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Heritage Bank License Revoked: Implications for Depositors and Stakeholders

The recent revocation of Heritage Bank’s license by the Central Bank of Nigeria (CBN) has sparked significant concerns among depositors, investors, and other stakeholders. However, the Nigeria Deposit Insurance Corporation (NDIC) has assured that it will pay up to ₦5 million to each depositor of Heritage Bank. For those with funds exceeding ₦5 million, the NDIC will pay a liquidation dividend upon the realization of the bank’s assets and recovery of debts owed to the bank. This announcement leaves many with unanswered questions and deep concerns. Let’s explore the implications of this development:

Depositors are understandably anxious, and their concerns could potentially trigger a bank run. A bank run occurs when a large number of depositors rush to withdraw their money, fearing the bank’s instability. This could create a ripple effect, causing panic among customers of other banks suspected of having financial issues. One worried customer of Heritage Bank recently asked, “When will we start receiving our money?” The response remains, “The NDIC will provide further details.”

Similarly, shareholders and investors may face significant losses due to the bank’s failure. The revocation impacts market confidence, possibly leading to broader economic repercussions. The effects of this decision will likely persist, causing more problems than initially anticipated. Other banks might also feel the strain from this fallout.

Under former Governor Godwin Emefiele, the CBN pursued a policy of preventing bank failures. For instance, in 2019, the CBN issued a letter of comfort to the First Bank of Nigeria Plc to facilitate a ₦456 billion loan to Heritage Bank to support interbank transactions. However, the current administration under Governor Olayemi Cardoso is adopting a different approach.

While the NDIC and the Asset Management Corporation of Nigeria (AMCON) have previously stepped in during financial distress to recover what they could, those days of superhero rescues are over. The CBN has now appointed the NDIC as the liquidator (seller of the company’a assets) of Heritage Bank. AMCON, established by an Act of the National Assembly of Nigeria in July 2010 with a ten-year lifespan, was supposed to have wound up by now.

The CBN’s revocation of Heritage Bank’s license is based on the bank’s lack of financial performance and prospects for recovery. Despite being nationally licensed, Heritage Bank did not show signs of improvement.

In conclusion, there is a real risk of losing your hard-earned money if your bank faces financial difficulties. Stakeholders should closely monitor developments and consider diversifying their financial exposure. Bank failures are complex, and their implications extend beyond depositors and investors, affecting the broader economic landscape.

 

 

 

 

Post Author: Chukwuemeka Ayogu

Chukwuemeka Ayogu is the founder and Lead Consultant at Countsystem, a service provider in accounting sector in Nigeria, bsiness systems and controller services. He is an Accountant Partner of Accounteer, a cloud based accounting software. He is an experienced service provider with diverse working experiences. He has worked in customer service at Regional Business Unit Nigerian Breweries Plc, Customer Service Representative at Diamond Bank Plc, Principal Partner at Prudential Auditors & Consultants, State manager at Chijgz Resources International and more.

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