CBN Revokes Banking License of Heritage Bank, Gives Reasons

• The CBN has decided to revoke Heritage Bank's banking license due to poor financial performance
• The decision is coming just months after Heritage Bank was dragged to court by sacked workers over unpaid benefits
• The Nigeria Deposit Insurance Corporation (NDIC) has been appointed as the liquidator to manage the bank's affairs and ensure depositor compensation

The Central Bank of Nigeria (CBN) has revoked the license of Heritage Bank Plc with immediate effect.

The move, announced in a statement on Monday, June 3, 2024, is part of the CBN's ongoing efforts to maintain a stable and healthy financial system as authorised under Section 12 of the Banks and Other Financial Institutions Act (BOFIA) 2020.

The statement signed by Hakama Sidi Ali, the Acting Director of Corporate Communications CBN, added that the revocation was executed after Heritage Bank breached Section 12 (1) of BOFIA 2020.

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The statement reads:

“The Central Bank of Nigeria (CBN), in accordance with its mandate to promote a sound financial system in Nigeria and in exercise of its powers under Section 12 of the Banks and Other Financial Act (BOFIA) 2020, hereby revokes the licence of Heritage Bank Plc with immediate effect.

This action has become necessary due to the bank’s breach of Section 12 (1) of BOFIA, 2020. 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 license the next necessary step.

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To ensure public confidence and integrity of the financial system, the CBN appointed the Nigeria Deposit Insurance Corporation (NDIC) as the Liquidator of Heritage Bank as stipulated in Section 12 (2) of BOFIA 2020.

Punch reports that the CBN reassured the public that Nigeria's financial system remains robust and secure.

The statement continued:

"Consequently, 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. The Nigeria Deposit Insurance Corporation (NDIC) is hereby appointed as the Liquidator of the bank in accordance with Section 12 (2) of BOFIA, 2020.

"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."

Expert speaks

Reacting to the development, Amamchukwu Okafor, Senior Consultant at Native Insight, told Legit.ng that the CBN decision was timely to protect the financial system.

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He said:

"A major responsibility of the CBN is banking supervision. And for some time now, it has gone about this role without fear or favour.

"We've seen shake offs on the board of big banks like First bank and others. I think it was Skye Bank that was acquired by today's Polaris Bank some years ago.

"So, this kind of action by the CBN is not unusual to safeguard the integrity of the banking sector, protect depositors' money and retain investors trust. The difference now is that the CBN is allowing Heritage to fail rather than pump free cash into it.

"I guess an early review and warning reports might be better to prevent such strong measures, but bailing ailing banks cannot continue to be the way out.

"It could create significant moral hazards where banks tend to become too big to fail. Recall that Heritage Bank was one of the banks bailed out during Emefiele' regime."

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Heritage Bank sack workers protest

Earlier, Legit.ng reported that Nigerian bank workers' unions are protesting the termination of their members' employment at Heritage Bank.

The union alleged unfair labour practices and claimed the affected workers were dismissed without compensation.

The union demanded justice for the affected workers and urged the bank to settle the three-month-old unpaid severance benefits.

Source: Legit.ng