The news was not a surprise. In fact, for the last few years, I have been wondering when it would happen. I used to even ask around and say, “Come, this Heritage Bank matter, what is going on?” and no one would be able to give a good response.
A few days ago, the inevitable happened. The CBN revoked its license, with a lot of depositors’ funds at risk, including one customer reportedly losing about N11 billion.
I knew I would write this piece. I had waited for this day but also knew very well that it would be a very sensitive piece because I had, and still have, a relationship with the original and founding top three of the Bank.
A few weeks ago in England, I was with one of the three. He had left very early to pursue other things, and the talk of Heritage Bank came up.
He closed up and refused to speak about it. I pushed and pushed, but he remained taciturn and only quipped, “Edgar, I thank God I left when I did.”
Heritage Bank had belly-upped a long time ago. For years, it had been grounded, leading to CBN moving it under the cover of the huge FBN.
Its delicate position was well-covered by the public as FBN piggybacked it under CBN guarantees. I liked the arrangement as it gave it a platform to reemerge while protecting depositors’ funds and ensuring that its situation didn’t cause a systemic run on the whole industry.
I guess the new lords at CBN were no longer patient, hence this turn of events, which, if you ask me, is also a responsible way to act by a serious regulator.
But before we go further, let’s look at the beginnings. The Bank, in my estimation which may not be accurate, emerged from the IEI Insurance cabal where its main promoter held sway, having built a sterling career as a CFO in another distinguished investment bank.
From there, the birth of Heritage was conceived. The ‘late’ SGBN joined the fold, and new investors were brought in.
A group of investors in IEI felt they were short-changed. They fought to have a stake in the new Heritage Bank but were repelled very aggressively and left with their tails between their wounded legs.
Heritage Bank from inception, in my estimation which could still be wrong, struggled with corporate governance. It could not rise above the cult of personality that emerged as a result of its birth.
This led to the very quick resignation of one of the Executive Directors who left for ‘further education.’
The lack of adherence to the industry-prescribed ethos of corporate governance became the talk around the industry, leading to a strong reluctance to engage Heritage Bank as a counterparty in most transactions.
With time, the need to shore up capital arose, and very early so. Shareholders’ funds had been eroded significantly and needed to be replaced urgently.
I was approached, and I brought in my client who was then into transportation and showed more than a passing interest in taking up about 20% of the bank.
To show good faith, he deposited some funds, and we all smiled. I remember the day we met in their boardroom with my client and another adviser I had brought in to midwife the transaction. It was all smiles and back-tapping, and then we didn’t hear from them again.
A bigger investor had come in. Significant funds had entered, and he demanded a robust recovery exercise as a condition.
This led to the removal of some top management as recovery was simply impossible due to the earlier mentioned challenges with corporate governance.
From then onwards, it was a gradual slide into infamy. Heritage Bank entered the record books as the first bank to be distressed and also not distressed.
It created confusion in the marketplace as the banking public were not too aware of its status, while the industry knew but kept the information to themselves due to esprit de corps or fear of contagion.
This is why the public is receiving this news as a surprise when almost all of the system had known for over five years that the place had capsized.
The front man went into seclusion, only emerging once in a while to support his town man and my brother, talented Yibo Koko’s world-famous dance exposition – Seki. After each show, he would go back into oblivion, making people ask if he was still the CEO.
Heritage Bank ran like a normal bank but with no visible CEO. We were not sure if he had resigned, and if he did, who was his replacement? If he did not, why was he not visible like his contemporaries?
Anyways, the CBN announcement has put an end to that, and the Bank has finally been sunk, with depositors’ funds gone with it. Thankfully, the NDIC has stepped up to the plate to at least give back some funds to depositors, leaving shareholders with empty bowls.
All of this could have been avoided with strict compliance to effective risk management and robust adherence to corporate governance.
We would have saved a lot of tears.
Na wa.
Duke of Shomolu
