*paid ₦8.268bn to 443,946 insured depositors, ₦100.080bn to the uninsured as at Sept, 2011
*As NDIC reviews banks’ DIF contributions, others to improve stability
From Anthony Nwachukwu, Lagos
For a more resilient banking system, the Nigeria Deposit Insurance Corporation (NDIC) said it has evolved a set of measures, including scaling up banks’ deposit insurance and timely support to insured institutions in order to raise depositors’ confidence and maintain stability in the financial sector.
The move, according to the NDIC Managing Director/Chief Executive, Bello Hassan, is in response to the global devastating effects of Covid-19, as well as the incursion of Fintech and similar enterprises into the nation’s financial services sector with some “enduring extreme disruptions” to the traditional banking system.
Hassan disclosed this in his address at the 2021 edition of the NDIC Editors Forum in Lagos at the weekend, with the theme, “Enduring Extreme Disruptions: Resilience & Reinvention for Banking System Stability & Deposit Insurance.”
He listed the agency’s key policy thrust as, “to scale up the deposit insurance framework, timely support to insured institutions as and when required, faster and orderly resolutions of failed insured institutions, as well as assistance to the monetary authorities in promoting stability in the banking system.”
To that end, his management team is placing a “high premium on working harmoniously with all our strategic stakeholders towards the realisation of the public policy objectives for which the corporation was established.
“We are also strongly convinced that the media has a critical role to play in the process”.
Hassan noted that under deposit insurance, as a distinct mandate of the corporation, empirical statistics, “the corporation’s coverage limits are not only adequate but robust enough to engender confidence in our banking system.
“For instance, in 2016, 2017, 2018 and 2019, the total number of accounts in the deposit money banks stood at 83.0 million; 99.1million; 112.0 million and 128.4 million respectively.
“Out of these numbers, the N500,000 coverage limit fully covered 99.4 per cent, 97.6 per cent, 97.5 per cent, and 97.6 per cent of accounts respectively.
“The implication is that in the event of bank failure, above 97 per cent of depositors would be fully covered by the corporation.
“In addition, we have commenced the review of our approach to the determination of premium/contribution by banks to our Deposit Insurance Fund (DIF) to a more risk-based approach to ensure that the probability of the risk crystallizing becomes a major factor in the pricing methodology of our premium going forward.
“On timely support to insured institutions, we have identified the need to reconsider our criteria for qualification of financial institutions to provide realistic terms and conditions in order to facilitate prompt access to technical and/or financial support in line with the Sec (2)(1)(b) of the NDIC Act, while also protecting the corporation from possible downside risk.
“We have commenced the process of strengthening our failure resolution and liquidation mandate through the improvement of our internal processes and procedures, as well as enhancing effective collaboration with relevant stakeholders to ensure that the corporation discharges its responsibilities more efficiently.
“This has become imperative to us given the need to implement prompt corrective actions on ailing or failed banks, improve our processes in addressing challenges in liquidation and most importantly provide timely reimbursement of insured sums to depositors of failed banks.”
He regretted that the agency’s operations are being hampered by “slow recovery and realisation of assets, slow adjudication of cases, depositors’ apathy toward deposit verification, as well as indifference of customers of banks in-liquidation with small balances, among others.”
These notwithstanding, he listed NDIC’s achievements to include “several failure resolution initiatives such as Open Bank Assistance (OBA), Purchase & Assumption (P&A) and Mergers & Acquisition (M&A) had been adopted in resolving distress in various banks from 1989, culminating in the novel Bridge Bank option to resolve four problem banks in 2011 and 2018.
“The bridge bank option did not only prevent a systemic crisis, it secured N1.021 trillion deposits, which ensured that depositors had continued access to their funds and financial services. “The implementation of the Bridge Bank option also saved over 12,667 jobs while over 877 branch networks and services of the affected banks were maintained.
On payment of guaranteed sums and liquidation dividends, “NDIC had paid a cumulative sum of ₦8.268 billion to 443,946 insured depositors and ₦100.080 billion to uninsured depositors of deposit money banks in-liquidation as at 30th September, 2021 while N3.413 billion was paid to 90,945 insured depositors of microfinance banks and ₦1.218 million to uninsured depositors.”
Likewise, “cumulative insured amount paid to 1,553 depositors of closed primary mortgage banks as at 30th September, 2021 stood at N110.15 million while ₦7.965 million was paid as uninsured deposits.
Most importantly, the payment of N1.274 billion to 991 creditors and ₦4.886 billion to 965 shareholders of banks in-liquidation as at 30th September 2021 underscored the corporation’s success story in bank liquidation.
“What this implies is that the corporation had realised enough assets to pay all the insured and uninsured depositors of the banks that present themselves for payment. Currently, 19 out of the 49 DMBs in-liquidation fall into this category.
Calling for the media’s continued support, Hassan urged the editors to not only provide informed scrutiny and analysis of the agency’s activities but also assist its other stakeholders with the right insight into its role as member of the financial safety net, and the contributions of DIS to the stability of Nigeria’s financial system.
He described the meeting as very timely and serving to re-enforce the value-adding interface with the highest echelon of the nation’s media industry as a deliberate strategy in deepening understanding of the Deposit Insurance System (DIS) among a broad spectrum of Nigerians.
Indeed, when the corporation introduced this forum in 2012 as an annual interactive platform between the NDIC management and editors, it was to deepen the media men’s collective understanding of the implementation of the DIS in Nigeria, with particular emphasis on the corporation’s mandate and contributions to the nation’s financial system stability, along with the challenges it encounters in the process.
Hoping that the editors would remain better informed on topical issues in the financial services industry, he noted: “Today, more than ever before, the same objectives for the initiation of the Editor’s Forum cannot be over-emphasized given the various challenges in the financial system as a result of the Covid-19 pandemic and its generational impact on global economies.”
