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Published On: Fri, Jul 17th, 2020

BOFIA: Clarity in NDIC, CBN roles Critical to effective Regulation of Banks – NDIC boss

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By Etuka Sunday

The Managing Director/CE, Nigeria Deposit Insurance Corporation(NDIC), Umaru Ibrahim has said in order to establish effective legal instruments to secure the safety and stability of the nation’s financial system, there was need to closely examine enacting laws with a view to harmonising the positions of the Nigeria Deposit Insurance Corporation (NDIC) and the Central Bank of Nigeria (CBN) in the NDIC Act 2006 and The Banks and Other Financial Institutions Act (BOFIA) 2004.
Umaru Ibrahim stated this as part of the Corporation’s presentation during the Public Hearing for the Amendment of the BOFIA Act 2004 towards the Repeal and Re-enactment of the Bill to BOFIA 2020 at the Public Hearing organised by Senate Committee on Banking, Insurance and Other Financial Institutions at the National Assembly in Abuja.
The NDIC MD/CE explained that variances in the Bills that may be perceived as overlapping mandates between the NDIC and the CBN should be clarified in order to avoid any ambiguity in the laws governing their operations and should be reflected in the BOFIA 2020.
This, he said was specifically critical in the area of the resolution of failing banks where the NDIC should be recognised as the primary actor in the resolution process while the CBN intervenes in the event of systemic crisis.
He also expressed the need for the Corporation to be involved in the process of licensing banks in collaboration with the CBN in order to ensure the necessary fit and proper checks and to establish clearer assessment of the status of financial institutions before licensing.
He also noted that the bill seems to suggest the option of the appointment of other entities in the liquidation of failed banks adding that the Bill should be amended to reflect the NDIC as the sole liquidator of failed banks based on the Corporation’s core mandate of Bank Liquidation.
He said, the clear delineation of roles between the NDIC and CBN would strengthen the legal framework and contribute towards effective and efficient collaboration in the supervision and regulation of the Banking Sector.
The highlights of the NDIC presentation focused on the following areas; Express prohibition of insider loans/criminalising insider loans by making it an offence punishable with imprisonment and fine for directors of licensed banks to obtain credit facilities from their own banks, whether such credit facilities are secured or not.
The Corporation noted that there is no need for approval of the Central Bank to be sought in the implementation of supervision, control and management and distress resolution of banks as reflected in the Bill as this constitutes the core mandates of the Corporation. The Corporation should therefore carryout these functions in consultation with the CBN not with the consent of CBN as both institutions are independent and compliment the functions.
Directors of banks should be held are personally liable without any limitation for the causes of the failure of their banks where they have been found to be negligent in managing the bank.
The imposition of penalties and persecution of various offences to serve as a deterrent to officers and directors of banks and will ensure that the banking industry ensures compliance with available laws and regulation in order to avoid paying stiff penalties.

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