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Published On: Tue, Feb 20th, 2018

How depositors in liquidated banks will remember NDIC in 2017

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How time flies. So, it is farewell to 2017 and all the good, the bad and all the politically induced upheavals that came with it! But for the lucky ones, memories of the past year will not be easily forgotten.
As a financial analyst, I have closely monitored most of our financial institutions, especially the regulatory bodies, and gauged the economic impulse of the nation more generally.
If, at the macro level, recession and devaluation defined Nigeria’s economy in 2016, the year 2017 would be remembered as one in which Nigeria exited the worst economic recession in her history, having recorded two positive real growth rates in quarters two and three Also in 2017, investments in agriculture began to pay significant dividends evidenced by bumper harvests.
At the macro level of the banking sector, depositors of liquidated banks, will remember 2017 as the year with the highest liquidation dividend payouts by the Nigeria Deposit Insurance Corporation (NDIC). In one instance, in 2017, the NDIC paid out a whopping 13.6 billion to depositors of six (6) banks-in-liquidation namely: African Express Bank, All States Trust Bank, City Express Bank, Hallmark Bank, Lead Bank and Metropolitan Bank.
For the entire 2017, the depositors of these banks can aptly be seen as the luckiest Nigerians. One can only imagine how many lives have been touched positively, revived and notched up through this singular act of effectively guaranteeing depositors and thus ensuring confidence in the financial sector.
Section 2 of the NDIC Act of 2006 specifies the functions of the Corporation as follows:
i) Insuring deposit liabilities of all licensed banks and such other financial institutions operating in Nigeria, so as to engender confidence in the Nigerian banking system;
ii) Giving assistance in the interest of depositors, in case of imminent or actual financial difficulties of banks particularly where suspension of payments is threatened;
iii) Guaranteeing payments to depositors, in case of imminent or actual suspension of payments by insured banks or other deposit taking financial institutions up to the maximum deposit insurance coverage;
iv) Assisting monetary authorities in the formulation and implementation of banking policy so as to ensure sound banking practice and fair competition among banks in the country; and
v) Pursuing any other measures necessary to achieve the functions of the Corporation provided such measures and actions are not repugnant to the objects of the Corporation.
NDIC’s history is grounded in the need to protect depositors and strengthen the safety-net for the banking sector.
NDIC’s existence was motivated by the adoption of the financial liberalization policy as a result of the introduction of the Structural Adjustment Programme (SAP) in 1986.
The phenomenal increase in the number of banks from 40 in 1986 to 120 in 1992 came with its attendant problems for the budding banking sector. That meant that, even before NDIC became fully operational in 1989, after its establishment a year earlier, all the signs of distress were visible among some banks in the country. Ever since, the NDIC went into action and saved the nation’s banking sector from collapse many times over. The interventions came through innovative and modern day deposit insurance best practices.
The NDIC, working in collaboration with other safety net participants, made remarkable progress towards restoring the stability and soundness of the Nigerian banking system. The NDIC’s has recorded major achievements consistent with the aforementioned mandate.
The increasing complexity, diversity, bank size and global nature of banking business warrant effective oversight by the supervisory agencies. The NDIC is empowered to supervise insured institutions so as to protect depositors, contribute to monetary stability and promote an effective payments system as well as healthy competition in the banking system. The NDIC undertakes this responsibility through on-site examination and off-site surveillance in collaboration with the Central Bank of Nigeria (CBN).
As part of its oversight function, the NDIC, in collaboration with the Central Bank of Nigeria (CBN), undertook the Risk Assessment Examination of all twenty five (25) Deposit Money Bank’s including three (3) holding companies 2017. In the same period the NDIC also carried out maiden examination of two newly licenced banks. Furthermore, the NDIC examined 300 Micro Finance Banks and 10 Primary Mortgage Banks in 2007.
In exercise of its mandate of distress resolution, the NDIC, ensures that failing and failed insured institutions are resolved in a timely and efficient manner. In that regard, it provides financial and technical assistance to eligible insured financial institutions in the interest of depositors.
The financial assistance could be in the form of loans, guarantees or accommodation bills. Similarly, the technical assistance includes Assumption of Control and Management of a failing institution, Change of Management or Assisted Merger/Acquisition with another viable institution.
The NDIC also decides on the least cost resolution option to adopt in the event that the licence of an insured institution is revoked. The NDIC shares the responsibility of distress resolution with the CBN.
