The Central Bank of Nigeria (CBN), in its economic report for the half year ended June 2018 sounded a note of caution concerning three financial institutions in the country. The banks which were not named failed to meet liquidity requirements.
With the exception of three (3) commercial banks, all others met the minimum regulatory liquidity ratios of: 30.0 per cent for commercial banks; 20.0 per cent for merchant banks; and 10.0 per cent for non-interest banks, at end-June 2018.
What liquidity ratio means
Liquidity ratio is the ratio of a banks liquid assets to its liabilities. In other words, a banks cash balance plus assets that it can easily convert to cash to the total liabilities owed by the bank, which is typically your deposits.
A liquidity ratio is important because it states how much cash a bank has to meet the request of its depositors.
A pointer to the banks
While not stated, the defunct Skye Bank (now Polaris Bank Limited) may have been one of the affected banks. The CBN had in September this year revoked the operating license of the bank and handed over its assets and liabilities to a bridge bank Polaris Limited.
CBN Governor, Godwin Emefiele in a press release, stated that the bank’s licence was revoked as the CBN was unwilling to provide liquidity indefinitely.
The result of our examinations and forensic audit of the bank has, however, revealed that Skye bank requires urgent RECAPITALIZATION as it can no longer continue to live on borrowed times with indefinite liquidity support from the CBN.