Union Bank, Polaris Bank, and Keystone Bank: Stable” on Paper, Shaky in Reality
The March 31, 2026 recapitalization deadline was supposed to be final. Thirty-three banks met it, raised N4.65tn, and lifted sector-wide capital adequacy above Basel benchmarks, demonstrating their competence to live up to the expectation of the regulatory authorities and other stakeholders. However, three institutions failed to cross that line. Union Bank, Polaris Bank, and Keystone Bank missed the threshold. Collectively N350bn short of the N200bn national licence floor, they failed the very test designed to separate the strong from the weak.
But while the outcome of the recapitalization exercise is not unusual, the response of the regulatory authorities has raised a serious concern. Instead of enforcing the outcome, the Central Bank of Nigeria chose to move the goalpost. First came a three-week extension. Then came “allowances tied to judicial and regulatory processes.” The CBN is trying to be smarter, seeking to avert a run by preempting public interpretation before panic sets in. Director of Banking Supervision Olubukola Akinwunmi insisted the banks have “capacity” but are held back by court cases and paperwork, while Governor Olayemi Cardoso urged the public not to panic. Keystone, now 100% Federal Government-owned after a February 11, 2025 court-ordered forfeiture of Sigma Golf’s shares, declared itself “safe, healthy, strong, and resilient.” The question remains, are those banks really stable, or just stable enough to keep depositors from running?
Banking is risk management because the business is maturity transformation; banks borrow short from surplus units who demand maximum liquidity and the best rates, then lend long to deficit units who want cheap, available funds, while shareholders require adequate returns, regulators insist on prudence, and the wider community expects responsible corporate citizenship. These five constituencies exist in permanent conflict; cash satisfies depositors’ liquidity but destroys shareholder profit, while loans maximize yield yet jeopardize liquidity and regulatory safety.
Measured against these obligations, Union Bank, Polaris Bank, and Keystone Bank have failed all five; surplus units are kept calm only by CBN assurances, not by inherent liquidity, as the banks survive on regulatory forbearance after missing the N200 billion recapitalisation floor by N350 billion collectively. Deficit units face uncertainty because contested ownership at Union and state wardship at Polaris and Keystone freeze lending appetite and deter new capital. Shareholders have been decimated; Union’s legacy investors won a court ruling nullifying CBN takeover only to see it appealed, while Keystone’s February 2025 forfeiture erased Sigma Golf and Alhaji Umaru H. Modibbo’s equity entirely, leaving retail holders with certificates that memorialize losses. Regulators are compromised; the CBN dissolved their boards in January 2024 for BOFIA breaches yet now props them up as “stable,” substituting deadline extensions for resolution and socializing risk while executive pay remains intact. The community at large bears the cost; instead of maximizing opportunity, these banks embody a suspended state where governance failed, private capital will not enter, and taxpayer exposure looms, proving that when a bank cannot satisfy depositors, borrowers, owners, regulators, and society together, calling it “stable” is only a deferral of collapse.
The waiver, however, is not the scandal. The scandal is what the waiver protects, and who it leaves exposed. While the CBN has a duty to manage disclosure to avert a run, its approach has been disingenuous. For years, material details on the scale of insider abuse, related-party exposures, and the true depth of capital impairment were kept from the public. Only when pressure mounted did CBN-appointed management teams release fragments about the “dirty deals perpetrated under their watch.” By then, private shareholders had already been dispossessed and prospective investors were left flying blind. Transparency, in effect, became a tactical weapon, not a regulatory principle. Damning facts were rationed until the heat on the CBN itself forced selective leaks.
