Nigeria’s Stock Exchange suspended trading in the shares of Skye Bank on Monday after the central bank withdrew the lender’s operating license and created a bridge bank to take over its assets.
In the last trade recorded on Friday, shares in Skye were worth 0.77 naira – 96 percent down from their peak in 2008, when the bank was valued at 202 billion naira ($660 million).
The suspension and the central bank’s actions on Friday, marked the end of years of efforts to save Skye, once seen as one of the country’s main banks, formed through a merger of four smaller rivals in 2006.
The central bank shored it up in 2016 with a 100 billion naira capital injection after sacking its top management for failing to meet minimum capital requirements.
Last year the central bank extended its guarantees to Skye Bank for another year while considering the bank’s recapitalisation proposal.
On Friday, Central Bank of Nigeria (CBN) Governor Godwin Emefiele said Skye’s shareholders had not managed to recapitalise it and the bank could “no longer continue to live on borrowed time with indefinite liquidity support from the CBN”.
The International Monetary Fund (IMF) has urged Nigeria in the past to put a time limit on regulatory forbearance for undercapitalized banks.
Last year four lenders were trading below the country’s minimum liquidity ratios, two members of Nigeria’s central bank monetary policy committee said.
Akintunde Majekodunmi, banking analyst at Moody’s, said the central bank’s action on Skye Bank was positive for the sector and would contain wider risks for the industry.
“Taking away Skye Bank Plc’s license and transferring its assets and liabilities to Polaris Bank … will limit the threat of contagion to Nigeria’s banking system from the failure of a Systemically Important Bank,” Majekodunmi said.
Calls to Skye’s investor relations line were answered with a recorded message saying the phone number was switched off.
The regulator created Polaris Bank, which is owned 100 percent by Nigeria’s state-run bad bank. That institution, the Asset Management Corporation of Nigeria, has injected capital into Polaris and is trying to find new investors to take it over.
Skye is yet to publish 2016 accounts after it reported a 37.65 billion naira loss for 2015, its last published accounts.