CBN and NDIC Contest Court Power in Mortgage Bank Licence Case
Legal representatives are currently fighting to restore their licences, despite strong jurisdictional opposition from the CBN and NDIC.
The Central Bank of Nigeria (CBN) and the Nigeria Deposit Insurance Corporation (NDIC) have formally contested the jurisdiction of the Federal High Court in Abuja regarding a lawsuit over the revocation of operating licences for ASO Savings and Loans Plc and Union Homes Savings and Loans Plc. The regulatory bodies argue that the judiciary lacks the competence to adjudicate on the matter, asserting that the withdrawal of the licences was a valid exercise of statutory powers. This legal confrontation arises as stakeholders seek to overturn the apex bank's decision to shut down the two primary mortgage institutions.
The Jurisdictional Argument
Central to the regulators' defense is the contention that the plaintiffs failed to follow requisite legal procedures before filing the suit. In a preliminary objection, the CBN and NDIC maintain that the court cannot interfere with regulatory actions taken under the Banks and Other Financial Institutions Act (BOFIA) 2020. They argue that the revocation was a necessary measure to protect the broader financial system and depositor interests, following the institutions' failure to meet critical financial thresholds.
The NDIC, acting in its capacity as the liquidator, further asserts that the legal challenge is premature. The corporation contends that the statutory framework governing the resolution of failed banks prioritizes administrative remedies over immediate litigation. By challenging the court's jurisdiction, the regulators aim to prevent a judicial review that could potentially reverse their enforcement actions.
Context of the Licence Revocation
The conflict traces back to the CBN's decision to withdraw the licences of ASO Savings and Union Homes due to persistent regulatory non-compliance. Specifically, the institutions reportedly struggled with:
• Inadequate capital structures that failed to meet minimum requirements.
• Chronic liquidity challenges that hampered their ability to meet obligations.
• Failed attempts at restructuring or finding suitable investors to recapitalise the entities.
While the plaintiffs argue that the revocation was high-handed and ignored ongoing recovery efforts, the regulators maintain that the "death certificates" issued to these banks were a final resort after years of forbearance.
Implications for Mortgage Banking and Investors
This case is being closely watched by investors and policymakers as it tests the limits of the CBN’s autonomy under BOFIA 2020. If the court sustains the preliminary objection, it will set a firm precedent that regulatory "intervention" in distressed banks is largely shielded from judicial interference. This would provide the CBN with a clearer mandate for aggressive enforcement but may raise concerns among shareholders regarding the protection of their investments during liquidation processes.
For the mortgage sector, the continued closure of these two legacy firms highlights the ongoing consolidation within the industry. The final ruling on jurisdiction will determine whether the liquidation of ASO Savings and Union Homes proceeds as planned or if the institutions receive a legal lifeline.
