It is a great honour for me to be in your midst this evening as one of the awardees of the Business Hallmark People of the year award for this year. I must say that I am humbled and at the same time excited to be in your midst to receive the award. I have observed with delight that our modest efforts in contributing to the nation’s financial system stability has been noticed and appreciated by your esteemed organization through this singular honour. I am delighted not only because of the award but also because public awareness about what we do and about deposit insurance system is critical to the success of the financial system. Indeed, I am further pleased because public awareness about the NDIC is one achieve; and with this recognition and our invitation to this august gathering, it would look like we are succeeding!
Our Royal Father, Ladies and gentlemen, my acceptance and receipt of this award and honour would not be complete without seizing the opportunity to once again share with you the achievements of the Nigeria Deposit Insurance Corporation (NDIC) in the discharge of its mandate. That, I believe would further promote better understanding of the operations of the Corporation.
As we are all aware, NDIC mandate i8ncludes deposits guarantee, banking supervision, failure resolution and bank liquidation. The deposit guarantee function of the NDIC refers to the insurance cover given to the deposit liabilities of insured deposit money banks as well as microfinance and primary mortgage banks. From inception, the coverage level has been reviewed from N50, 000.00 to N200, 000.00 and presently N500, 000.00 for deposit money banks. For the microfinance and primary mortgage banks, the extension of deposit insurance coverage to this category of deposit – taking financial institutions, which commenced in 2006 with coverage level of N100, 000.00 was increased to N200, 000.00 in 2010. It is noteworthy that the present coverage levels for all the insured institutions cover between 80% and 90% of depositors and about 20% of the total eligible deposits of banks. Periodic reviews are made to address changes in economic circumstances in the country has a primary focus of protecting mainly small savers to guard against moral hazard and instil market discipline in both the banks, investors and big time depositors.
Banking supervision by the NDIC is done through on-site examination and off-site surveillance. For the on-site examination, the Corporation conducts routine, special and target examinations. Since its inception in 1989, the Corporation employed compliance-based system of supervision, which was mainly a reactive approach, before migrating to Risk-Based Supervisory (RBS) approach. The adoption of Risk-Based approach to supervision is a significant supervisory achievement for both the NDIC and the CBN as it is proactive and allows for the optimization of supervisory resources, in the supervision of deposit money banks in Nigeria. The implementation of RBS commenced in 2010 and we believe it will facilitate a more effective banking supervision in the interest of all players in the financial system, particularly depositors of insured financial institutions.
The NDIC Act No 22 of 1988 and the NDIC Act No 16 of 2006 (as amended) empowers the Corporation to adopt appropriate failure resolution measures to address the problems of failing insured institutions in the interest of depositors. Over the years, the Corporation adopted measures ranging from pay out to Purchase and Assumption options to discharge that mandate. The most recent resolution option adopted by the Corporation to address the problems of failing banks was the establishment of bridge banks on August 5, 2011, which took over the assets and assumed the liabilities of Afribank Plc, Bank PHB Plc and Spring Bank Plc. The decision was based on the deteriorating financial condition of the banks and inadequate efforts on the part of the former owners of the banks to recapitalize the bank on or before September 30, 2011 deadline given by the apex bank. Other reasons for adopting the bridge bank option included:
(a) To preserve and sustain daily operations of the failed banks by ensuring that all the 577 branches of the banks continue to function;
(b) To safeguard the banks’ total deposit liabilities of N809.4 billion belonging to about 3.7 million depositors;
(c) To safeguard 6,667 jobs in the affected banks;
(d) To enhance the confidence of both the depositors and creditors of the banks
(e) To prevent the systemic repercussions of the failure of the banks on the entire financial system thereby ensuring financial and macro-economic stability; and
(f) To safeguard tax payer’s money.
The three banks were acquired by the Asset Management Corporation of Nigeria (AMCON) through share subscription the same day with an infusion of about N736.9 billion.
In its liquidation activities, the Corporation made the following strides:
(a) In August 2011, the Corporation commenced payment of insured deposits to depositors of Triumph and Fortune Banks closed in 2006 thereby bringing relief to the depositors whose deposits were trapped due to protracted litigation.
(b) Following the revocation of operating licenses of 103 MFBs by the CBN in September 2010, the Corporation had, as at August 2011, directly paid an aggregate sum of N2,024 billion to about 70,424 depositors, which represented about 41% of the total insured amount of about N4.94 billion. Payment to the rest of the depositors continues through branches of appointed Agent Banks close to the location of their closed MFBs.
(c) The Corporation continues with the payment of insured sums as well as liquidation dividends to uninsured depositors of the banks closed before 2006 and those closed in 2006. As at the end of November 2011, the cumulative insured deposits as well as the liquidation dividends paid in respect of the 35 banks that were closed before 2006 were N3.304 and N6.162 respectively. Similarly, cumulative insured deposits and the liquidation dividends paid in respect of the 13 banks closed in 2006 were N4.294 and N66.757 respectively.
(d) One of the principal liquidation activities of the Corporation is the realization of assets of the closed banks. The cumulative recovery for the banks in liquidation since 1994 rose from about N21.756 billion in 2010 to about N22.158 billion in 2011, representing an increase of about 2%. On the other hand, a sum of N8.33 million had been recovered to date in respect of the closed MFBs.
Furthermore, in order to support the new licensing regime and as part of its preparations to extend Deposit Insurance System (DIS) to non-interest banks, the Corporation has developed a framework that would enable it extend DIS to non-interest bearing financial institutions that would be licensed in due course by the CBN. The development aims at creating a level playing field for all operators in the banking system as well as facilitating financial inclusion in Nigeria.
In furtherance of its efforts in ensuring protection for all consumers of the financial system, the Corporation is in the Vanguard of advocating for an integrated deposit insurance system in the country. Under the system, protection would not only be for small depositors of banks, but also extended to small investors in the capital market as well as small conventional insurance policy holders. When put in place, it would facilitate orderly development and growth of the entire financial system.