BusinessDay

NDIC says Bridge Bank option secured N1.02trn deposits, saved 12,667 jobs

...outlines accomplishment in payment of guaranteed sums, liquidation dividends

The Bridge Bank option applied by Nigeria Deposit Insurance Corporation (NDIC) did not only prevent a systemic crisis, it secured N1.021trillion deposits which ensured that depositors had continued access to their funds and financial services, said Bello Hassan, Managing Director/Chief Executive, Nigeria Deposit Insurance Corporation.

Pursuant to provisions of the NDIC Act, 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.

Hassan futher noted that the implementation of the Bridge Bank option also saved over 12,667 jobs while over 877 branch network and services of the affected banks were maintained.

He noted this at the 2021 edition of the NDIC Editors Forum held in Lagos on Saturday November 27.

NDIC key policy thrust is 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.

Read Also: How NDIC’s prompt resolution saves banking sector from failure

The forum themed “Enduring extreme disruption: resilience & reinvention for banking system stability and deposit insurance” kept Editors better informed on the topical issues in the financial services industry in general.

“We place high premium on working harmoniously with all our strategic stakeholders towards the realization of the public policy objectives for which the Corporation was established. NDIC is also strongly convinced that the media has a critical role to play in the process,” Hassan added.

In the area of Deposit Insurance as a distinct mandate of the Corporation, Hassan noted that from empirical statistics, the Corporation’s deposit insurance coverage limits “are not only adequate but robust enough to engender confidence in our banking system.”

NDIC has commenced the process of strengthening its failure resolution and liquidation mandate through the improvement of its 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,” Hassan said.

He further stated, “As we look ahead to a reinvigorated NDIC, it is equally important to intimate you with some of the Corporation’s landmark achievements despite obstacles bedeviling its operations, such as slow recovery and realization of assets, slow adjudication of cases, depositors’ apathy toward deposit verification as well as indifference of customers of banks in-liquidation with small balances amongst others.”

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 regulatory agencies to come up with appropriate strategies for building resilience into the financial system while also reinventing the policies that define its workings in line with efforts at providing the much-needed support to the Federal Government’s economic recovery agenda.

NDIC noted for instance that in 2016, 2017, 2018 and 2019, the total number of accounts in the deposit money banks stood at 83million; 99.1million; 112 million and 128.4 million respectively. “Out of these numbers, the N500,000 coverage limit fully covered 99.4percent; 97.6percent; 97.5percent and 97.6percent of accounts, respectively. The implication is that in the event of bank failure, above 97percent 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 whilst also protecting the Corporation from possible downside risk”, the managing director of the Corporation said..

The Corporation’s accomplishment in the payment of guaranteed sums and liquidation dividends speaks volumes of its commitment to the discharge of its unique mandate.

NDIC had paid a cumulative sum of N8.268 billion to 443,946 insured depositors and N100.080 billion to uninsured depositors of deposit money banks in-liquidation as at September 30, 2021 while N3.413 billion was paid to 90,945 insured depositors of microfinance banks and N1.218 million to uninsured depositors.

In the same vein, cumulative insured amount paid to 1,553 depositors of closed primary mortgage banks as at September 30, 2021 stood at N110.15 million while N7.965 million was paid as uninsured deposits.

Most importantly, the payment of N1.274 billion to 991 creditors and N4.886 billion to 965 shareholders of banks in-liquidation as at September 30, 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.

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