Why The CBN Revoked Heritage Bank’s Licence
The Central Bank of Nigeria (CBN) on Monday, June 3, 2024, revoked the licence of Heritage Bank.
In a statement signed by Hakama Sidi Ali, Acting Director, Corporate Communications of CBN, Heritage’s licence was revoked due to the bank’s non-compliance with Section 12(1) of BOFIA, 2020.
“The Central Bank of Nigeria (CBN), in accordance with its mandate to promote a sound financial system in Nigeria and in 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,” Ali said.
Established in 2012, Heritage Bank has been facing challenges for over five years. Although it acquired Enterprise Bank for ₦56 billion in 2014, the bank witnessed a major setback when the Treasury Single Account was implemented in 2015. This not only reduced deposits for banks with a small customer base but also raised the cost of funds for Heritage Bank.
According to Section 12 of the Banks and Other Financial Act of 2020, there are several reasons why the CBN can revoke the licence of a Nigerian bank, including insufficient assets to meet its liabilities or being involved in circumstances or actions that constitute a threat to financial instability.
As reported by Tech Cabal, quoting someone familiar with the case, Heritage Bank has a negative shareholder equity of ₦900 billion. Shareholder equity, also known as net worth or book value, represents the amount of money that would be left for shareholders if a company were to liquidate all its assets and pay off all its liabilities.
This means that if Heritage Bank sells all its assets and pays off all its debts, it would still be short ₦900 billion.
Additionally, a bank’s failure to comply with any “obligation imposed upon it by or under the CBN Act or any other rule, regulation, guideline, or directive made hereunder” can result in licence revocation.
In a circular dated March 28, 2024, Nigeria’s Apex Bank announced the recapitalisation of ₦200 billion for all national commercial banks in the country. While this resulted in banks seeking ways to raise funds from investors to meet the new directive, Heritage Bank failed to communicate its implementation plan until the deadline of April 30, 2024.
“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,” Ali said.
