The Nigeria Deposit Insurance Corporation (NDIC) has further reduced the deposit insurance premium rate to all Deposit Money Banks (DMBs) in Nigeria, as part of efforts toward contributing to financial system stability and promoting public confidence in the banking industry.
The Managing Director/Chief Executive, NDIC, Alh. Umaru Ibrahim disclosed this during the last Financial Correspondents Association of Nigeria (FICAN) Workshop held in December 2014 in Katsina state.
“This premium reduction was initiated to consolidate on the gains achieved by the Corporation’s migration from Flat Rate Premium System (FRPS) to Differential Premium Assessment System (DPAS).
“The DPAS approach takes into consideration the risk each bank poses to the system and encourages banks to adopt sound risk management practices”, he stated.
Alh. Ibrahim also said that the Board of the Corporation had granted further relief to the DMBs at its last meeting held in September 2014; adding that the Board had reduced the insurance premium basis rate from the existing 40 to 35 basis points and the new premium rate would take effect from January this year.
According to him, the insurance premium rebates were part of the NDIC major contributions toward improving the intermediation role and other banking related activities of the DMBs.
The NDIC Chief Executive pointed out that Principle 11 of the Core Principles for Effective Deposit Insurance System requires Deposit Insurance Agencies (DIAs) to set aside adequate funds to ensure depositors’ prompt reimbursement in the event of any bank failure. He also opined that the Corporation would from 2015 set new coverage levels for the DMBs in view of their relatively large volumes of deposits.
It would be recalled that the Corporation began the insurance premium rebate since the commencement of DPAS in 2008 but the import began in 2010, sequel to the Board’s decision to contribute to the Financial Stability Fund that was spearheaded by the Central Bank of Nigeria (CBN). The Corporation had supported the fund through the reduction of premium base rate from 50 to 40 basis points to reduce the premium burden on the DMBs.
By 2012, 2013 and 2014, the Corporation had granted a total rebate of N53 billion, N63.6 billion and N75.98 billion respectively; thus a cumulative rebate sum of N192.6 billion to the DMBs.
The Corporation administers three (3) types of funds, namely: Deposit Insurance Fund (DIF) for DMBs, Special Insured Institutions Fund (SIIF) for MFBs and PMBs and Non-Interest Deposit Insurance Fund (NIDIF) for Non-Interest Banks. Therefore, premium collection from the insured banks contributes substantially to the funds available to the NDIC to discharge its mandate.
At present, the Corporation covers 97% of the bank depositors, which is an indication of adequate coverage and appropriate pricing.