• Monday, May 20, 2024
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NDIC jerks up maximum deposit insurance coverage for deposit-taking financial institutions

NDIC targets N400bn debt recovery to pay deposit insurance claims

The Nigeria Deposit Insurance Corporation (NDIC) on Thursday jerked up the maximum deposit insurance coverage levels for all licensed deposit-taking financial institutions with immediate effect in line with its establishing laws and also to factor current realities especially inflation, and exchange rates among others.

As the adjustment takes immediate effect, the maximum deposit insurance coverage for Deposit Money Banks (DMBs) was moved up substantially from N500,000 to N5,000,000, which would provide full coverage of 98 98% of the total depositors compared with the current cover of 89.20%.

In terms of the value of deposits covered, the revised coverage would increase the value of deposits covered by deposit insurance to 25.37% compared with the current cover of 6.31% of the total value of deposits.

For Microfinance Banks (MFBs) the coverage was moved from N200,000 to N2,000,000 and would provide full coverage of 99.27% of the total depositors compared with the current level of 98.76% and would increase the value of deposits covered by deposit insurance to 34.43% compared with 14.38% of the total value of the deposit, currently covered

For the Primary Mortgage Banks (PMBs), there is an increase of the maximum deposit insurance coverage from N500,000 to N2,000,000 which would provide full coverage of 99.34% of the total depositors compared with the current 97.98% and would increase the value of deposits covered by deposit insurance to 21.04% compared with 10.77% of total value of deposit, currently covered.

Also for Payment Service Banks (PSBs), the maximum deposit insurance coverage is raised from N500,000 to N2,000,000 and is expected to provide full coverage of 99.99% of the total number of depositors and would increase the value of deposits covered by deposit insurance to 43.10% of the total value deposits from the current cover of 40.60%.

For Subscribers of Mobile Money Operators, their maximum Pass-through deposit insurance coverage was equally raised from N500,000 to N5,000,000 per subscriber per MMO as the applicable coverage level for depositors of DMBs.

The new policy which was announced by Bello Hassan, Managing Director/Chief Executive, NDIC adoption of the revised maximum deposit insurance coverage is supported by the Corporation’s current funding, represented by the balances in the various Deposit Insurance Funds (DIFs), expected annual premium collection, enhanced supervision that would reduce the likelihood of bank failures, effective bank resolution frameworks and other funding arrangements provided by the NDIC Act No. 33 of 2023.

Hassan said that it is in line with the NDIC’s commitment to enhancing depositors’ protection, public confidence, financial inclusion, and stability of the financial system and that the decision was taken by the Interim Management Committee (IMC), during its 18th meeting held between April 24 and 25, 2024.

According to him, the NDIC, leveraging technology and its balance sheet is capable enough to take on the new policy and promptly pay insured depositors of failed banks.

He also noted that the issue of moral hazard was adequately put into consideration in the process of the review.

“ I must emphasise that, the revised deposit insurance coverage has balanced the NDIC’s goals of deposit protection and financial system stability with incentives for depositors to practice market discipline and prevent banks from unnecessary risk-taking and moral hazard consideration was given to ensure that the coverage was limited but adequate enough to protect a large number of depositors and credible enough to prevent the destabilizing effect of bank runs,” Hassan stated.

…This is a developing story.