To be clear, the worst infractions predate the current CBN leadership and the CEOs it installed. Yetunde Oni’s appointment at Union Bank, and the other two CEO appointments, looked less like reform than damage control. A forensic audit ordered by President Tinubu exposed a regulator-led capture of Union Bank under the watch of the sacked investors. A special investigator alleged that former Governor Godwin Emefiele used proxies and ill-gotten wealth to acquire the bank via Titan Trust Bank without proof of payment, while key investors refused to cooperate. The fraud ran deeper on the books. An unhedged $300m Afreximbank loan taken by Titan Trust was dumped onto Union Bank without disclosure or safeguards. Over $100m in depositor and lender funds were misappropriated, and $58m was siphoned to service that toxic loan. This was not mismanagement but looting under regulatory cover. The same CBN that should have blocked the deal allegedly brokered it, leaving Union with stolen capital, fraudulent debt, and a CEO tasked with stabilizing what the regulator itself helped break.
The Polaris story follows a similar arc. For years, actors at the center of the Skye Bank collapse circulated freely, while the CBN let its appointees feed on the bank under the pretext of courting investors. When a buyer eventually emerged, it looked little more than a proxy for the CBN leadership itself. Questionable financial reports were churned out for unsuspecting stakeholders who never knew the truth. Instead, billions in taxpayer money went into a dead bank kept alive by CBN oxygen. The name Tunde Ayeni has become shorthand for this pattern. The former Skye Bank chairman was remanded at Kuje in May 2026 on 17 counts of N15.66bn–N36bn fraud for allegedly moving N3.2bn to Misa Limited and N5.07bn to Union Registrar Limited in 2014. Parallel probes cite N36.5bn and $30m diverted via Polaris into NATCOM, NITEL and MTEL deals. Yet there is no conviction, only recurrence. Elite scandals are managed, not resolved. Ayeni blames politics, not mismanagement. The courts hear bail, not closure. The books stay open, depositors’ losses unpaid, while the same names return like unsettled accounts.
As a result, regulatory oversight has not been deep or genuine enough to give investors confidence in the actual health of these banks. That fact sits uneasily against the CBN’s insistence that all banks remain “stable” and depositors have nothing to fear. For more than two years these three institutions have been on regulatory life support. The CBN dissolved their boards and management on January 10, 2024 over breaches of BOFIA 2020, governance failures, and threats to financial stability. Since then they have operated under CBN-appointed management, an arrangement that was supposed to be temporary but now looks structural.
In that period, shareholders have watched value evaporate. Union’s legacy investors secured a Federal High Court judgment nullifying the CBN’s takeover. The regulator appealed and froze the outcome. Keystone’s February 2025 forfeiture order wiped out Sigma Golf Nigeria Limited and Alhaji Umaru H. Modibbo entirely. Years of private investment turned to zero on the order of a judge. Retail investors who hold certificates from the pre-intervention era are left with paper that memorializes money lost to the same fraud the CBN cited as grounds for takeover.
Yet the pain has not been evenly shared. Executives, whether appointed by the CBN or holdovers from tainted regimes, continue to draw board-approved remuneration. They retain official quarters, fleet vehicles, and the perquisites of high finance. They remain insulated from the capital erosion that left shareholders holding near-worthless equity. That asymmetry corrodes the moral authority of intervention. Regulatory action that preserves executive comfort while shareholder value bleeds out looks less like resolution and more like redistribution of pain. It is precisely why fresh capital stays away. No investor wants to fund a structure where risk is socialized to equity holders and reward is ring-fenced for insiders.
Moreover, each bank carries a hindrance that makes recapitalisation look hopeless. Union Bank remains trapped in an ownership war. With the CBN appealing the judgment that voided its takeover, title is contested and no rational investor commits N200bn to a bank that may revert to litigants tomorrow. Polaris Bank continues to carry the stigma of its origin. Carved out of Skye Bank in 2018 as a bridge bank, it has never shed the perception of regulatory wardship. Keystone’s ownership has only just been settled by forfeiture to the Federal Government through an EFCC action, a resolution that immediately raises the question of who recapitalises a bank the state already owns, and with whose funds.
Because of this, the options on paper all run into the same wall of absent counterparties. Fresh injection, merger, acquisition, or downgrade to a regional licence require willing investors. For years none of the three has attracted genuine private capital at scale. The scandals that prompted CBN intervention in the first place have not helped. So what the CBN calls “stability” begins to look more like stasis. A bank that cannot raise capital, cannot attract buyers, and survives only through regulatory forbearance is not stable but suspended.
