By Etuka Sunday
The Nigeria Deposit Insurance Corporation (NDIC) has the mandate to protect bank depositors and deepen the stability of the nation’s financial system; a role it is performing to complement the Central Bank of Nigeria (CBN)’s supervisory activities in ensuring a safe and sound banking system.
Established in March 1989, the corporation has been working tirelessly to protect depositors and contribute to financial system stability through effective supervision of insured institutions, provision of financial/technical assistance to eligible insured institutions, prompt payment of guaranteed sums and orderly resolution of failed insured financial institutions.
NDIC was designed as a Risk-Minimiser with the mandate of Deposit Guarantee, Banking Supervision, Distress Resolution and Bank Liquidation. The corporation had in the last 30 years achieved some milestones in the discharge of this mandate to the satisfaction of its stakeholders.
The Managing Director/Chief Executive of NDIC, Umaru Ibrahim at a Press Conference in Abuja on Friday to kick-start events scheduled to commemorate the 30th Anniversary of the Corporation gave the following, as some of the milestones so far achieved:
Deposit Guarantee is a key and distinct mandate of the Corporation. The NDIC guarantees payment of deposits up to a maximum limit in accordance with its statute in the event of failure of an insured financial institution.
The DIS covers all deposit-taking financial institutions licensed by the CBN which include Deposit Money Banks (DMBs), Microfinance Banks (MFBs), Primary Mortgage Banks (PMBs), Non-Interest Banks (NIBs) and subscribers of Mobile Money Operators (MMOs).
Accordingly, the NDIC, currently provides Deposit Insurance cover to 27 DMBs, 918 MFBs, 34 PMBs and 2 (Two) NIBs.
Since its inception, the Corporation successfully responded to economic realities and yearnings of Depositors by periodically increasing the Maximum Deposit Insurance Coverage to enhance the confidence of the public in the Nigerian financial system. On average, this is done every five years in line with Global best practice.
The Corporation increased the maximum deposit insurance coverage twice, from 50,000.00 per depositor per deposit money bank (DMB) at inception, to N200,000.00 in 2006 and N500,000.00 in 2010.
Similarly, maximum coverage per depositor of PMBs/MFBs was increased from N100,000.00 in 2006 to N200,000.00 in 2010.
Coverage per depositor per PMB had since been increased to N500,000.00 to reflect the increased deposits structure in the sub-sector and to stimulate Mortgage Savings.
To date, the NDIC has paid a cumulative sum of over 8.25 billion as insured amount to 442,999 depositors of closed DMBs; paid over 2.97 billion to 83,415 depositors of closed MFBs, and over 70.53 million was paid to 869 depositors of closed PMBs.
The NDIC collaborates with the CBN to ensure that the Institutions remain healthy at all times and/or where there are problems, they are detected and addressed promptly.
Supervision guarantees stability, integrity, soundness and efficiency in the banking system and is employed by NDIC for the protection of depositors’ interest.
The collaboration between CBN and NDIC over the years has reduced the bank examination cycle, enhanced monetary policy, promoted safe and sound banking practices as well as assist in resolving Troubled Financial Institutions.
NDIC and CBN, proactively respond to developments and challenges in banking operations through appropriate policy framework which have produced great results in the interest of the banking industry.
The success recorded by the Corporation in this area include: Adoption of Risk-Based Supervision Framework, Development of Framework for Early Warning Signals to detect problem banks, Development of Framework for the Identification and measurement of Systemically Important Banks (SIBs) and Articulation of a Framework for the Provision of Financial and Technical Assistance to deserving Insured Institutions.
This is one area in which the NDIC continues to demonstrate great ingenuity and sagacity. At inception in 1989, the banking system was already in distress with seven technically Insolvent state-owned banks.
NDIC in collaboration with the CBN had adopted multiple resolution options to resolve failures in the system.
The options range from Open Bank Assistance (OBA), Purchase and assumption (P & A), Bridge Bank, and reimbursement (payout) of Insured Depositors.
