* Says No Nigerian Bank Currently Faces Precarious Situation Comparable To Liquidated Heritage Bank
In what seems as furtherance of confidence building in the banking industry and seamless recapitalisation which has mergers and acquisition as one of the viable options, the Central Bank of Nigeria (CBN) says it has approved for financial accommodation to support the proposed merger between Unity Bank Plc and Providus Bank Limited.
CBN, in a statement by its acting Director of Corporate Communications, Hakama Sidi-Ali, said the move is designed to bolster the stability of the nation’s financial system and avert potential systemic risks.
Some analysts say last night that respite may be coming the way of Unity bank that has been facing liquidity challenges for the past seven years.
Providus Bank Limited, a commercial bank founded in 2016, some two years ago commenced steps to acquire majority stake in the over 20 years Unity Bank Plc, as part of the former’s business expansion plan.
The arrangement with Unity Bank, which had been struggling to beef up its minimum capital requirement since 2017, is however claimed by their staff as more of a business combination which had reached final stage before the new government and subsequent new leadership at the bank came on board and eventually halted all the M&A exercises by the previous Godwin Emefiele administration
The apex bank’s statement reads; “The merger is contingent upon the financial support from the CBN. The fund will be instrumental in addressing Unity Bank’s total obligations to the Central Bank and other stakeholders.
“It is unequivocal to state that the CBN’s action is under the provisions of Section 42 (2) of the CBN Act, 2007. This arrangement is crucial for the financial health and operational stability of the post-merger organisation.
“It is important to emphasise that no Nigerian bank currently faces a precarious situation comparable to that of Heritage Bank, which was recently liquidated.”
The CBN said it remains committed to safeguarding depositors’ interests and ensuring the smooth functioning of the banking sector through proactive measures and strategic interventions.
The Central Bank of Nigeria (CBN) recently revoked the banking licence of Heritage Bank Plc with immediate effect, citing the bank’s persistent financial instability and breach of regulatory requirements.
ALSO:Bank Recapitalisation: M&A Option Under Scrutiny (2)
The decision is part of the CBN’s mandate to maintain a sound financial system in Nigeria, as outlined under Section 12 of the Banks and Other Financial Institutions Act (BOFIA) 2020.
In a statement, the CBN disclosed that Heritage Bank had failed to adhere to Section 12 (1) of BOFIA 2020, which necessitated regulatory intervention.
Despite multiple supervisory measures prescribed by the CBN to mitigate the bank’s declining financial performance, Heritage Bank has been unable to improve its financial health.
The bank’s continuous underperformance poses a significant threat to financial stability, compelling the CBN to revoke its licence.
The CBN also emphasized that the action is crucial to reinforce public confidence in the Nigerian banking sector and to ensure the integrity and soundness of the financial system.