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CBN, Skye Bank, bank customers and way forward – Part 2

By Uju Ogubunka
22 July 2016   |   4:18 am
To elicit the co-operation of the entire staff, there will also be the need to assure and re-assure them of the stability of their employment, especially for as long as they play their expected rules creditably.
CBN

CBN

To elicit the co-operation of the entire staff, there will also be the need to assure and re-assure them of the stability of their employment, especially for as long as they play their expected rules creditably. In this wise, those who may test the will of management should quickly be shown the way out in order not to pollute the willing, co-operating and performing ones. It is advisable that any staff disengagement must be done within due process via established policies. Otherwise, attention of the bank’s leaders may be distracted by avoidable human resource-occasioned problems such as litigations and adverse publicity.

The other important thing is to urgently rebuild the liquidity of the bank. The CBN, given that the bank is now its baby, so to say, can be of temporary assistance by granting enough credit facility for a specified reasonable period. But the leaders of the bank must in collaboration with CBN determine the needed level of re-capitalisation and source the money.

This will also impact positively on capital inadequacy challenges. Essential for liquidity enhancement is the importance of embarking on well focused, coordinated and aggressive debt recovery exercises. Experienced professionals abound in the industry that can assist the bank in this regard without the need for in-house employees leaving their critical job posts for debt recovery assignments.

But before embarking on this remedial exercise, it is imperative that the entire portfolio of sticky debts be profiled one-by-one with the intention of determining the feasibility of recovery. The debts with the greatest chance of quick recovery should be scaled up for immediate action. They will serve as the low-hanging fruits. Others that may prove more difficult to recover quickly perhaps, because of dwindling fortunes of the businesses that necessitated granting the credits, can be re-negotiated and/or restructured. Concessions in forms of interest waivers and stoppage of further interest charges may also be considered subject, of course, to legal and regulatory provisions.

Where collaterals that back-up the debts are easily identifiable, marketable and realisable at good values, due process should be followed for their foreclosure and disposal. Personal guarantees (if any) executed by the directors of defaulting borrowing companies and/or directors on their own personal accounts could be a necessary fall-back position as well. It is expected that the law courts will be expected to play patriotic roles in ensuring that unnecessary technicalities are not deployed to waste time and money in determining any case that may be taken to the courts.

It is also expected that, given the said huge non-performing insider credits in the bank, the Economic and Financial Crimes Commission (EFCC) should be able to render help in ensuring the delinquent borrowing companies, directors and managers repay their substantial indebtedness to the bank.

This is particularly important because the roles played by the affected directors and managers could be regarded to tantamount to financial and economic crimes. To further make life easier and faster for Skye Bank to quickly recover fully, the Asset Management Corporation of Nigeria (AMCON) can step in to buy some of the non-performing debts. This will create immediate liquidity for the bank. Indeed, the issue of debt recovery can produce good liquidity for the bank if properly planned and executed especially if the underlining businesses for which the credits were taken are still thriving.

While proceeding as fore-highlighted, it is imperative that cost of running the bank must be effectively managed. A thorough review of the bank’s cost profile is necessary; major cost – lines/items should be identified, reviewed and watch-listed. Every existing area of wastages and leakages should be blocked while envisaged new ones must be prevented. Cost savings will further boost liquidity the bank needs to meet its matured or maturing obligations.

In order not to put pressure on the existing challenging liquidity position, the bank must not be found extending new credits until stability returns and is guaranteed. This will obviously affect the bank’s income earning capacity and hence profitability. However, a focus on non-interest income earnings will be a good route to remedy part of the bottom-line situation.

In addition to the above suggested ways forward, Skye Bank must ensure it keeps or quickly re-negotiates earlier agreements. This is one area that can easily be over-sighted despite its potential high risks. It should not wait for its creditors, for instance, to begin to call on it before it commences reaching out to them. Waiting may further jeopardise its credibility and image with resultant negative consequences. Similar to managing its outstanding prior agreements is the management of its image.

In word and deed, the Board, Management and Staff must be mindful of the image of the bank they create within and outside the bank. They must appreciate that mere “body language” and flippant corridor discussions can send unexpected wrong signals. Perhaps, to prevent employees from falling into image-damaging traps, a properly articulated and well delivered awareness programme may be necessary. Most importantly, the primary image makers and managers of the bank must face anticipated and arising challenges within this side of the business proactively and squarely.

As earlier pointed out, Skye Bank, now on a balance, waiting for where to skew towards, has quite a number of things that must be done quickly to assure it does not fall on the wrong side of the pendulum. Some have been highlighted above. Perhaps, the greatest single success factor is for the Board, management and staff to sincerely commit to obeying the laws, rules, regulations, codes and norms of banking. If Skye Bank gets everything else right but fails in this regard, the resultant promise is a date with the negative side of history.

While, therefore, we welcome back Skye Bank, wish bank customers good luck and congratulate CBN, one thing that must not elude us is that lessons learnt from the bank’s episode should be front-loaded to guide and guard bank management, regulation and supervision. The sole aim should be to proactively prevent a re-occurrence.
Concluded Dr. Ogunbunka is President Bank Customers Association of Nigeria (BCAN)