By Terungwa Tyowase, Abuja
The House of Representatives has called on the Central Bank of Nigeria (CBN) to carry out a thorough probe of the collapse of Heritage Bank.
This is coming in the face of charges of mismanagement and wrongdoing.
The House also moved to amend the Nigeria Deposit Insurance Corporation (NDIC) Act to increase the minimum insured amount and provide better protection for depositors.
Also, the House resolved that the CBN’s investigation should ascertain any possible mismanagement or wrongdoing that led to the bank’s collapse, which has left depositors with significant financial losses.
The House urged the NDIC to review its operations and compensation scheme to offer more meaningful relief to depositors.
The motion moved by Hon. Uchenna Harris Okonkwo, said that the collapse of the Heritage Bank has caused significant financial distress and uncertainty for depositors, who had entrusted their savings and financial security to the bank. The House expressed concern that the current compensation scheme, which limits payment to N5 million, is inadequate to alleviate the substantial losses experienced by depositors.
The House mandated its Committee on Banking Regulations to promote public awareness and education campaigns to inform citizens about the risks associated with banking and the importance of diversifying their financial holdings. The Committee is also tasked with ensuring that the CBN and NDIC are held accountable for their regulatory oversight and that depositors’ interests are protected.
The House’s resolution came after the CBN revoked Heritage Bank’s license on June 3, 2024, citing violation of Section 12 (1) of the Banks and Other Financial Institutions Act (BOFIA), 2020. The NDIC has since initiated the liquidation process, but depositors with funds exceeding N5 million will only receive liquidation dividends after the realization of the bank’s assets and retrieval of debts owed to the bank.
The House asked the NDIC and other relevant authorities to carefully reassess the current compensation scheme, with a view to offering more meaningful relief to depositors who have experienced substantial financial losses.
They also want the NDIC to conduct a comprehensive review of its operations and the effectiveness of its mandate to ensure that it is adequately equipped and resourced to fulfill its role as deposit insurer and investor of failed banks.
The House asked the federal government of Nigeria on establishment of a robust and well-funded depositors’ protection fund to provide greater financial security and assurance for depositors in the event of bank failures, and to facilitate timely and fair compensation for affected depositors.
It mandated it’s Committee on Banking Regulations on promoting public awareness and education campaigns to inform citizens about the risks associated with banking and the importance of diversifying their financial holdings with a view to empowering depositors to make informed decisions about their banking relationships and safeguard their financial well-being.
Rep Okonkwo said given recent developments surrounding the Heritage Bank, the government expresses profound and unwavering concern for the welfare and prosperity of its treasured citizens, particularly depositors who have placed their trust in financial institutions, emphasizing the critical need for strong regulatory oversight to protect their interests.
He said that on June 3, 2024, the Central Bank of Nigeria (CBN) publicly declared the revocation of Heritage Bank’s license, citing its violation of Section 12 (1) of the Banks and Other Financial Institutions Act (BOFIA), 2020, Consequently, the CBN designated the Nigerian Deposit Insurance Corporation (NDIC) as the entity responsible for overseeing the liquidation process.
He noted that the NDIC has initiated the liquidation process of Heritage Bank Plc in accordance with Section 55, sub-sections 1 and 2 of the NDIC Act 2023, adding that the corporation has swiftly commenced the liquidation procedures of the failed bank, prioritizing immediate verification and disbursement of insured deposits to the bank’s depositors.
He said further that the NDIC has initiated the liquidation process, which regrettably limits the verification and payment of depositors to a maximum insured amount of only 5 million Naira.
He disclosed that the NDIC, in its statement dated June 3, 2024, has specified that depositors with funds surpassing 5 million Naira will receive liquidation dividends only after the realization of the bank’s assets and the retrieval of debts owed to the bank.
He claimed that some depositors allegedly entrusted significant sums, amounting to in excess of 10 Billion Naira Only, to Heritage Bank, representing their hard-earned savings and financial security, this realization underscores the magnitude of the financial losses and uncertainties they are now facing, highlighting the profound impact of the bank’s failure on their lives and well-being.
He said that amidst the prevailing economic challenges in Nigeria, the financial stability of its citizens has been significantly compromised, limiting compensation to 5 million Naira is deeply inadequate to alleviate the substantial losses experienced by depositors who had placed their trust in Heritage Bank, exacerbating their financial distress and uncertainty.
He stressed that the CBN’s failure to promptly disclose the financial instability of Heritage Bank, which has left depositors vulnerable to unexpected financial losses, this lack of transparency has not only eroded public trust in the banking system and regulatory bodies but has also intensified the distress and uncertainty faced by depositors who relied on the bank for their financial security.
He said that there were allegations suggesting that the CBN had prior knowledge of the bank’s deficiencies for an extended period but failed to enact timely corrective measures, this underscores the pressing need for a thorough review of regulatory oversight mechanisms, as it is unjust for depositors to suffer the consequences of regulatory inaction. Such a review is essential to restoring confidence in the regulatory framework and ensuring the protection of depositors’ interests.
The House’s move aims to ensure that depositors are better protected in the event of bank failures and that regulatory bodies are held accountable for their oversight.
