How NDIC’s prompt resolution saves banking sector from failure
The Nigeria Deposit Insurance Corporation (NDIC) on Thursday said its prompt resolution of bank failure in its over 32 of existence, has succeeded in steering the banking sector off systemic failure and collapse of public confidence.
This has further led to safeguarding the role of Financial Safety Net, Ronke Sokefun, NDIC Board Chairman, said while welcoming participants at the 2021 NDIC retreat from Members of the House of Representatives’ Committee on Insurance and Actuarial Matters, in Lagos.
The bank resolution options applied so far by the NDIC have included Financial Assistance, Technical Assistance, Hold Action, Assisted Mergers and Acquisition, Purchase and Assumptions, as well as the application of the Bridge Bank Mechanisms.
“It is only when all these options could not rescue a bank that it is allowed to go into liquidation,” Sokefun said in Lagos.
As at date, 49 DMBs, 367 MFBs and 51 PMBs are either completely liquidated or undergoing the process of complete liquidation by the NDIC, following the revocation of their operating licenses by the Central Bank of Nigeria (CBN).
The deposit insurance guarantee provided by the NDIC covers all customers of insured financial institutions in Nigeria, namely: Commercial Banks, Merchant Banks, Non-Interest Banks, Microfinance Banks, Primary Mortgage Banks, Payment Service Banks, including subscribers of the mobile money operators (MMOs).
The coverage limits under the guarantee fully covers over 96 percent of depositors whose account balances in one bank are below N500,000 (and N200,000 for MFBs), while still providing partial insurance to less than 4percent of depositors in Nigeria whose balances in accounts held in a bank aggregate above the coverage limit.
She reassured the honorable members that the Deposit Insurance Scheme (DIS) model and mandate in Nigeria has continued to further strengthen the financial safety-net, thus safeguarding the interest of depositors in Nigeria.
According to her, the NDIC has continued to work with the CBN and other supervisory authorities to reduce fraud and forgeries in Nigeria. Also, the Corporation has continued to collaborate with the CBN to promptly resolve any complaints reported by customers of insured financial institutions.
She noted that bank customers have used NDIC toll-free Helpdesk to make their complaints known to the NDIC. The continued usage of this medium by the public underscores the confidence reposed in it as an effective way of having their complaints resolved.
“This initiative, which has served as a means of communication with the public and hence an avenue for improving their awareness of DIS, has further strengthened the financial safety-net arrangements in Nigeria,” she said.
In his welcome address, Bello Hassan, managing director/CE, NDIC, explained that Financial Safety-Net is a framework comprising four key components/ functions of prudential Regulation and Supervision, Resolution, Deposit Insurance and Lender of Last Resort.
“The various components aim to promote financial stability at all times and manage eventualities of any financial crisis. The CBN handles the Lender of last resort function, with the CBN/NDIC collaborating to address prudential regulation and supervision, with the last, Deposit Insurance, being undertaken only by the NDIC,” Hassan said.
Speaking at the retreat, Darlington Nwokocha, Chairman House of Representatives Committee on Insurance and Actuarial Matters, said, “We can comfortably say that this committee has driven the insurance industry to a point that every person in less than no time will find out that yes, the house committee on insurance and Actuarial Matters have really done well.”
He said the insurance bill, which is almost gutting to the third reading will highly synergize what they are doing to a very great height and having choosing this theme, “Strengthening Nigeria’s Financial Safety-Net : The role of deposit insurance”, he said is very key at this moment because when “we’re talking about strengthening there are too many indices, there are too many factors that must come together to guarantee such strengthening and I think that one of the core reason to drive that process will come from the legislature and that is the more reason why we are calling and saying that we are ever ready to strengthen the NDIC Act by amending that Act.
“I want to say that this gathering will offer both the NDIC and the legislature and the entire nation a very mutual and outstanding profit at the end of the day.
“I want to say that we are ready to learn, we are ready to interact. We are ready to work and partner with you to achieve a better result, Nwokocha said.
Speaking with some journalists at the end of the opening session, Oghene Emmah Egoh, representing Amuwo Odofin Federal Constituency, Lagos State, said there is a new banking system that is coming up and the financial industry is growing rapidly and so this topic is good.
“It will enable us to look at the financial industry and see how we can handle it by ensuring that the nation moves forward because if there is a crisis in the financial industry then this country is finished. And I am happy NDIC is doing fantastic work in that area. But they will need to consolidate, they will need to expand and look at the new businesses that are coming up for instance, several new companies do money transfers using different apps and all these ones are part of the financial services.