The Nigeria Deposit Insurance Corporation (NDIC) announced plans to pay 2.3 million depositors of Heritage Bank approximately N650 billion starting this week. This move follows the recent withdrawal of Heritage Bank’s operating licence.
NDIC Managing Director Mr. Bello Hassan made this announcement during a briefing in Abuja. He explained that the majority of Heritage Bank’s depositors, 99.9 per cent, have less than N5 million in their accounts. This means the NDIC expects to process these insured deposits swiftly.
There are about 4,000 depositors with more than N5 million in their accounts. Before losing its license, Heritage Bank had issued over N700 billion in loans. To manage the payment process, NDIC has deployed 400 staff members across the bank’s 116 branches and regional offices.
Hassan advised that depositors with alternate bank accounts do not need to visit a bank branch. The NDIC will use their Bank Verification Number (BVN) to credit these accounts directly. However, depositors without alternate accounts must visit NDIC to provide the necessary information to receive their funds.
Unfortunately, most Heritage Bank employees have lost their jobs due to the bank’s closure. Only a few staff members, particularly those with knowledge of the bank’s operations, will be retained.
Mr. Hassan stated 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.
Heritage Bank lost its license for failing to comply with prudential guidelines set by the Central Bank of Nigeria (CBN). These guidelines are designed to ensure the safety and soundness of banks by covering areas such as: Capital Adequacy, to ensure banks have enough capital to absorb potential losses; Liquidity Risk Management, by maintaining sufficient liquid assets to meet short-term obligations; Credit Risk Management, by assessing the creditworthiness of borrowers and setting lending limits.
Others are, Risk Management Framework to identify and manage all relevant risks; Large Exposures to limit how much a bank can lend to a single borrower or related group; Loan Loss Provisioning by setting aside reserves for potential loan losses; Corporate Governance this is required to maintain strong governance practices, including a competent board of directors and sound internal controls and Anti-Money Laundering (AML) and Counter-Terrorist Financing (CFT) required to Implement controls to prevent illegal activities.
While Mr. Hassan did not explicitly mention insider lending, he implied that Heritage Bank likely failed to meet guidelines in this area, which involves strict rules to prevent conflicts of interest in lending to bank insiders.
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