Legal Matters/Regulations

Legislation
The major Acts that guide the operations of the Corporation are the following:

(i) Nigeria Deposit Insurance Corporation (NDIC) Act

An Act to establish the Nigeria Deposit Insurance Corporation (NDIC) for the purpose of insuring all deposit liabilities of licensed banks and other financial institutions operating in Nigeria, providing assistance in the interest of depositors in case of imminent or actual financial difficulties; and other financial institutions; guaranteeing payments to depositors in case of imminent suspension of payments by insured banks and other financial institutions and assisting the authorities in the formulation and implementation of banking policy.

To view the Act, Click NDIC Act

To view the Corrigendum, Click Corrigendum on Nigeria Deposit Insurance Corporation Act,2006

While on the other hand Regulation involves providing input into developing and interpreting legislation and regulations, issuing guidelines, and approving requests from regulated financial institutions. The three main types of supervision are Transaction Based, Consolidated and Risk Based Supervision.

(ii) Banks and Other Financial Institutions Act (BOFIA)

An Act which confers on the Central Bank of Nigeria (CBN) the power to regulate banks and other financial institutions and for matters connected therewith which includes but not limited to licensing, examination (on-site and off-site), supervision, take over and control of management of distressed banks, prescription of capital requirement, revocation of licences, and general control over banks and other financial institutions operating in Nigeria.

To view the Act, Click BOFI Act

(iii) Failed Banks (Recovery of Debts) and Financial Malpractices in Banks Act (Failed Banks Acts)

An Act to provide for the speedy recovery of debts owned to failed banks arising in the course of business and which remains outstanding as at date the bank is closed or declared a failed bank and for the speedy trial of offences relating to financial malpractices in banks and other financial institutions as specified in the Act or such other offences relating to the business or operation of a bank under any enactment.
Pursuant to its Statutory Powers under the NDIC Act 2006,and as part of the statutory obligations towards ensuring safe and sound banking practises,the Corporation’s efforts at sanitizing the banking sector is manifested in its implementation of the failed Banks Acts
To this end,the Corporation is involved in the criminal prosecution of Bank Directors,officials and customers suspected of commiting banking malpractices as well as the recovery of debts owned to failed banks in order to pay dividends or depositors of the failed banks using the provision of the failed banks Acts.

Implementation of the failed Banks Act

The Failed Banks Decree was promulgated in November, 1994. The Tribunals that were established under the Act commenced sitting in July, 1995. The Promulgation and Implementation of the Failed Banks Act was to ensure the quick dispensation of Justice. The twin objectives of the Decree were to assist in resolving distress of failing banks through speedy recovery of their non-performing loans and to sanitize the banking sector through criminal prosecution and conviction of errant directors found guilty of banking malpractices.

The implementation of the Failed Banks Decree by the NDIC and the Central Bank of Nigeria was indeed a major plank in the resolve to contain distress and promote the soundness of the Nigerian banking system. The success achieved by the Tribunals is widely acknowledged. Between 1994 – 1999, a period of 5 years, the 14 Tribunals tried and conclusively disposed of 45 criminal cases and 672 civil/debt recovery cases.

However, with the return to democratic rule in 1999 the Tribunals were abolished by the Tribunal, (Consequential Repeal, etc) Act No.62 of 1999, which transferred jurisdiction to try civil and criminal cases pursuant to the Failed Banks Decree to the Federal High Court. The Decree as amended is now referred to as the Failed Bank (Recovery of Debts) and Financial Malpractices in Bank Act, Cap F2 Laws of the Federation of Nigeria, 2004. The Act seeks to ensure safe and sound practices by punishing the bank directors, staffs and customers who contributed in any manner to the collapse of any bank as well as recovery of debts owed failing/failed bank.

Some bank executives and other officers are currently facing criminal prosecution pursuant to the provisions of Failed Bank (Recovery of Debts) and Financial Malpractices in Bank Act, Cap F2 Laws of the Federation of Nigeria, 2004 and some have actually been convicted. Amongst them is the high profile trial and conviction on October 9, 2010 of Mrs Cecilia Ibru, the former managing director of Oceanic Bank PLC, who was convicted to six months in jail and ordered to forfeit over N150 billion in assets and cash. She was convicted under Section 15(1)(b) of the Failed Bank (Recovery of Debts ) and Financial Malpractices in Banks Act Cap F2 Laws of the Federation of Nigeria, 2004 and punishable under Section 16(1) (a) of the same Act.

To view the summary of criminal cases pending against Directors and Officers of Banks and debt recovery instituted against debtors on behalf of Failed Banks pursuant to the Failed banks (Recovery of Debts) and financial malpractices in Banks Act, go to Litigations and Click Legal Matters
To view the Act, Click Failed Banks Act.