To be fair, the CBN’s mandate is to protect depositors and the system, not to defend brands. Akinwunmi’s shift toward ongoing stress testing rather than once-in-20-years recapitalisation is prudent on its face. However, stress tests presume that a bank can fail without contagion. That assumption forces an uncomfortable question. If these three banks cannot be allowed to fail, then they are effectively too important to fail, and the CBN’s assurances become cover for indefinite support. If they can fail without systemic risk, given that together they hold less than 8% of industry assets, then the extensions and appeals begin to look like political caution rather than prudential policy.
This forces the question that must now be answered directly: must a distressed bank be allowed to remain alive at the expense of taxpayers for the benefit of government appointees, under the pretext of protecting depositors? The answer is no, and the Union, Polaris, and Keystone cases prove why.
First, “protecting depositors” is the pretext, not the policy. Deposit insurance exists through the NDIC. That is the tool for protecting depositors. Indefinite forbearance goes beyond that mandate. When a bank has failed the capital test, cannot attract private funds, and survives only on regulatory oxygen, the depositor argument becomes cover. The real beneficiaries are the appointees drawing salaries, perks, and power from institutions the market already rejected. These three banks hold under 8% of industry assets. That is not systemic. NDIC can pay insured depositors and arrange a purchase-and-assumption for the rest without a run. The contagion risk the CBN cites is therefore political, not prudential. It is about avoiding the optics of a bank closure, not the reality of systemic collapse.
Second, forbearance without market discipline creates moral hazard. When the regulator suspends deadlines, appeals court judgments, and withholds material facts for years, it tells the market that failure has no consequence if you are well-connected. It tells future investors that equity can be wiped out by judicial fiat while executive pay continues. It tells bank managers that governance breaches will be managed, not punished. For more than two years these banks have run on CBN-appointed management, and in that time legacy shareholders lost everything while executive privileges continued. That is not resolution. It is a structural subsidy for executives at the expense of shareholders.
Third, taxpayer funding of dead banks reverses accountability. Keystone is now 100% FG-owned after forfeiture. Polaris has been a de facto state ward since 2018. Recapitalising them now means the Federal Government would use public funds to replenish equity it already destroyed or acquired for free. That turns the state into both arsonist and firefighter, and sends the bill to taxpayers. The recapitalisation programme was premised on private capital strengthening the system. If public money backfills banks that private investors won’t touch, the principle dies. You socialize losses from fraud committed under the watch of the sacked investors, then socialize the cost of keeping the shell alive for new appointees. Depositors could have been paid from NDIC’s fund. Instead, billions are sunk into operating costs, salaries, and legal fees to preserve institutions the market already priced at zero.
Therefore, distressed banks must be allowed to die if they cannot raise private capital. Market discipline means some banks fail. That is the point of a deadline. The March 31, 2026 cutoff separated 33 banks that raised N4.65tn from 3 that could not raise N200bn each. The three failed because their ownership is contested, their books carry fraud from the Emefiele/Titan era and the Skye/Ayeni era, and their reputations are toxic. Keeping them alive through extensions, appeals, and selective disclosure does not cure those defects. It only transfers the cost from shareholders to taxpayers, and the benefit from capital providers to CBN appointees.
Ultimately, the CBN has four paths. Force a merger that requires a buyer who doesn’t exist. Downgrade licences and accept diminished status. Recapitalise with public funds and undermine the private-capital principle. Or liquidate and bear the political cost. Until it chooses, Union, Polaris, and Keystone will remain liabilities on the regulator’s balance sheet of credibility. Calling them “stable” will not make them so. It only defers the moment when the CBN must concede that not every bank can, or should, be saved, especially when the price of preservation is paid by shareholders who lost billions while those at the top kept their privileges, and when indefinite forbearance risks committing billions of taxpayer funds to retain dead banks at all cost. Protect depositors with NDIC, not with indefinite executive employment. Anything else is insider protection dressed as prudential policy
