6th June, 2024
Some financial experts have commended the Central Bank of Nigeria (CBN) for its proactive action in revoking the operating licence of Heritage Bank Plc in order to save depositors’ funds.
The experts, who spoke with the News Agency of Nigeria (NAN), on Monday in Abuja, said that the action was in the overall interest of the financial system.
According to Uche Uwaleke, a Professor of Finamce and Capital Market, and the president of Capital Market Academics of Nigeria, the revocation is a step in the right direction.
Uwaleke said that the proactive step by the CBN was in the overall interest of financial system stability.
He, however, said that efforts should be made to protect the depositors and employees of the liquidated bank.
“With the Nigeria Deposit Insurance Corporation (NDIC) taking over the liquidation process, efforts should be made to protect the depositors as well as interests of employees using liquidation dividends,” he said.
An economist, Dr Chijioke Ekechukwu, said that Heritage Bank had been struggling over the years to remain afloat, adding that the situation must have become irredeemable for the apex bank to revoke its licence.
According to Ekechukwu, a past president of the Abuja Chamber of Commerce and Industry, some years ago, some of us in the finance sector knew that the bank is struggling to remain afloat.
“For the CBN to revoke its licence, it means that it was irredeemable and probably not marketable to investors,” he said.
He said that there would be an initial setback to all the bank’s customers because it would take a while to verify them for the purpose of compensation and refund of their monies by the NDIC.
“It is, however, better to sanitise the financial system than to allow a sick and weak bank to continue to open its doors to customers,” he said.
Mr Gregory Mmaduakolam, also an economist, said that the action by the CBN was rash and capable of eroding the much needed confidence in the banking system.
Mmaduakolam said that the action would also result in avoidable job loss of staff of the bank, thereby, further exacerbating the country’s unemployment challenge.
“I would have preferred a situation where the CBN supports ailing banks and prevent them from failing than simply withdrawing their licences.
“Such an action does not encourage confidence in the banking system, ” he said.
The News Agency of Nigeria (NAN) reports that the CBN had on Monday, announced revocation of the licence of of the bank witb immediate effect.
It said that the action was in accordance with the apex bank’s 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).
It said that the board and management of the bank had not been able to improve the bank’s financial performance, a situation which constituted a threat to financial stability.
(NAN)