Victor EzejaFormer deputy governor of the Central Bank of Nigeria (CBN), Prof. Kingsley Moghalu, has stressed that banks, like other entities, are in business and liable to suffer the consequences of bad management.
Moghalu said Nigerian banks and bankers must be reminded that banks are businesses and must be well managed or they savor the consequences later.
Join our WhatsApp ChannelHe added that badly-run banks, as businesses, should not have the right to lifetime guarantee because there is an agency like the Asset Management Corporation of Nigeria (AMCON). According to him banks do not have the right to privatise profits and socialize losses because there is AMCON.
The former CBN deputy governor stated this while reacting to the revocation of Heritage Bank’s licence by the CBN.
The apex had in a statement released on Monday, announced that it has revoked the licence of Heritage Bank over failure to meet up with the regulatory requirements arising from the bank’s deteriorating financial health.
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In a post via his X handle, Moghalu said the revocation of the Heritage Bank’s license by the CBN was “the chronicle of a death foretold,” adding that it didn’t come as a surprise to many industry experts and observers.
“I don’t think it should worry anyone, nor does it mean the financial system isn’t sound,” Moghalu stated.
“Banks are businesses, even if very special and thus heavily regulated ones.
“A bank that is badly run should not have a lifetime guarantee. The important thing is to protect depositors funds.
“I repeat, Nigerian banks and bankers must be reminded that banks are businesses that may also suffer the business consequences of bad management. They should not have a right to privatize profits & socialize losses because @AmconNg exists. That’s called “moral hazard.”
Mixed reactions have trailed the revocation of Heritage Bank’s licence. While some supported CBN saying it was done to ensure financial stability in the system, others insisted that the apex bank could have found a way to save the bank by either allowing a window of merger, recapitalisation or instituting a process leading to AMCON taking over the bank and managing it to protect depositors’ funds.
The CEO of Sogato Strategies and Chair of Africa Private Sector Summit (APSS), explained that when AMCON was created in 2010, the aim was to ensure that no bank failed as they strived to maintain financial stability in the system because of the then global financial crisis.
Moghalu added that over time, he never subscribed to the idea that no matter how badly run, no bank should ever fail because because it’s a wrong approach to financial regulation.
“What we did in 2010 when we created @AmconNg was to ensure SYSTEMIC financial stability. We made sure no bank failed then to ensure systemic stability because of the unique situation of the global financial crisis. But over the long term, I never subscribed to a view that no bank no matter how badly run, should ever fail. That would be a wrong approach to financial regulation,” Moghalu stated.
Victor Ezeja is a passionate journalist with six years of experience writing on economy, politics and energy. He holds a Masters degree in Mass Communication.
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