Failure Resolution

The Corporation is empowered to provide financial and technical assistance to failing or distressed banks in the interest of depositors.

Types of Failure Resolution:

Claims Settlement

Claims Settlement involves the settlement of claims filed by depositors and other creditors of closed banks. It also includes the payment of liquidation dividends to uninsured depositors and creditors of closed banks.

Debt Recovery

The quantum of liquidation dividend that can be paid by the Liquidator is critically dependent on the quantum of the failed banks’ assets that can be successfully realized.  In case of banks, loans and advances expectedly, constitute the bulk of their assets given the nature of banking business. The recovery of loans of the banks under liquidation has been constrained by a number of factors, which included poor state of business of borrowers, thus making recovery efforts difficult; protracted legal process; and the fact that many of the loans were irregularly granted and unsecured.

Of particular concern was the unwillingness on the part of some debtors to honour obligations.  Instead of seeking ways to settle their debts, some debtors had challenged the jurisdiction of the Federal High Courts to adjudicate in matters between them and the closed banks.  The Court of Appeal gave a ruling in their favour which was successfully challenged by the Corporation at the Supreme Court.  The time taken to resolve the issues by the Courts was a huge cost to the Liquidator.  In spite of the Supreme Court ruling, some solicitors still resorted to such gimmicks to buy time.
The transfer of cases being handled by the defunct Failed Bank Tribunals to the Federal High Courts in 1999 exacerbated the challenge faced by the Corporation in the area of its liquidation activities in particular and for banks’ operations in general.  This was because the normal court processes and procedures were not only slow and cumbersome, but they were easily abused by bank debtors.  The protracted delays in disposing of cases brought before the courts had adversely affected the NDIC in debt recovery in respect of banks in liquidation and other operating banks’ ability to recover hard-core debts.
These challenges notwithstanding, the Corporation had as at October 2011, recovered a total of about N22.20 billion from the debtors of the closed banks.  The forty-six (46) closed banks had a book value of the risk assets of about N168.74 billion, with a total of 62,155 debtors as at closure.  However, these figures do not include the loan assets of Eagle and Hallmark Banks that were sold to the acquiring banks.

Similarly, the Corporation had recovered about N9.44 million from the debtors of microfinance banks in liquidation as at October 2011.

Focus of Supervisory Activities

The CBN/NDIC during bank supervision and examination focus on the main aspects of banking operations. These include capital requirement, loan concentration, liquidity ratio, provisioning, internal control and management among others.

Disposal of Assets
The Corporation usually adopts systematic and orderly marketing and disposal strategies in respect of all assets of closed banks. Well articulated laid-down guidelines are followed in assets valuation before such assets are disposed off. As at October 2011, the Corporation had realized N19.35 billion from the disposal of assets of banks in liquidation, the proceeds of which were used to pay liquidation dividends. Similarly, the sum of N60.99 million was realized from the disposal of assets of microfinance banks in liquidation as at October 2011.