N2trn Insurance Fund Inadequate To Pay Depositors Of Liquidated Banks-NDIC
The Deposit Insurance Fund which was set up by the Nigeria Deposit Insurance Corporation to settle bank depositors in the event of any liquidation of banks is insufficient to promote financial stability.
The Managing Director, NDIC, Mr Bello Hassan said this on Thursday during his inauguration as MD by the Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed.
Hassan takes over from Alh Umaru Ibrahim who has concluded his two terms of five years each.
He was inaugurated alongside Mr. Mohammed Mustapha Ibrahim who is now the Executive Director (Operations) of NDIC.
The DIS, managed by the NDIC is set aside to pay back the money lost by depositors due to the failure of a financial institution.
The number of financial institutions that have so far been liquidated by the NDIC is about 49. But the rate of recovery has really not been that significant considering that out of 49 banks in liquidation, only about 10 that the Corporation has been able to pay 100 per cent liquidation dividend.
But Hassan said there is an urgent need for the government to quickly fast track the build up of this fund so that in the event of any eventuality, the Corporation would have sufficient fund to be able to pay depositors without recourse to the Treasury.
This, according to him, would help to ensure that the NDIC offers assistance to insured deposit-taking institutions in a timely manner in order to promote stability and confidence within the banking system.
Of recent there has been calls from the industry that there is need for the NDIC in line with the provisions of the Act to offer assistance to insured financial institutions that need this assistance.
In line with its mandate, the NDIC Boss said the Corporation would ensure that there is orderly and faster resolution of liquidated financial institutions where such licenses have been revoked by the CBN.
He said, “There are a number of challenges the Corporation is facing. I have taken note of the comment made by the minister. If you look at the number of institutions that have been liquidated about 49, the rate of recovery was really not that significant considering that out of 49 banks in liquidation, only about 10 the Corporation is able to pay 100 per cent liquidation dividend.
“There is need to enhance the powers of the Corporation to be able to recover debts owed to liquidated institutions.
“There has been slow growth in the deposit insurance fund if the Act is reviewed we will find a way to ensure that we can actually fast track the build up of this deposit insurance fund this is necessary when you look back to global crisis of 2007 2008 when the CBN had to bail out a number of banks about N620bn was injected by the CBN to liquidate those institutions and those liabilities that are being carried by AMCON are due for settlement.
He added, “We cannot afford to have similar situation should in case we experience another crisis there is need for us to see how we can quickly fast track the growth of this deposit insurance fund so as to ensure that in the event of any crisis, we should be able to pay depositors as at when due without recourse to CBN or we go to the treasury to bail us out.”
The NDIC MD also expressed worry on the issue of slow judicial process, noting that the Corporation would collaborate with the judiciary to ensure that all cases pending before the courts are given accelerated hearing.
He added, “We will work with relevant stakeholders to address challenges one of the challenges is recovery powers.
“This is because those loans and advances were financed by depositors money not shareholders money. So there is the need to enhance the powers of the Corporation to be able to go after those obligors so as to recover depositors money, pay them and build confidence and stability in the financial system.”
The Finance Minister said that with the work done by the outgoing management, the new Managing Director would be taking over an organization that is functionally, professionally, and financially sound.
She said over the years, the Corporation has become an important component of the nation’s financial safety net and at the forefront of activities that promote financial system stability through its contributions to Financial Inclusion and other economic policies of Government.
Furthermore, she said the Corporation has been consistent in remitting its 80 per cent operating surplus to the Consolidated Revenue Fund of the government among many other milestones achieved.
Ahmed stated that the successes achieved by the Corporation over the years were because of good corporate governance, and the dedication of the entire staff.
She added, “I am aware there are issues that arose from the recently amended Banks and Other Financial Act 2020 to which my attention was drawn. We will work with you and the Board to resolve them. I pledge the Ministry’s continuous support and collaboration to your Corporation in the discharge of its mandate.”