Polaris bridge bank option saved N949.60bn depositors` funds in defunct Skye Bank, says Nigeria’s deposits insurer, NDIC

By  Jacob Ajakaiye, in Kano

Nigeria Deposit Insurance Corporation (NDIC), an agency of the federal government established for the protection of depositors fund in the nation`s financial system, says the recent adoption of a bridge bank option was an intervention measure taken to prevent the loss of N949.60 billion of depositors’ money in the defunct Skye Bank.

The bridge bank arrangement, according to the corporation, which culminated in the emergence of Polaris to take over the operations of the defunct Skye Bank, has also saved over 6000 jobs within the nation`s banking system, as well as help keep 277 branches of the bank alive.

Umaru Ibrahim, managing director of the NDIC, said the adoption of the bridge bank option was done in line with the primary objectives of protecting bank depositors and promoting public confidence in the entire financial system.

Umaru, who made this disclosure in the week, in his address during the corporation`s special day at this year’s Kano International Trade Fair, described a bridge bank as a temporary measure created by the deposit insurer to operate a failed bank until it is stabilized and solid enough for it to be sold to interested payers.

“It is useful to inform us that, the NDIC adopted bridge bank option to resolve the failure of the defunct Skye Bank Plc. Following the revocation of its operation licence by the Central Bank of Nigeria. A bridge bank is a temporary bank created by the deposit insurer to operate a failed bank until it is stabilized and sold to an interested buyer.

“The benefits of a bridge bank are not far-fetched: The resolution option is less disruptive to rendition of bank services, unlike outright liquidation or depositors` payoff. It is also less costly to the entire macro-economy, while staff are retained in the bridged bank.

 “With this expert arrangement, Polaris was able to continue banking operations in the 277 branches of the defunct Skye Bank, over 6000 jobs were saved and depositors have unhindered access to their deposit in excess of N949.60 billion as at June 2018.

“Meanwhile, all those that contributed to the failure of the bank are being investigated by relevant agencies of the government and would be prosecuted to serve as deterrent to others,” he explained.

Umaru, who was represented at the occasion by Bashir Nuhu, controller, Kano Zonal Office, further disclosed that the corporation will continue to work closely with the CBN to ensure effective supervision of the banks so as to ensure strict adherence to rules and regulations guiding banking operations.

“This is to protect depositors in the domestic financial system against fragrant disregard of extant rules by management of financial institutions. The collaboration with the CBN will help to minimize the occurrence of unlawful insiders` dealings, weak internal control and the overall non-compliance to prudential guidelines. The NDIC, in collaboration with other stakeholders, will continue to promote good corporate governance in the nation’s banking system.

“As you are all aware, the CBN recently revoked the licenses of 154 MFBs [micro finance banks] and 6 PMBs [primary mortgage banks] due to their insolvency. The action became necessary due to erosion of their capital base, poor liquidity, inept management, as well as some insiders helping themselves with loans they never intended to pay back.

“The above were further worsened by boisterous life style of the management that remained at variance with the philosophy of micro finance banking operations. The NDIC has commenced verification of insured depositors and will soon start paying the verified claims to appropriate depositors in fulfillment of our core mandate.

“From the record obtained so far, majority of the depositors especially, in the MFBs, have less than #200,000 in their accounts , which implied that NDIC will hopefully cover 100 % of the depositors `funds in the affected MFBs” he added.