AMCON To Sell Polaris Bank In 2 Years

by Bamidele Ogunberu Posted on October 12th, 2018

Lagos, Nigeria : The Asset Management Corporation of Nigeria (AMCON) plans to sell Polaris Bank within two years. Ahmed Kuru, the chief executive officer of AMCON made this known at a presser in Lagos today.

The Central Bank of Nigeria (CBN) had revoked the operating licence of Skye Bank in September for failing to meet capital and liquidity requirements.

Polaris Bank was subsequently approved as a bridge bank to take on the assets and liabilities of Skye Bank.

He said the agency has met with the management of Polaris Bank and will sell the financial institution in less than two years.

Kuru added that the authorities intervened in the Skye Bank issue because of “a lot of systemic issues”, including saving more than 5,000 jobs and almost N1 trillion in deposits.

He said AMCON will advertise for financial advisers for the sale of Polaris Bank after an investigation into the cause of its capital and liquidity challenges.

“The divestment must be quick. It’s a very big bank and if you allow anything to happen to it, it will affect some other financial institutions,” Kuru said.

“Because we have put a lot of money there, where we find out that something wrong has been done, I can assure you that people will be held responsible.”

Kuru said AMCON, established in 2010 to buy bad debts, had set a 2023 deadline to dissolve its operations, even as it is still struggling to recover non-performing loans.

The Managing Director, Nigeria Deposit Insurance Corporation (NDIC), Alhaji Umaru Ibrahim earlier shed more light on why the regulatory agency adopted the “Bridge Bank” model to take over the operations of the defunct Skye Bank.

Ibrahim revealed that it decided on the bridge bank option because it was the most effective and efficient way to resolve the Skye Bank crisis without much loss to the fragile financial system and the economy generally.

He further revealed that the bridge bank option saved the country of contagious risks that could have led to a gap in the financial system, loss of more than 6,000 jobs and disruption of banking services in the 300 branches of the defunct bank.

He noted that while the corporation has other bank failure resolution mechanisms 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 searching for would-be investors and addressing other fundamental issues.

“On the whole, the bridge bank ensures preservation and continuity of daily operations that were hitherto being undertaken by the failed bank throughout all its branches and guarantees all depositors immediate access to their deposits. It ensures that no jobs are lost in the resolution process.”

Ibrahim noted that the processes leading to the establishment of the bridge bank was actually very thorough and exhaustive as provided for under Part VIII, Section 39 of the NDIC Act (2006) as amended.

According to him, first step involves series of consultations between the NDIC and Central Bank of Nigeria (CBN) after which the name and bridge bank was 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 an operating licence to the bridge bank to enable it commence operations as a fully licensed 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.

The fourth process involves the withdrawal of the operating licence of the Skye Bank Plc by the CBN, upon which the closed bank is effectively handed over to the NDIC being the provisional liquidator, as provided for under the NDIC Act, 2006, as amended. The NDIC commences the liquidation process by filing appropriate applications at the Federal High Court.

Recall that Afribank, Bank PHB, and the Spring Bank were subjected to the same bridge Bank transfer model in 2011.

Ibrahim hinted that the bridge bank is not an end in itself as it can be best described as a special purpose vehicle designed to return a failing bank to profitably bearing another name. If it fails to return to profitability in the time-frame envisaged by the Deposit Insurer, the bank will be liquidated.

EARLIER : Polaris Bank Takes Over Nigeria’s Skye Bank

Polaris Bank has taken over the assets and liabilities of Skye Bank, the Central Bank of Nigeria (CBN) said today. Consequently, the CBN has revoked the operating licence of Skye Bank Plc with immediate effect.

Governor of Central Bank, Godwin Emefiele, disclosed this during a press briefing in Lagos on Friday.

Umaru Ibrahim, chairman of the Nigeria Deposit Insurance Corporation (NDIC), also confirmed this  to journalists on Friday.

Umaru said the NDIC in collaboration with the Central Bank of Nigeria (CBN) has approved that a bridge bank will be established.

Addressing journalists, Godwin Emefiele, CBN governor, said the bridge bank, Polaris Bank, will take on the assets and liabilities of Skye Bank.

“Consequently, Polaris Bank Limited has been issued operating licence by the CBN and shall commence banking business from today, Friday, 21st September,” Umaru said.

“The operating license of Skye Bank has been revoked by the governor of the Central Bank and the NDIC has commenced its liquidation. The capitalisation of Polaris Bank Limited is being done by the Assets Management Corporation of Nigeria through the injection of about N786 billion to return the bank to soundness and profitability so as to enable its subsequent sale to credible and financially sound third-party acquirers.”

Emefiele said that although the bank’s performance improved after July 2016 when the Assets Management Corporation of Nigeria and the CBN stepped in.

“The result of our examinations and forensic audit of the bank 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.

“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 Monday, 24th September 2018, to ensure customers to transact their businesses seamlessly.”

