…NDIC will use BVN to verify, pay customers
…As CBN denies plans to revoke Polaris, Keystone Banks licenses
By Charles Ebi
Revocation of the operating licence of Heritage Bank by the Central Bank of Nigeria ,CBN, on Monday, June 3, 2024, did not come as a surprise to many observers but the action took a toll on the stock market, especially the banking index.
The withdrawal of the lender’s licence by the regulator triggered selling pressure in the banking sector on the floor of the Nigerian Exchange ,NGX, Limited yesterday, as its index slumped by 0.84%, joining forces with the industrial goods and consumer goods sectors to bring down the market by 0.18%.
This occurred because of the reactionary action of some investors, who felt it was better for them to reduce their exposure to banking equities, fearing that other financial institutions could be affected.
However, analysts at Meristem Research have allayed the fears of investors, emphasising that the CBN’s hammer on Heritage Bank was “aimed at strengthening public confidence in the banking system and… also send a strong message to other banks that they must adhere to regulatory requirements and maintain sound financial performance”.
It was stated in the note released by the apex bank obtained by AljazirahNigeria, that Heritage Bank’s underperformance had become a substantial threat to financial stability, and the CBN’s intervention ensures that its assets and liabilities are managed to minimise further financial risks.
It was stated that before the operational licence of the bank was taken away, its operational inefficiency had been a persistent issue, as its cost-to-income ratio was hovering around 99% indicating that nearly all of its operating income was consumed by costs, which is not healthy for any organisation.
In its conclusion, Meristem Research said, “We do not anticipate that this liquidation will trigger any contagion risk within the banking sector as the bank’s financial challenges and regulatory breaches were specific to its operations and management, and are not reflective of widespread vulnerabilities in the banking system”.
The apex bank, in its circular yesterday, explained that it stopped Heritage Bank from continuing banking operations in Nigeria because of its persistent breaches of Section 12(1) of the Banks and Other Financial Institutions Act (BOFIA) 2020.
There have been reports that before the Central Bank’s action on Monday, some customers of Heritage Bank had been having difficulties withdrawing their funds, with the company’s Automated Teller Machines ,ATMs, unable to dispense cash.
However, the Nigeria Deposit Insurance Corporation ,NDIC, has said that it has started the liquidation process of Heritage Bank Plc following the revocation of its banking licence by the Central Bank of Nigeria ,CBN.
In a press statement issued on Monday by Bashir Nuhu, Director of Communication & Public Affairs at NDIC, the Corporation noted that depositors are protected, as the NDIC is currently verifying to pay customers of the bank up to N5 million, depending on their deposits.
The NDIC noted that the revocation of the banking licence and the subsequent liquidation is pursuant to Section 12(2) of the Banks and Other Financial Institutions Act (BOFIA) 2020.
The agency also stated the verification and payment process for insured deposits complies with Section 55 subsections 1 & 2 of the NDIC Act 2023.
Depositors with alternate bank accounts within the industry will receive payments up to the insured limit of N5 million per depositor.
This process will utilize the Bank Verification Number ,BVN, to locate these alternate accounts, facilitating a smooth and efficient transfer.
The statement noted: “Depositors of the bank that have alternate accounts 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”.
For depositors who do not have an alternate bank account, the NDIC advised such customers to visit the nearest Heritage Bank branch with proof of account ownership and a verifiable means of identification, such as a driver’s license, permanent voter’s card, or National Identity Card, along with their BVN.
This will allow for the verification of their deposits and the subsequent payment of insured sums.
Also, depositors can file claims online by visiting the claims page of the NDIC website.
Creditors of Heritage Bank are instructed to visit the nearest bank branch to file their claims or use the online platform.
The NDIC assured that the process for creditor payments will begin immediately after all depositors have been compensated.
Debtors with outstanding loans are advised to contact the Corporation’s Asset Management Department ,AMD, to arrange repayments.
The CBN revoked the banking licence of Heritage Bank Plc with immediate effect, citing the bank’s persistent financial instability and breach of regulatory requirements.
The decision is part of the CBN’s mandate to maintain a sound financial system in Nigeria, as outlined under Section 12 of the Banks and Other Financial Institutions Act (BOFIA) 2020.
the CBN disclosed that Heritage Bank had failed to adhere to Section 12 (1) of BOFIA 2020, which necessitated regulatory intervention.
Despite multiple supervisory measures prescribed by the CBN to mitigate the bank’s declining financial performance, Heritage Bank has been unable to improve its financial health.
The bank’s continuous underperformance poses a significant threat to financial stability, compelling the CBN to revoke its licence.
Meanwhile, the Central Bank of Nigeria ,CBN, has described as false the news that it is planning to revoke the licenses of Unity, Polaris, and Keystone banks.
According to online reports, the apex bank plans to revoke the licenses of three additional banks following Heritage Bank’s revocation. However, in a post on its social media pages on Tuesday, the bank said the content was not authentic and didn’t emanate from them.
The Central Bank of Nigeria withdrew Heritage Bank’s banking license on June 3, citing the bank’s failure to recover from its poor financial standing as the reason for its decision.
The apex bank 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.
“Heritage Bank had not improved and has no reasonable prospects of recovery, thereby making revoking the license the next necessary step.
“The revocation, according to the apex bank, reflects its continued dedication to take all necessary steps to ensure the safety and soundness of Nigeria’s financial system”.
