Central Bank Revokes Heritage Bank’s License Amid Financial Instability

The Central Bank of Nigeria (CBN) announced on Monday that it has revoked the license of Heritage Bank Plc.

Heritage Bank is now the first lender to collapse since the central bank introduced stringent capital requirement measures just over two months ago.

The CBN cited breaches of banking legislation and the bank’s inability to improve its financial performance as primary reasons for the revocation.

“The management has not been able to improve the bank’s financial performance, a situation which constitutes a threat to financial stability,” the CBN stated in an emailed announcement.

In March, the CBN mandated new minimum capital requirements, giving banks until 2026 to comply.

These requirements were significantly raised with the threshold for banks with international units increased tenfold to 500 billion naira ($337 million) and for those with in-country operations like Heritage Bank, eightfold to 200 billion naira.

The intent behind these measures is to strengthen the defenses of Nigeria’s banking industry, which faces challenges such as a steep naira devaluation, high inflation, rising interest rates, and sluggish economic growth.

While several banks, including FBN Holdings Plc, Fidelity Bank Plc, and Stanbic IBTC (Standard Bank’s Nigeria unit), have announced plans to raise new capital to meet these requirements, others may struggle to do so.

Mustafa Chike-Obi, chairman of the Bank Directors’ Association of Nigeria, highlighted the difficulties some banks might face in meeting these stringent thresholds.

Heritage Bank, which secured its commercial license in 2012 and acquired Enterprise Bank in 2014—a bank that was nationalized by the government due to financial infringements—has faced persistent financial difficulties.

Despite ongoing engagement and prescribed steps by the CBN to address these issues, the bank’s condition continued to deteriorate.

The regulator stated, “The lender continued to suffer with no reasonable prospects of recovery.”

To safeguard the integrity of the financial system, the CBN decided to revoke Heritage Bank’s license.

This move is aimed at bolstering public confidence in the banking sector and ensuring the soundness of Nigeria’s financial system.

The Nigeria Deposit Insurance Corporation (NDIC), responsible for guaranteeing the payment of insured deposits when a bank’s license is revoked, will act as the liquidator for Heritage Bank.

The revocation of Heritage Bank’s license underscores the CBN’s commitment to maintaining financial stability and enforcing regulatory compliance within the banking sector.

As the NDIC steps in to manage the liquidation process, customers and stakeholders will be watching closely to see how this impacts the broader banking landscape.

Heritage Bank has not yet responded to requests for comment on the revocation.