Reps ask CBN to investigate management of failed Heritage Bank

The House of Representatives has asked the Central Bank of Nigeria (CBN) to investigate the leadership and management of the failed Heritage Bank “to identify possible mismanagement or wrongdoing that may have contributed to the bank’s failure.”

It also directed its Committee on Banking Regulations to probe the circumstances surrounding the failure of the bank.

The resolutions followed a motion of urgent public importance moved by Uchenna Okonkwo (LP, Anambra) on Tuesday during plenary.

Background

The CBN on 3 June revoked the llicence f the bank, citing its violation of Section 12 (1) of the Banks and Other Financial Institutions Act (BOFIA), 2020.

Consequently, the CBN appointed Nigeria Deposit Insurance Corporation (NDIC) as the liquidator, pursuant to Section 12(2) of BOFIA, 2020.

The NDIC announced that depositors of the bank who have alternate accounts within the industry will be paid up to the insured amount of N5 million per depositor using their Bank Verification Number (BVN) to locate their alternate account.

Depositors with funds in excess of N5 million are to be paid liquidation dividends upon realisation of the bank’s assets and recovery of debts owed to the bank.

The motion

In the motion, Mr Okonkwo said the liquidation process could disproportionately affect some depositors who have above the N5 million threshold.

He noted that “limiting compensation to N5 million 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.”

The lawmaker said the CBN failed to disclose the status of the bank to the public, in order for depositors to take adequate action.

“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,” Mr Okonkwo said.

Without debate, Speaker Abbas Tajudeen put the motion to a voice vote and it was unanimously adopted.

Consequently, the House resolved to:

-Urge the Nigerian Deposit Insurance Corporation (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;

-Urge the National Assembly to strongly advocate for fair and compassionate compensation for depositors who have been adversely affected by the unfortunate failure of Heritage Bank. This may entail respectfully;

-Urge the Central Bank of Nigeria (CBN) conduct a thorough investigation of the leadership and management of Heritage Bank to identify any possible issues of mismanagement or wrongdoing that may have contributed to the bank’s failure;

-Urge the Nigerian Deposit Insurance Corporation (NDIC) and other pertinent authorities to carefully reassess the current compensation scheme, with a view to offering more meaningful relief to depositors who have experienced substantial financial losses;

-Urge the Nigerian Deposit Insurance Corporation (NDIC) on limitations of the current deposit insurance coverage, the Federal House Of Representatives should consider regulatory amendments to increase the maximum insured amount to better protect depositors’ interests. This adjustment would provide greater financial security for depositors in the event of bank failures;

-Urge 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;

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-Urge the 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. This initiative aims to empower depositors to make informed decisions about their banking relationships and safeguard their financial well-being;

-And mandate the Committee on Banking Regulations in Collaboration with other relevant bodies to set up an investigation into the circumstances surrounding the Heritage Bank case.