NDIC, CBN must do more to stem depositors’ panic at Heritage Bank branches

That the Nigerian Deposit Insurance Corporation (NDIC) has pledged it would promptly pay depositors with N5 million and below has not lowered the panic among depositors of the defunct Heritage Bank.

The Central Bank of Nigeria (CBN) revoked the bank’s operating licence on June 3, after assuming its powers under Section 12 of the Banks and Other Financial Institutions Act (BOFIA) 2020. Under the same law, it appointed NDIC to liquidate the bank.

The NDIC has since swung into action. Bello Hassan, NDIC managing director, told the media on June 5 that while Heritage Bank’s total deposits stood at N650 billion, its loan portfolio stood at slightly over N700 billion.

“The NDIC put the total depositors of the bank at 2.3 million” he said “with 99 per cent of them having total balances less than N5 million.” The depositors are spread over the bank’s 116 branches nationwide.

If depositors with N5 million and below indeed constitute 99 per cent, then there is little cause for panic. That shows that NDIC’s initial depositor payment of N5 million and below should cover the bulk of the depositors. Only one per cent would now wait until NDIC disposes of the bank’s assets and recovers its loans – before finally winding down the bank.

“All depositors are currently being verified for onward payment of insured benefit of N5 million,” the NDIC boss added, “while depositors with insured deposits above N5 million will be paid upon the sale of the assets of the bank.” That is highly welcome. The importance of due diligence cannot be over-stressed.

Still, both NDIC and CBN should push out more reassuring news to calm depositor nerves and stem panic. Depositors too must panic less, listen more, and follow the payment processes and instructions, as laid down by NDIC. Blind panic won’t solve any problem. It will only lead to depositor headache. It’s the least they need right now.

But even if this exercise attained a 100% success, nothing can pay for the initial shock of a bank failure and the sinking feeling that all the depositors’ – and even investors’ – money might have gone up in smoke! That is why everyone involved in the latest failure must be probed, tried and brought to book.

Banks should not just be failing. This is one sector – the ultra-sensitive financial sector — that that old saying: “prevention is better than cure”, has an added, pressing and urgent meaning.

Bank failures send a negative signal for the economy. So, CBN must be commended for its prompt intervention, after its failed efforts – by the CBN’s own communication — to help the bank back to life. The NDIC too deserves kudos for its early rally. But it would not fully earn that applause until it has walked its talk and ensured no legitimate depositor is excluded from the payment scheme.

Still, the fundamental question remains – what went wrong? Bad loans? Insider trading? Poor corporate governance? Woeful due diligence on loans?

Then, the bank’s nativity: did Heritage Bank ever rise above the corporate governance crisis that led its ancestor, SocieteGenerale Bank (SOGEN) into a terminal coma — a coma that birthed Heritage Bank, though with a lowered regional licence? If it did not, what roles did the regulatory midwives play in this present meltdown?

All these are not accusations. They are just legitimate questions that must be asked and answered, in the course of a rigorous post-mortem.

Heritage Bank is gone – and you just must feel for its sponsors and investors, aside from those whose criminal bent could have helped to kill the bank. But these questions must be answered, and grim lesson learned from them, if only to avert future bank failures.

This is already one failure too many. Never again? Yes. But how sincerely we learn from this pitfall will determine that.

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