The NDIC used Purchase and Assumption (P & A) to resolve problems of 13 banks closed by the CBN in 2006 as a result of their inability to meet the Consolidation/Recapitalization requirement of N25 billion.
The P&A option was adopted by the Corporation to resolve the problems of banks affected by the Global Financial Crisis of 2009, which manifested in poor Asset Quality and Weak Risk Management, as well as weaknesses in Corporate Governance.
Furthermore, in the discharge of its statutory role under Section 39 (i) of the NDIC Act 16 of 2006 and in consultation with the CBN, the Corporation adopted the Bridge Bank mechanism to resolve the failure of three (3) DMBs namely Afribank, Spring Bank and BankPHB in 2011. Similarly, in 2018, that mechanism was used to resolve the failure of Skye Bank Plc. Indeed, the merits of the bridge bank to the nation’s economy are numerous.
It should interest you to note that the bridge bank initiative safeguarded 12,667 jobs, protected deposit liabilities of over 1.759 trillion which ensured that depositors had uninterrupted access to their funds, and prevented the systemic repercussions of the failure of the bank on the entire financial system.
The Bridge bank option engendered macro-economic stability, sustained daily operations of the failed banks including meeting maturing obligations and enhanced the confidence of Depositors and other Stakeholders.
The Corporation is identified with ensuring that Depositors of liquidated banks suffered little loss or pain. Between 1994 to date, 53 DMBs, 325 MFBs and 51 PMBs were put under liquidation without disruption to the nation’s payment system.
Other achievements include:
NDIC’s liquidation activities involved recovery of debts and realization of assets of closed banks. To date, a cumulative amount of over 29.112 billion was recovered from debtors of DMBs in-liquidation. 129.10 million was realized from debtors of failed MFBs, while that of PMBs stood at N300 million.
On realisation of assets, currently 21.502 billion was collected from the disposal of physical assets of closed DMBs, while N404.74 million and 78.17 million were realised in respect of MFBs and PMBs, respectively.
Debt collection and Assets sales culminated in the payments of over 116.258 billion as Liquidation Dividends to Depositors, Creditors and Shareholders of closed DMBs, MFBs and PMBs as at today.
It is important to stress that through sustained and diligent liquidation activities, NDIC has realized assets to pay in full, deposits of the customers of 17 of the DMBs (in-liquidation).
In effect, all the depositors of the 17 defunct banks who came forward to file their claims have been paid all their monies (both insured and uninsured) erstwhile trapped in those banks.
Institutional Growth and Development
In the past 30 years, NDIC exhibited a strong determination to maintain a high level of professionalism and excellence in its operations. The Corporation had gone through a series of structural and operational reforms necessary to align its activities with global best practices and also give the right impetus to the realisation of its mandate. With the reforms, the Corporation has been able to institute Systems, Processes and Procedures that makes it operationally ready to effectively discharge its mandate.
The NDIC has introduced DIS Courses in Nigerian Universities and is in Partnership and Collaboration with stakeholders so as to foster effective working relationship to further enhance Depositors and Consumers protection in the banking system.
Annually, the Corporation Sponsors Capacity Building for PMBs and MFBs Operators in areas of “Moveable Collaterals”, Enterprise Risk Management as well as Assets & Liabilities Management (ALM).
Over the years, the Corporation confronted and successfully resolved many challenges. Such challenges include lack of enforcement powers; protracted litigation initiated by owners of closed banks; recovery of debts owed failed banks, inadequate public awareness, amongst others.
The Journey ahead
Apart from working to be the best deposit insurer in the world by the year, 2020, the Corporation has articulated a Strategic Plan that is running from 2016 – 2020. The 5-year plan is designed in line with the Balanced Scorecard Performance Management System aimed at achieving its mandate through four key perspectives, namely: Stakeholders’ Satisfaction, Process Improvement, Financial Planning and Organisational Learning and Growth.
It has also assured Stakeholders in the banking system in particular and the economy in general of its readiness, not only to sustain the high standard recorded, but to raise its bar in line with our core values of Honesty, Respect & Fairness, Discipline, Professionalism, Teamwork and Passion.