Former Deputy Governor of Central Bank, Professor Kingsley Moghalu, has said the Heritage Bank’s death was not surprising.
Professor Moghalu said banks management must know that banks are businesses that could die due to poor management policies. He said a bank that is badly run would have a short long time guarantee.
The revocation of the banking license of Heritage Bank by Central Bank is the chronicle of a death foretold. In other words, it’s not surprising.
Moghalu said Heritage Bank’s death due to CBN’s revocation of its operating license should not create panic in Nigerians.
“I don’t think it should worry anyone, nor does it mean the financial system isn’t sound. 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 Professor of Political Economics said.
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He added that what was more important in the banking sector “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 Asset Management Corporation of Nigeria (AMCON) exists. That’s called “moral hazard”.
“What we did in 2010 when we created AMCON 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,” he added.