NDIC, HERITAGE BANK, SHAREHOLDERS AND DEPOSITORS – ALL YOU NEED TO KNOW.
Let me now break it down for you if you don’t get it.
First, it is no longer news that CBN has revoked the operating licence of Heritage Bank plc.
What does that mean?
What it means is that as you and I speak, there is no longer a bank in Nigeria with that name.
But the first question is, why did CBN revoke the licence?
Simple!
The bank can no longer perform.
They have too many bad loans, and depositors are no longer guaranteed of their deposits with the bank. So, if CBN allows them to continue, it might get worse, and nothing will be rescued.
This is the reason – at least, what CBN told us.
So what happens to depositors in the bank?
First, who are depositors?
They are the customers of the bank; those whose interest in the bank is just to keep their money there and not necessarily with the motive of making any profit.
Whether you have a savings account, current account, fixed deposit account or any other form of account, you are a depositor.
Your risk with the bank as a depositor is usually minimal since you aren’t after profit.
So, if you are a customer of the bank, by law, you are protected by NDIC – The Nigerian Deposit Insurance Corporation.
NDIC is like an insurance company for banks.
The money you put in any bank in Nigeria is insured with NDIC. What this means is that if anything happens to the bank, NDIC is supposed to ensure you get all your money back.
But one thing nobody told you is that there is a limit to the amount that is insured. For instance, in the case of HeritageBank, as we have it now, NDIC said the maximum insured amount for depositors is N5M.
What is the implication of that?
It means that if you are a customer of Heritage Bank and you:
✅ Have 50k in the bank, you will get your money in full.
✅ Have 100k in the bank, you will get your money in full.
✅ Have N1M in the bank, you get your money in full.
✅Have N5M in the bank, you get your money in full.
But if you have:
❌N50M in the bank, NDIC can only give you N5M NOW.
❌N200M in the bank, NDIC can only still give you N5M NOW.
Before you start rejoicing that your money is at least not up to N5M, let me remind you. In this life, you just have to pray against problems.
Now, it is not as if you will just walk into the bank and request for your 50k, 100k, 500k, or 1M and it will be given.
NDIC has a process (and countless documents) you must follow to prove that you are the owner of that money before you can access it.
And if this is Nigeria, you should know that such will not just be smooth and easy as it were.
READ ALSO : Peter Obi reacts to CBN’s Revocation of Heritage Bank license
And mind you, NDIC said the maximum they will pay is N5M, but don’t just assume also, that when you get there, there will just carry N5M and give you at once.
Next question is this,
What happens to your balance then?
If you have N100M and NDIC give you N5M, what happens to your balance of N95M?
Does it mean you will lose it?
Maybe yes,
Maybe no.
How?
By law, NDIC is now required to liquidate (completely sell off) the bank.
So, they need to find someone who is ready to buy the bank (including all assets and liabilities).
Whoever is going to buy the bank, MUST ACCEPT To pay you your balance of N95M and also pay any other person whose money is trapped in the bank.
The question now is, “how easy is that going to be?”
Your guess is as good as mine.
So, just pray your flight be not in the winter.
Now, what about the shareholders?
This is where it gets interesting.
Shareholders are like the owners of the bank. They are people who buy share in the company with the aim of making profits.
Now, they are the principal risk bearers in the bank, unlike the depositors.
If the bank do well, they will hammer, but if the bank fail, they will lose.
So in this case of Heritage Bank, NDIC is principally responsible for depositors and not shareholders.
So even after the liquidation process, the new owners of the bank will have to settle all depositors and if anything is left (as profit) before they talk about shareholders.
But here, we are talking about a failed bank (where depositors are not even guaranteed of recovering all), so where is the profit for shareholders to share likely to come from?
Your guess is as good as mine.
Just one more group of people before we go!
The staff of Heritage Bank.
What happens to them?
I am sorry, many will definitely lose their jobs.
LESSONS
👉As an individual banker, your money is not 100% insured, but most banks won’t tell you.
👉Choosing which bank to bank with is more critical than most people would know.
👉 If you buy share, you must know from day one that the bank (or any company for that matter) owns you nothing; if the company is doing well, you gain, if they fail, you lose.
I hope this helps?