In a significant step to ensure stability in the banking sector, the Central Bank of Nigeria, CBN has revoked the licence of Heritage Bank Plc with immediate effect.
Hakama Sidi Ali, Acting Director, Corporate Communication of CBN made this known in a statement on Monday.
Ali said the action became necessary due to the bank’s breach of Section 12 (1) of BOFIA, 2020.
She said: “The Board and Management of the bank have not been able to improve the bank’s financial performance, a situation which constitutes a threat to financial stability.
“This follows a period during which the CBN engaged with the bank and prescribed various supervisory steps intended to stem the decline. Regrettably, the bank has continued to suffer and has no reasonable prospects of recovery, thereby making the revocation of the licence the next necessary step.”
Mrs Halima said the CBN has taken this action to strengthen public confidence in the banking system and ensure that the soundness of our financial system is not impaired.
She said the Nigeria Deposit Insurance Corporation (NDIC) had been appointed as the Liquidator of the bank in accordance with Section 12 (2) of BOFIA, 2020.
She said: “We wish to assure the public that the Nigerian financial system remains on a solid footing. The action we are taking today reflects our continued commitment to take all necessary steps to ensure the safety and soundness of our financial system.”
REASONS FOR REVOCATION:
-Breach of Financial Regulations:
Heritage Bank was found to have breached Section 12 (1) of BOFIA, 2020.
-Poor Financial Performance:
Despite various supervisory steps taken by the CBN, the bank’s board and management were unable to improve its financial performance.
-Threat to Financial Stability:
The continued poor performance of the bank posed a threat to the stability of the financial system.
WHAT HAPPENS TO CUSTOMERS’ FUNDS ?
The Nigeria Deposit Insurance Corporation will pay insured sums to eligible depositors up to the maximum insured limit. Customers will need to provide necessary documentation to claim their insured deposits
The NDIC has been appointed as the liquidator of Heritage Bank. Customers with insured deposits will be paid up to the insured limit of N5m. Customers of amounts exceeding the insured limit may be at risk, and customers will need to follow the liquidation process to claim any additional funds.
ARE CUSTOMERS’ DEPOSITS SAFE ?
Nigeria’s first Professor of Capital Market Studies, Uche Uwaleke described the revocation by the CBN as a step in the right direction.
He said, “I think the revocation of the license of Heritage Bank by the CBN is a step in the right direction.
“This proactive step by the CBN is in the overall interest of financial system stability.
“With the NDIC taking over the liquidation process, efforts should be made to protect the Depositors as well as interests of employees using liquidation dividends
Also, Senior Partner and Economist at SPM Professional, Paul Alaje told THE WHISTLER that the new review of maximum deposit insurance coverage for bank depositors by the Nigeria Deposit Insurance Corporation (NDIC) covers up to N5m.
He said depositors with N5m and below will likely get their full deposits depending on the outcome of the liquidation process.
Alaje explained, “The liquidator is the the NDIC and the liquidator will come up with the total worth of the bank’s assets, then the liquidation process will start. So, for workers, especially those that have some outstanding with the banks, it is the NDIC that will decide the total amount that the bank has in terms of asset sales. So, that those the banks are owing, including the staff, will first be paid.
“I think the best thing is to now wait for the NDIC regarding what they will do and how much they will realise regarding the sale of the assets. For the depositors, NDIC has recently reviewed what people can get in case of bank liquidation. So, I believe that will apply. I am sure if the policy applies, over 80 per cent of their depositors will get their money back.”
But Alaje insisted that the depositors can only get up to N5m if the new policy applies to Heritage Bank.
The expert explained that the new N5m is an improvement compared to the former insurance coverage of only N500,000.
Alaje said, “The circular issued by the NDIC for the new rule, the amount is quite huge that a depositor will get. Whether this will apply to this situation, I can’t tell. If you have up to N5m and below, that is what you will get from their deposit money banks.
” Remember, as of December, the total number of DMBs that this bank falls into is only 206 million and the total number of people with N5m and below is 204 million.
“So, the implication is that only 1.2 per cent will not get anything using that circular. If whatever happens to the bank extends to this decision, virtually, 90 per cent and more of the people will get their money. When the property is now liquidated, they will get some or all.”
In accordance with Section 55 sub-section 1 & 2 of the NDIC Act 2023, the Corporation has commenced liquidation process of the failed bank with immediate verification and payment of insured deposits to the bank depositors.
“Depositors of the bank that have alternate account within the industry will be paid up to the insured amount of N5 million per depositor using their Bank Verification Number (BVN) to locate their alternate account. While depositors with funds in excess of N5 million will be paid liquidation dividend upon realization of the bank’s assets and recovery of debts owed to the bank.
“Verification and Payment of Depositors Without Alternate Bank Account:
All depositors of the defunct bank without alternate bank account in the industry are advised as follows:
“Visit the nearest branch of the bank with proof of account ownership, verifiable means of identification such as driver’s license, permanent voter’s card, National Identity Card, together with their alternate account and Bank Verification Number (BVN) for the verification of their deposits and subsequent payment of insured sums or file online claim by visiting the NDIC website claims page on www.ndic.gov.ng/claims/claims, download and fill the claims forms and upload the required documentation.
“Verification and Payment of Creditors:
Creditors are also advised to visit the nearest branch of the bank to file their claims or via the online platform. Please note that the process of payment of creditors will commence immediately after all depositors have been paid.
“Debtors’ Repayment of Loans:
Debtors that are yet to complete the repayment of loans are advised to contact the Corporation’s Asset Management Department (AMD). Visit the NDIC website for more details.
“The NDIC wishes to assure the entire banking public of its commitment to the continued safety of depositors’ funds in all licensed banks. As such, depositors are urged to continue their banking businesses without fear as banks whose licenses have not been revoked remain safe and sound.”
