorrhage and restored depositor confidence.
“As a responsible and responsive regulator and in consultation with NDIC, we have decided to establish a bridge bank- Polaris Bank, to assume the assets and liabilities of Skye Bank.
The strategy is for AMCON to capitalise the bridge bank and begin the process of sourcing investors for a buy out, hence the licence of the Skye Bank is hereby revoked.

“We wish to assure all depositors that under this arrangement, their deposits shall remain safe and that normal banking services shall continue in the new bank on to enable customers to transact their businesses seamlessly.
“Thus, all customers of Skye Bank shall be automatic customers of the new bank and their accounts and records duly purchased by Polaris Bank,” he said.
He said that given the good performance of the board and management, CBN shall retain them, as well as all employees of the defunct Skye Bank under a new contract, unless any employee decides to opt out.
“We wish to assure the general public that the Nigerian banking industry remains safe and resilient and that the CBN will continue to live up to its responsibilities of promoting stability in the banking and financial system,” he added.
The apex bank and Nigerian Deposit Insurance Corporation (NDIC) were unanimous in affirming the continued operations of customers’ accounts under Polaris Bank.

In the era of banking consolidation, which was regulatory-induced, there were job losses, as many banks that could not scale through the minimum requirement either merged or liquidated, leaving their workers “on their own”.
The same happened in the period of Lamido Sanusi-led banking stress test, which engulfed three banks.
Of course, the collapse of Skye Bank, an institution designated as Systematically Important Bank, with estimated 5,000 workers, would have spelt doom for workers and the economy, but averted by the regulatory interventions.
But in the new Polaris Bank, the board and management that restored stability in Skye Bank prior to the take over have been retained, while all the employees of Skye Bank shall be absorbed by Polaris Bank under a new contract, unless any employee decides to opt out
It is also a positive trend for depositors, who would have scampered for their monies in the bank, coupled with the long period of wait for settlements by the Nigeria Deposit Insurance Corporation (NDIC).

It is worth noting that the NDIC would only settle depositors to the tune of the valuation of the recovered assets of the bank.
Polaris Bank, as a full fledged bank under the supervision of AMCON, represents a going concern, as opposed to collapse and liquidation and may offer hope of any possible left over for the shareholders, after their investments were washed away by “mismanaging officers.”
But a source from the regulatory corridors affirmed that there is a vicious campaign going on against the newly established, identifying those behind the smear campaign as the same evil people who ruined the defunct Skye Bank.
“Their plot is to create a run on Polaris Bank to cover their tracks and mask their abortive attempt to defraud both the depositors and shareholders of Skye Bank,” the source said.

Already, a group, identified as Concerned Depositors of Polaris Bank Limited, has alleged that depositors and shareholders funds were shared by way of non-performing loans, which now denied them of their investments.
“We believe and trust in the integrity of CBN and NDIC and we applaud the innovative manner in which they have managed the Skye Bank crisis. EFFCC should now step in and get hold of these thieves and jail them for corporate fraud and economic sabotage,” the group said.
Meanwhile, NDIC has assured that events leading to capital erosion of the defunct Skye Bank Plc and the roles played by its officers would be unearthed soon.
The Chief Executive Officer of NDIC, Umar Ibrahim, while addressing the newsmen on the sidelines of the Africa Regional Committee workshop of the International Association of Deposit Insurers, in Lagos, yesterday, said the investigation has already begun.
He said: “They are being investigated and I can assure you that when the time comes, the relevant security and law enforcement agencies will do their work.”