NDIC to pay depositors of failed banks with balances exceeding N5m

…84.98% of depositors with BVN-linked accounts have been paid – Hassan

The Nigeria Deposit Insurance Corporation (NDIC) has announced its commitment to reimbursing depositors of failed banks who have balances exceeding N5 million.

The corporation has already largely compensated depositors for their insured deposits, but plans are now in motion to ensure that those with higher balances will also be paid.

Bello Hassan, managing director and CEO of the NDIC, made this disclosure during the 2024 NDIC Workshop for Business Editors and the Finance Correspondents Association of Nigeria (FICAN) held in Lagos.

According to Hassan, “The Corporation is already working assiduously to ensure that all depositors with amounts in excess of the maximum insured amount of N5 million are paid through liquidation dividends from the realisation of the defunct bank’s assets and recovery of debts.”

This effort primarily targets depositors of Heritage Bank, which was recently shut down, as uninsured deposits form a significant portion of the bank’s total deposits.

Hassan emphasised that the NDIC has already initiated the process of debt recovery, including the realisation of investments and physical assets of the defunct bank. This, he explained, is critical for ensuring the timely payment of uninsured deposits. “The Corporation has taken decisive steps to recover debts and liquidate assets to expedite the reimbursement of those depositors,” Hassan said.

Furthermore, the NDIC’s responsibility extends beyond depositors to creditors of the defunct bank. Once all depositors have been fully reimbursed, creditors will also receive their payments, following an orderly process of asset realisation and the prioritisation of claims. Hassan remarked that this system is designed to “maintain public trust in the banking system and promote financial stability,” demonstrating the corporation’s broader mandate of ensuring depositor protection even during financial disruptions.

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Reflecting on the NDIC’s role in financial stability, Hassan reminded attendees that the Corporation was established over three decades ago with the primary goal of safeguarding depositors, particularly the most vulnerable, while contributing to overall financial system stability. “Our core mandate includes providing deposit insurance cover to depositors of licensed banks, supervising insured financial institutions, resolving distressed banks, and ensuring orderly resolution in the event of bank failure,” he stated.

He further emphasised the importance of public confidence in the financial system, underscoring that deposit insurance plays a critical role in maintaining stability. “Confidence is key in the maintenance of financial system stability, and the role of deposit insurance cannot be overemphasised. As one of the safety nets, it reassures depositors, thereby instilling trust in the banking system and preventing bank runs during times of uncertainty,” Hassan noted.

The recent closure of Heritage Bank, following the revocation of its license by the Central Bank of Nigeria (CBN) on June 3, 2024, has highlighted the NDIC’s critical role in protecting depositors. In line with the provisions of the Banks and Other Financial Institutions Act (BOFIA) 2020 and the NDIC Act 2023, the Corporation was appointed as the liquidator responsible for overseeing the orderly resolution of the bank. Hassan pointed out that “acting in accordance with relevant laws, the NDIC stepped in to ensure the protection of depositors and the systematic liquidation of Heritage Bank’s assets.”

In the immediate aftermath of the bank’s closure, the NDIC began the process of reimbursing insured deposits, with a maximum payout of N5 million per depositor. Hassan highlighted that this reimbursement process began within a record time of four days after the bank’s closure, using the innovative approach of Bank Verification Numbers (BVN) to identify depositors’ alternate accounts in other banks. “This process enabled us to avoid the lengthy form-filling and unnecessary visits to NDIC offices,” he said. To date, 84.98 percent of depositors with BVN-linked accounts have been paid, showcasing the efficiency of the new system.

The NDIC’s proactive efforts have provided a cushion for depositors during an economically challenging time, particularly with the recent increase in deposit insurance coverage from N500,000 to N5 million in Deposit Money Banks. Hassan stressed that the prompt payment of depositors is “consistent with the provisions of the International Association of Deposit Insurers (IADI) Core Principle 15, which emphasises timely payouts to depositors of failed banks.”