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NDIC to pay 2.3M Heritage Bank depositors N650B



NDIC to pay 2.3M Heritage Bank depositors N650B

NDIC to pay 2.3M Heritage Bank depositors N650B

In a significant move to safeguard depositors’ funds and maintain public confidence in the banking system, the Nigeria Deposit Insurance Corporation (NDIC) has announced plans to disburse approximately N650 billion to 2.3 million depositors of Heritage Bank. This decision comes on the heels of the Central Bank of Nigeria’s (CBN) recent withdrawal of Heritage Bank’s operating license, citing failure to adhere to prudential guidelines.

Swift Action to Protect Depositors

NDIC Managing Director, Mr. Bello Hassan, shared details of the payout process during a press briefing in Abuja. He emphasized the urgency and efficiency of the plan, noting that the majority of Heritage Bank’s depositors—99.9 percent—hold less than N5 million in their accounts. Consequently, the NDIC anticipates a rapid processing of these insured deposits.

“Given the structure of depositors at Heritage Bank, we expect to process the insured deposits swiftly. Most depositors have amounts under N5 million, which simplifies the payout process significantly,” Hassan explained.

Managing the Payout Logistics

To handle the logistics of the payout, NDIC has mobilized 400 staff members across Heritage Bank’s 116 branches and regional offices. Additionally, depositors with alternate bank accounts linked to their Bank Verification Number (BVN) will receive direct credits, eliminating the need to visit bank branches.

“For depositors without alternate accounts, it is necessary to visit NDIC offices to provide the required information for fund disbursement,” Hassan noted.

Impact on Heritage Bank Employees

The closure of Heritage Bank has unfortunately resulted in the loss of jobs for most of its employees. Only a select few, particularly those with specialized knowledge of the bank’s operations, will be retained to assist in the liquidation process.

Enhanced Powers for Asset Recovery

Mr. Hassan highlighted that NDIC now has enhanced powers to recover assets from Heritage Bank’s debtors. These powers include the ability to arrest, prosecute, and blacklist defaulters, ensuring that the bank’s outstanding loans, which exceed N700 billion, are pursued rigorously.

Reasons for License Withdrawal

Heritage Bank’s license was revoked due to non-compliance with CBN’s prudential guidelines. These guidelines are critical for ensuring the safety and soundness of banks, covering areas such as:

– Capital Adequacy: Ensuring banks have sufficient capital to absorb potential losses.
– Liquidity Risk Management: Maintaining enough liquid assets to meet short-term obligations.
– Credit Risk Management: Assessing the creditworthiness of borrowers and setting appropriate lending limits.
– Risk Management Framework: Identifying and managing all relevant risks.
– Large Exposures: Limiting the amount a bank can lend to a single borrower or related group.
– Loan Loss Provisioning: Setting aside reserves for potential loan losses.
– Corporate Governance: Maintaining strong governance practices, including a competent board of directors and sound internal controls.
– Anti-Money Laundering (AML) and Counter-Terrorist Financing (CFT): Implementing controls to prevent illegal activities.

Hassan hinted that Heritage Bank likely failed to meet guidelines on insider lending, a critical area aimed at preventing conflicts of interest when lending to bank insiders.

Public Reaction and Future Implications

The NDIC’s swift action has been met with mixed reactions from the public. While many commend the corporation for protecting depositors, concerns remain about the broader implications for the banking sector.

Financial analyst Bola Afolabi commented, “The NDIC’s intervention is a crucial step in maintaining trust in the banking system. However, this incident underscores the need for stricter regulatory oversight to prevent such occurrences.”

Meanwhile, depositors have expressed relief over the assurance of receiving their funds. “I was worried when I heard about the license withdrawal, but NDIC’s prompt response has eased my fears,” said Kemi Adedoyin, a depositor.

A Call for Stronger Regulatory Framework

The Heritage Bank incident highlights the importance of a robust regulatory framework in the banking sector. Industry experts suggest that this situation should serve as a wake-up call for both regulators and banks to adhere strictly to prudential guidelines.

“The withdrawal of Heritage Bank’s license and the subsequent payout by NDIC emphasize the need for banks to comply fully with regulatory requirements. It is essential for maintaining the stability and integrity of the financial system,” remarked Tunde Ogunsanwo, a financial consultant.