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Usually, revocation of a bank’s license in Nigeria only removes its ability to perform core banking activities, including accepting deposits and making loans. The bank may still be able to continue other activities that don’t require a license. The Central Bank of Nigeria (CBN) is charged with the responsibility of revoking a bank’s license. The CBN revokes a bank’s license if the bank fails to comply with the Banks and Other Financial Institutions Act (BOFIA) 2020.

Recently, on the 3rd of June, 2024, the CBN revoked Heritage Bank’s license because of financial stability threat; Heritage bank’s management and board could not improve its financial performance. When a bank’s license is revoked, the Nigeria Deposit Insurance Corporation (NDIC) may begin to liquidate the bank. The process includes verifying and paying insured deposits to depositors.

Within 30 days of the revocation, depositors, shareholders, and financial institutions can challenge the decision.

Concerning the Heritage Bank's current situation, the Nigeria Deposit Insurance Corporation (NDIC) said it has commenced liquidation of the bank, adding it will pay the insured amount of N5 million per depositor. The Acting Director of CBN’s Corporate Communications, Hakama Sidi Ali has stated that the CBN in accordance with its mandate to promote a sound financial system in Nigeria and in exercise of its powers in line with Section 12 of the BOFIA 2020, made the revocation in this regard.

Depositors of the bank with 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 will be paid liquidating dividends upon realisation of the bank’s assets and recovery of debts owed to the bank.

A Liquidating Dividend is a type of payment that a corporation makes to its shareholders during a partial or full liquidation. For the most, this form of distribution is made from the company’s capital base. This distribution is typically not taxable for shareholders as a return of capital. A Liquidating Dividend is distinguished from regular dividends that are issued from the company’s operating profits or retained earnings. A Liquidating Dividend may be made in one or more installments.

Some procedures that would be involved in Liquidating the bank include:

Verifying and Paying Depositors Without Alternate Bank Account: All depositors of the defunct bank without alternate bank account in the industry are advised to visit the nearest branch of the bank with proof of account ownership, a valid means of identification which includes driver’s license, permanent voter’s card, National Identity Card, as well as their alternate account and Bank Verification Number (BVN). Their deposits will be verified and payment of insured sums would be done subsequently. The affected persons can also file an online claim by visiting the NDIC website claims page, downloading and fill the claims forms and upload the required documentation.

Creditors are also advised to visit the nearest bank branch to file their claims physically or through the online platform. It is worth mentioning that the process of payment of creditors will commence immediately after all depositors have been paid.

Debtors who are yet to complete the repayment of loans are advised to contact the Corporation’s Asset Management Department (AMD).

CAC MANDATE ON POS AGENT REGISTRATION: MATTERS ARISING

In conclusion, it is noteworthy to mention that revocation of Heritage bank’s license does not affect other Nigerian banks as banking activities continues in those banks. However, the revocation might instigate public panic and loss of confidence in the banking system. Also, the revocation may dampen prospective investors trust and this may affect the credibility of the Nigerian banking system.

Notwithstanding, the NDIC has assured the entire banking public of its commitment to the continued safety of depositors’ funds in all licensed banks in Nigeria. As such, depositors are urged to continue their banking businesses without fear as banks whose licenses have not been revoked remain safe and sound.