• Monday, May 20, 2024
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NDIC to review insurance of Mortgage Banks

NDIC

The Nigeria Deposit Insurance Corporation (NDIC) says it will review the insurance coverage it provides for Primary Mortgage Banks (PMBs) to ensure effective operations of the sector.

The NDIC Managing Director, Alhaji Umaru Ibrahim, made the disclosure at the opening of a two-day workshop for PMBs on Monday in Abuja.

“Going forward, we hope to review the insurance coverage that we do provide, you are aware that right now it is N200, 000 in case of any failure.

“We are thinking why not segregate slightly from what is obtained in the Micro Finance Banks (MFB), given the huge portfolio and risks you carry.

“And also in return, given the quantum of premium that you give,’’ he said.

According to him, the corporation is also reviewing the basis of premium of the PMBs in the country.

He said that instead of using the flat rate which was the initial practice, the corporation would introduce risk-based premium assessing system.

This, he said, was obtainable with the Money Deposit Banks.

“That way, we will be able to promote safer and best practices and in the process, the best manned and managed institutions will have less premium burden on them,’’ he said.

On the workshop, he said that discussion would be focused on the state of affairs of the mortgage institutions and risk management and its importance.

He said that weak corporate governance and poor risk management frameworks could result in risky behaviours by the PMBs, adding that it could help to create huge toxic assets and ultimately put insured deposits at risk.

Ibrahim said that the supervisory authorities were concerned about build up of toxic assets with Micro Finance Banks which stood at about 45.7 per cent as at December 2013 against the prescribed maximum of 5 per cent.

“Our attention is now being focused on both the MFBs and PMBs sub sectors so as to address the emerging challenges.

“Our efforts can only be successful if the operators can embrace good corporate governance and sound risk management practices.

“We cannot afford the repeat of 2008/2009 crisis,’’ he said.

Ibrahim said PMBs in Nigeria could create significant impact if they adhere to the recommended corporate governance practices based on effective risk management practices instituted by regulatory authorities.

He said that PMBs should be interested in enhanced risk management standards as some mortgage portfolios were on predominantly variable interest rate

Ibrahim added that government was making effort to rejuvenate the sector through its recent initiative on mortgage and housing policies.

He said that the ratio of mortgage finance as a percentage of Gross Domestic Products currently stood at one per cent, while countries like South Africa at 29 per cent, Mexico at 10 per cent and Malaysia at 29 per cent.

The managing director said the corporation would continue to ensure that all insured institutions were put on the path of sustainable growth and development.

He appealed to all PMBs to pay their annual premium promptly.

(NAN)