CBN Affirms Confidence in Skye Bank, Institutes Guarantee Line


Thursday, July 21, 2016 4:41pm /Skye Bank Plc

The Central Bank of Nigeria (CBN), has affirmed its confidence in
Skye Bank Plc., through a guarantee line which ensures that withdrawals it suffered in the wake of the undue panic of last week does not adversely affect its operations.

This development analysts believe lends credence to the regulator’s earlier assertion that Skye Bank is a Strategically Important Bank (SIB), with substantial market share, interconnectedness and significant relevance to the nation’s financial systems stability.

A leading international news organisation, Bloomberg, reports that the apex bank confirmed this development through a statement by the CBN spokesman, Isaac Okoroafor who stated that the undisclosed guarantee sum would assist the bank to shore up its liquidity and maintain its level of operations.

“The short-term lending facility will allow the management of the bank to ensure that some withdrawals it suffered in the wake of the undue panic of last week do not adversely affect its operations”, Okoroafor said.

In addition, “the CBN issued guarantees to depositors and creditors of Skye Bank as a demonstration of the bank’s health”, Okoroafor further explained.

The guarantee line is coming on the heels of CBN’s recent intervention in the bank following the voluntary resignation of the Board of Directors of the bank and the consequent re-constitution of the Board with a new management team led by Mr. M.K. Ahmad and Mr. Adetokunbo Abiru, who emerged as Chairman and Group Managing Director respectively.

The CBN guarantee will not only enhance Skye Bank’s interbank trading and activities; but will also provide assurance to the other banks to continue to deal with and trade with the bank’s instruments in the interbank market.

The CBN had similarly introduced a bank credit guarantee package for some banks in 2009 in the wake of the global economic crisis which affected both the local and global financial markets.

The bank guarantee programme enables financial institutions to meet their financing needs during a period of record high credit spreads and aids the successful return of the credit market to near normalcy, despite the recession and slow economic recovery.

The affirmation of confidence in Skye bank continues to grow as no fewer than two state governments have expressed confidence in the bank’s ability to deliver on crucial mandates in the last two weeks. First, it was the Lagos State government which directed its ministries, departments and agencies to establish business relationship with the bank on account of its track record and pedigree in mandate execution.

We had earlier reported that on Monday July 18 2016, the Kogi State government re-appointed Skye Bank as lead collecting bank for its Internally Generated Revenue (IGR) and services. The appointment ensures that the bank is responsible for collecting all its revenue just as other agent banks are required to pay their collections to Skye Bank on behalf of the state government.

In October 2008, as part of a co-ordinated response by the U.S. government to the disruption in the financial system and the collapse of credit markets, the Federal Deposit Insurance Corporation (FDIC) implemented the Temporary Liquidity Guarantee Program (TLGP). By calming market fears and encouraging lending, the TLGP helped bring stability to financial markets and the banking industry during the crisis period.

The TAGP guaranteed in full all domestic noninterest-bearing transaction deposits, low-interest NOW accounts, and Interest on Lawyers Trust Accounts (IOLTAs) held at participating banks and thrifts through December 31, 2009. The deadline was extended twice and expired on December 31, 2010.

The TAGP brought stability and confidence to banks and their business customers by removing the risk of loss from deposit accounts that are commonly used to meet payroll and other business transaction purposes.

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