The NDIC is the sole liquidator of failed/closed insured financial institutions in Nigeria. The NDIC discharges this mandate of liquidation only after the revocation of the license of an insured financial institution by the CBN.
Undertaking this mandate by NDIC involves the orderly and efficient closure of failed insured financial institutions with minimum disruption to the entire banking system, cost effective disposal and realization of physical assets, recovery of debts owed the failed insured financial institution and settlement of claims of depositors, creditors, debtors and shareholders.
Similarly, in the discharge of this mandate, depositors have priority of claim on a failed bank’s assets over other stakeholders, such as preferred creditors, general creditors and shareholders. Shareholders of various banks in liquidation, primary mortgage banks and microfinance banks also received dividend payouts in 2017.
The relentless NDIC Management also commenced verification and payment of insured sums to depositors of Jubilee Building Society Limited and New Heights Microfinance Bank.
The process of liquidation is not always easy. It is an exercise sometimes entangled in long, complicated and, if you like, annoying legal tussles. That was why NDIC had cause to celebrate the judgement against First Bank of Nigeria (FBN) Plc. in favour of depositors of Lead Merchant Bank Limited (in-liquidation) to the tune of 556.40 million at a Lagos High Court presided over by Honourable Justice Ibrahim N. Buba.
Other achievements recorded by the NDIC under the able leadership of its Managing Director/CEO, Alhaji Umaru Ibrahim, FCIB mni in 2017, included the assessment of the British Standards Institution (BSI) where the NDIC successfully obtained three (3) Certifications from the BSI for Information Security Management System ISO/IEC 27001:2013, IT Service Management System ISO/IEC 20000-1:2011 and Business Continuity Management System, ISO 22301:2012 after a rigorous process of satisfying the conditions precedent to accreditation. It is on record that the NDIC is the first Public Institution in Nigeria to be so certified by the BSI.
The Corporation recorded another commendable achievement with the conferment of an award as “The Best Performing Ministerial SERVICOM Unit (MSU) 2017” by the SERVICOM Office of the Presidency. This award is in consonance with the core values of the Corporation in the pursuit of excellence in operational performance and service delivery to all stakeholders.
Also, the NDIC during the year received a Commendation Award for Excellence in Banking (Public Service) during the Business Day Annual Banking Awards 2017.
The dedication of the Management to take the NDIC to greater heights through training and re-training of its staff is not in doubt. The recent accreditation of the NDIC Academy as a training service provider for the banking industry by the Council of the Chartered Institute of Bankers of Nigeria (CIBN) is a pointer to this rare commitment.
The Academy is currently recognized by the International Association of Deposit Insurers (IADI) as a Centre of Excellence for the teaching of Deposit Insurance Courses within the African Continent. Going forward, the Academy plans to be the hub of training in Deposit Insurance Issues in West Africa and beyond.
To encourage staff self-development, the Corporation entered into partnership with the University of Bangor, Scotland, and Chartered Institute of Bankers Nigeria where staff of the Corporation are sponsored for an MBA programme. Staff that undergo such programme graduate with double honours, an MBA and a Chartered Banker of Scotland. To date, 77 staff of the Corporation have enrolled in the programme out of which 47 have successfully graduated.
The NDIC, during the year under review, continued to pursue the achievement of its mandate of depositor protection, and the promotion of safe and sound banking practices. The Corporation remains an active component of the Nigerian financial safety-net, particularly in the area of engendering confidence and contributing to financial system stability. It is in this direction that the Corporation, in the face of increasing Non Performing Loans is partnering with the CBN to float a Private Sector Led Asset Management Company to buy the NPL at commercial rates.
The NDIC in collaboration with other regulatory authorities continues to educate the public on the risks of patronising wonder banks. and the danger inherent in patronising Block Chain/Digital currencies for example BITCOIN, which are rapidly gaining currency in the Nigerian landscape leading to possibility of serious financial losses.
Indeed, time flies but it always leaves its shadow behind. The year 2017 has gone, but it has left depositors of banks-in-liquidation, counting their luck and thanking the NDIC for standing by them and ensuring that they get their dividends; no matter how long it takes and no matter the extent of complication imposed by legal hurdles.
It is obvious that the Corporation will continue to monitor the performance of banks in order to promote their safety and soundness in such a manner that the banking sector will continue to contribute to the recovery and development of the economy which is coming out of recession.

Bashir Ibrahim Hassan is a financial Analyst

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