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NDIC develops methodology for deposit insurance funding ratio

The Nigeria Deposit Insurance Corporation (NDIC) says it is developing an effective methodology for determining a realistic Target Funding Ratio (TFR) for the Corporation.

The strategy, which accentuates the Corporation’s existing framework, strives to ensure that insurance cover is adequate to support its objective within the banking sector.

Bello Hassan, managing director/chief executive, NDIC, disclosed this at the ongoing 18th edition of the workshop for business editors and Finance Correspondents Association (FICAN) in Ibadan.

“We have commenced the review of our approach to the determination of premium by banks to make it more risk-based, such that, the probability of the risk crystallising, becomes a major factor in the pricing methodology of our premium going forward,” he said.

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Hassan noted that there have been recent calls on the Corporation to enhance the provision of support to insured institutions that are facing financial difficulties.

“To this end, we have identified the need to reconsider our framework, to provide realistic terms and conditions that will enable qualifying insured financial institution promptly access technical and or financial support, in line with S.(2)(1)(b) of the NDIC Act, whilst also protecting the Corporation from possible downside risks,” he said.

He said the Corporation is collaborating with relevant stakeholders, to ensure that it discharges its responsibilities efficiently without hindrances, following revocation of licenses of any insured institution by the CBN.

“This has become more important to us, given the need to improve on our processes in resolving liquidated financial institutions. Some of the obstacles bedevilling the efficient and timely resolutions of liquidated institutions, such as slow recovery and realization of assets, as well as litigation by erstwhile shareholders and creditors of closed banks can only be addressed through effective collaboration”.

Hassan said the focus of the Corporation is to scale up the deposit insurance framework; provide timely support to insured institutions as and when required; ensure faster and orderly resolutions of liquidated insured institutions; as well as continue to assist the Central Bank in promoting the stability of the banking system.

He reiterated the determination of the current management of the NDIC, to work harmoniously with all stakeholders, to enhance the capacity of the Corporation in the discharge of its statutory obligations towards the fulfilment of the public policy objectives for which it was established.

According to him, the choice of the theme of this year’s workshop: “Enduring Extreme Disruptions: Resilience and Reinvention for Banking System Stability & Deposit Insurance” was apt.

“As economies across the globe continue to grapple with the devastating impact of the COVID-19 Pandemic, it has become expedient and highly desirable, for supervisors to come up with appropriate strategies that are required to build resilience into our financial system as we seek to provide the much-needed support to the Federal Government’s economic recovery agenda”, he said.

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