Victor EzejaAn economic analyst, Dr Wisdom Selekekeme Krokeyi, has stated that although the Central Bank of Nigeria (CBN)’s action of revoking Heritage Bank’s licence was in line with its mandate of ensuring financial stability in the system, it could have saved the bank and protect depositors’ funds.
The apex bank had on Monday, issued a statement announcing the revocation of Heritage Bank’s licence over a breach of the Banks and Other Financial Institutions Act (BOFIA),which was attributed to the bank’s deteriorating financial health.
Join our WhatsApp ChannelIn an interview with Prime Business Africa, a senior lecturer at the Department of Economics, Niger Delta University, Dr Wisdom Selekekeme Krokeyi, stated that the CBN could have identified some alternative measures the bank would have explored to stay afloat and ensure the safety of depositors’ funds.
He said: “CBN has a fundamental role. The role is to ensure financial stability in every system and that is not different from Nigeria. The revocation of Heritage Bank’s licence is actually a very complex issue with far-reaching implications for both banks, customers and of course the entire financial system of Nigeria. CBN may have revoked the licence due to concerns about the financial health of the bank, and also the issue of compliance with regulatory requirements. These are the critical issues that brought about the revocation.
“Although CBN’s responsibility involves ensuring financial system stability, which also includes taking necessary action against struggling banks to sustain such banks, like in the case of Heritage Bank, CBN ordinarily, would have if all things being equal, ensured that the bank is sustained by deploying some measures.”
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One of them according to him is allowing Heritage Bank to explore the window of recapitalisation to enable it raise additional capital to meet its financial needs. Another option he mentioned was allowing the bank to merge with another stronger commercial bank.
“CBN would have made it possible for Heritage Bank to enjoy a merger window. A higher or stronger bank would have absorbed Heritage Bank so that the bank’s licence would have been totally revoked,” Dr. Krokeyi stated.
The don also emphasised the need for CBN to step up its role of banking supervision to monitor and guide banks against management decisions or steps that could lead them into financial crisis.
The CBN had after revoking the Heritage Bank’s licence, directed the Nigeria Deposit Insurance Corporation (NDIC) to liquidate the bank.
Consequently, the NDIC announced that it would pay out insured deposits to depositors of the defunct Heritage Bank who have N5 million or less in their accounts starting from next week.
This means that customers whose deposits are more than N5 million would get all now. The Corporation said the benefits will be paid upon the sale of the assets of the bank.
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To allay the fears that many depositors may lose funds above N5 million, the NDIC Managing Director, Bello Hassan, disclosed on Wednesday that 99 per cent of 2.3 million Heritage Bank customers do not have total balances that is up to N5 million.
Hassan said all depositors at the bank are currently being verified for onward payment of insured benefits.
Speaking on bank customers’ deposit insurance system in Nigeria, the NDU economics lecturer advised bank customers to have accounts in different banks where they deposit money so that when one is affected they can rely on others.
On the recovery process, Krokeyi maintained that it is not going to be easy as NDIC would have to trail all loan defaulters to recover the funds.
He also advised that authorities should enlighten bank customers in the country to know that when they deposit their money, a maximum of N5 million is what each would get in the event of any collapse of the bank.
He, however, noted that the CBN’s decisions and NDIC’s actions are likely based on a thorough assessment of Heritage Bank’s financial health and the potential impact on the wider financial system, urging that the apex financial regulator’s action should not be outrightly condemned. “So, we shouldn’t just condemn the action of CBN, but we need to also look deeply into the reason behind this. We should not forget that the role of the CBN is to ensure that they have a stable financial system, and that requires ensuring that dying banks are resuscitated but banks that could not meet up the financial regulatory requirements, it become a very dicey situation to handle,” he added.
Victor Ezeja is a passionate journalist with six years of experience writing on economy, politics and energy. He holds a Masters degree in Mass Communication.
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