- Bridge Bank Option to Protect Skye Bank –NDIC
The Nigeria Deposit Insurance Corporation has said the use of the bridge bank option to resolve the failure of the defunct Skye Bank Plc is the most effective way to curtail the spread of systemic risks that can endanger the financial system and lead to loss of jobs.
The Managing Director, NDIC, Alhaji Umaru Ibrahim, said the establishment of Polaris Bank was in line with the corporation’s core mandate of guaranteeing deposits and resolving bank failure and illiquidity.
He stated that while the corporation had other bank failure resolution measures such as purchase and assumption, provision of liquidity support, assisted merger, takeover and management of ailing banks and outright liquidation, the bridge bank option allowed unhindered operation of the lender, while efforts to source for investors and address other fundamental issues were continuing.
Ibrahim said, “Unlike the other failure resolution options such as outright liquidation, which could result in delays in depositors’ access to their total funds, the bridge bank guarantees depositors uninterrupted operation of their accounts. The same benefits apply to the creditors of the failing bank, whose liabilities are assumed by the bridge bank.
“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.
“The adoption of the bridge bank as the resolution option of the defunct Skye Bank will save 6,000 jobs and ensure continuity of banking services in the 300 branches of the defunct bank.”
He noted that the stability of the banking system could not be over emphasised as the establishment of Polaris Bank to resolve the failed Skye Bank was done in the interest of depositors, while its establishment also protected the employees of the failed lender by preserving their jobs.
Ibrahim explained that the NDIC undertook a strenuous due process in the establishment of Polaris Bank as a bridge bank to take over the defunct Skye Bank Plc.
According to him, although the establishment of Polaris Bank before the revocation of the operating licence of Skye Bank may appear spontaneous to the uninformed, the processes leading to the establishment of the bridge bank are thorough and exhaustive as provided under Part VIII, Section 39 of the NDIC Act (2006) as amended.
