The Central Bank of Nigeria (CBN) has 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.
Heritage Bank’s poor performance threatened Nigeria’s banking sector
In a press release on Monday, 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.
The statement read: “The Central Bank of Nigeria (CBN), in accordance with its mandate to promote a sound financial system in Nigeria and in the 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.”
The CBN emphasized that the action is crucial to reinforce public confidence in the Nigerian banking sector and to ensure the integrity and soundness of the financial system.
NDIC to liquidate the bank
The Nigeria Deposit Insurance Corporation (NDIC) has been appointed as the liquidator of Heritage Bank, in line with Section 12 (2) of BOFIA 2020.
Based on the recently adjusted maximum deposit insurance coverage levels across various banks, customers of the bank may get up to N5,000,000 payment from the NDIC, depending on the total deposits the customer has with the bank.
More Insights
- Heritage Bank Plc began its operations in Nigeria as a regional bank on March 14, 2013. It acquired the license and structure of the old Societe Generale Bank of Nigeria which was closed down by the CBN for failing to meet the capital requirements of N25 billion or $155 million for a national bank in January 2006.
- In October 2014, the Assets Management Corporation of Nigeria (AMCON) announced that Heritage Bank had emerged winner of the bid for the acquisition of the defunct Enterprise Bank. Heritage Bank had successfully met all the terms and conditions set by the CBN and AMCON towards owning 100% shares in Enterprise Bank. It inherited over 160 branches, over 177 ATMs, and 2000 POS terminals spread across major markets and commercial centres in the country. This move automatically transformed Heritage Bank from a regional bank to a national bank.
- Last year, the Association of Senior Staff of Banks, Insurance and Financial Institutions (ASSBIFI) issued a threat to mobilize its affiliate trade unions and workers to picket the head office of Heritage Bank due to alleged wrongful termination and the failure to settle severance benefits for more than 30 former employees.
- In its staff report on Nigeria, the International Monetary Fund (IMF) noted that three commercial banks that were unable to meet capital requirements have been placed under a special supervisory regime by the CBN.