The shares of Skye Bank will be temporarily suspended on the Nigerian Stock Exchange and Polaris Bank will begin operations on Monday in all Skye Bank offices.

Polaris is a bridge bank set up in concert with NDIC and AMCON and the unveiling was a guarded secret until Emefiele’s announcement in Lagos today. According to Emefiele, the bridge bank, Polaris Bank will be getting a single digit interest long term facility of N786 billion from the Assets Management Corporation of Nigeria (AMCON).

The winding up of the bank came five months after the CBN renewed the mandate of the board of the for an additional two years. Emefiele passed a confidence vote on the board and said it shall continue to run the bank.

The bank’s board comprises Mr Muhammad Ahmad and Mr Tokunbo Abiru, Chairman and Group Managing Director respectively.

The CBN back in April also said the board was given a new two-year term to turn around the operations of the bank.

“In the two years of the board’s mandate, the team has stabilised the institution, entrenched sound corporate governance and risk management practices, and restored depositors’ confidence.

“In recognition of the stellar performance of the board, the CBN has renewed the Board’s mandate for an additional two-year term till 30th June, 2020.

“We wish to assure the Bank’s shareholders and stakeholders of the commitment of its board and Management, working with the CBN, to conclude various initiatives to achieve a positive turn around for the bank and deliver value to its stakeholders.”

Also, the Managing Director and Chief Executive of Nigerian Deposit Insurance Corporation (NDIC), Alhaji Umaru Ibrahim said the option of a bridge bank was to ensure that the depositors of the bank are taken care of and deposits are not lost.

Ibrahim said that the bridge bank would also ensure that there would be no job losses as Polaris Bank would retain all staff of the distressed bank under a new contract.

Meanwhile, the share price of Skye bank on Friday gained 4.05 percent at 77 kobo.

The stock is expected to be placed on suspension from Monday in accordance with bridge bank procedures.

Here is the full statement by CBN Governor Godwin Emefiele:

You will recall that on 4th July 2016, we took a regulatory action on Skye bank Nigeria PLC. Specifically, 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

At that time the proactive action was informed by unacceptable corporate governance lapses as well as the persistent failure of Skye Bank PLC to meet minimum thresholds in critical prudential and adequacy ratios, which culminated in the bank’s permanent presence at the CBN Lending Window.

The focus of the action then was to save depositors’ funds and to ensure that the bank continued as a going concern, being a systemically important bank. Part of our intention was also to stem the imminent job losses to staff if a liquidation option had been adopted. These objectives have been fully achieved and the bank has been able to meet customer obligations, having curtailed the liquidity haemorrhage and restored depositor confidence.

“Indeed, the bank’s performance has improved considerably compared to the pre-July 2016 era.

“The result of our examinations and forensic audit of the bank has, however, 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.

As a responsible and responsive regulator and in consultation with the Nigerian Deposit Insurance Corporation (NDIC), we have decided to establish a bridge bank, Polaris Bank, to assume the assets and liabilities of Skye bank. The strategy is for the Asset Management Company of Nigeria (AMCON) to capitalise the Bridge Bank and begin the process of sourcing investors to buy out AMCON. By this decision, the licence of the defunct 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 Monday, 24th September, 2018, 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.

Given the good performance of the board and management, the CBN shall retain them. In addition, all employees of Skye Bank shall be absorbed by Polaris 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.”

About Skye Bank

Skye Bank Plc which has metamorphosed into Polaris Bank was a product of the merger of five legacy banks as a result of the banking industry consolidation and recapitalisation exercise of 2005. The legacy banks were Prudent Bank Plc, EIB International Plc, Bond Bank Limited, Reliance Bank Limited and Co-operative Bank Plc.

Following the merger, the bank opened three West African subsidiaries in Sierra Leone, Gambia and Guinea.

In 2014, the bank won the bid to acquire the 100 per cent ownership stake of Asset Management Corporation of Nigeria (AMCON) in Mainstreet Bank Limited, a deal which made Skye Bank one of the top four banks in Nigeria. But the move, may also have undermined its books as the bank was taken over by the CBN in 2016.

The defunct bank is quoted on the Nigerian Stock Exchange (NSE) with over 450,000 shareholders.

Your Money Is Intact- CBN Assures All Ex-skye Bank Customers

The Central Bank of Nigeria has asked all customers of former Skye Bank now Polaris bank, not to fret or panic as their money in the bank is safe. This evening, the apex bank revoked the license of the former Skye bank.

The CBN governor, Godwin Emefiele said the decision had been reached following the inability of the owners of former Skye bank to shore up the capital of the distressed bank which had earlier received a N350 billion intervention in July 2016.

He announced that the Cental bank had injected N786 billion into the bank to return it to soundness and profitability. In a statement released this evening, the apex bank says the former Skye Bank which would now be known as Polaris bank will continue banking activities all branches of the former Skye Bank on Monday September 24th.

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Bamidele Ogunberu

Bamidele Ogunberu

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