Branch closures, Job Cuts, Hike in Charges: Signs Your Bank May Be Failing
- The signs of a failing bank could be myriad, but there is tale-tale evidence a bank is heading to the cliff
- Some of the symptoms could be when a bank begins to care less about its service offering and customer satisfaction
- Others could be job cuts, branch closures, and extreme hikes in fees, among others
Despite several assurances by the Central Bank of Nigeria (CBN) that Nigerian banks are healthy, there have been some signs of stress in the banking sector.
The recently failed Silicon Valley Bank in the US, which almost triggered another global financial crisis, sounded the alarm bells for depositors rattled by its closure.
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Funds insured by NDIC
When a bank fails, the Nigeria Deposit Insurance Corporation (NDIC) should protect customers’ savings, but having access to funds from a failed financial institution can be challenging.
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Here are signs to watch out for if your bank may be failing.
Eroding financial ratios.
Customers of a bank can get detailed financial ratios from the Central Bank of Nigeria. The information can be confusing, but it shows a bank's performance. You can see if your bank has a healthy financial ratio.
Deposits
You can check the year-to-year comparison of total deposits for a bank at CBN’s website. A sharp decline means customers are closing their accounts.
Delayed financial reporting:
Some factors could contribute to banks’ delayed financial reporting.
Recently some Nigerian banks delayed their financial reporting due to impairments caused by Ghana’s default bonds.
Some banks posted billions in impairment losses and stated in their financials that the delays resulted from the losses they incurred due to the Ghana bonds.
Delayed financial reporting could be the trigger; you need to know that your bank may be failing.
If you hear a report that a bank has delayed its financial details, it may be a sign they are struggling.
Layoffs.
Drastic job cuts and layoffs are ominous signs. Even if the bank is not failing, job cuts mean the bank is trying to cut costs due to extreme financial struggles.
Branch closures.
See this as a more extreme version of job cuts. Reducing the number of bank branches is not a bad sign, but if it becomes more frequent, there is something fishy.
Hikes in charges
Healthy banks would typically do everything to attract new customers. One of the signs that a bank is beneficial is that they advertise regularly, offers competitive savings account rates and reasonable fees,
Troubled banks tend to go into a defensive mode where they don’t care about new businesses and hike fees to get more out of existing customers.
Some banks may hike fees because the macroeconomic environment has changed, but customers should be careful if it is a severe hike.
According to Money Rates, the signs may not be definitive, but the more customers notice these signs, they should be careful and consider moving their funds to more stable banks.
UBA, Ecobank buy 2: List of 46 failed Nigerian banks and dates of closure
Legit.ng reported that over the past 28 years, at least 45 commercial and merchant banks had ceased operations.
Data obtained revealed that the banks had their lienses revoked by the Central Bank of Nigeria, between 1994 and 2006.
In 2018, the CBN revoked Skye Bank's operating license, and Polaris Bank was authorized to take over.
Source: Legit.ng
