Access Bank Nigeria Limited
Address: Head Office: 1665, Oyin Jolayemi Street, Victoria Island, Lagos
Phone: +234 1 26210404-41, 2626273-76, 2641571-72, 3201889; Fax: +234 1 2621037
Diamond Bank Plc
Address: Head Office: Plot 1261, Adeola Hopewell Street, Victoria Island, Lagos
Phone: +234 1 2701500, 2620740; Fax: +234 1 2619728
Ecobank Nigeria Plc
Address: Head Office: 2, Ajose Adeogun Street, Victoria Island, Lagos
Phone: +234 1 2626638-88, 2626710-17; Fax: +234 1 2616568, 2620920
Enterprise Bank Limited (Formerly Spring Bank Plc).
Address: Head Office: Plot 143, Ahmadu Bello Way, Victoria Island, Lagos
Phone: +234 1 4619570-3, 2623780-7; Fax: +234 1 2615138, 4619574
Equitorial Trust Bank Limited
Address: Head Office: Plot 1092, Adeola Odeku Street, Victoria Island, Lagos
Phone: +234 1 3201595-9, 3201600-9,2623576-80; Fax: +234 1 2619124, 2611052
Fidelity Bank Plc
Address: Head Office: 2, Kofo Abayomi Street, Victoria Island, Lagos
Phone: +234 1 2610408-12; Fax: +234 1 2610414
FinBank Plc (Fomerly First Inland Bank Plc)
Address: Head Office: Plot 532, IBB way, Wuse 4, Abuja
Phone: +234 9 6700136-7; Fax: +234 9 5239640
First Bank Nigeria Plc
Address: Head Office: Samuel Asabia House, 35, Marina, Lagos
Phone: +234 1 2665900-19; Fax: +234 1 2665934, 2643166
First City Monumental Bank Plc
Address: Head Office: Primrose Tower, 17A, Tinubu Street, Lagos
Phone: +234 1 2665944-53; Fax: +234 1 2665126, 2668833
Guaranty Trust Bank Plc
Address: Head Office: Plot 1669, Oyin Jolayemi Street Victoria Island, Lagos
Phone: +234 1 2622650-69, 3201100; Fax: +234 1 2622698-9.
Intercontinental Bank Plc
Address: Head Office: Intercontinental Plaza, Danmole Street, Victoria Island, Lagos
Phone: +234 1 2622940-59; Fax: +234 1 2622981
Keystone Bank Limited ( Formerly Bank PHB).
Address: Head Office: Bank PHB House, 1, Bank PHB Crescent, Victoria Island, Lagos.
Phone: +234-1- 4485742
Mainstreet Bank Limited (Formerly Afribank Nigeria Plc).
Address: Head Office: Afribank Plaza, (14th Floor) 51/55, Broad Street, Lagos
Phone: +234-1-2799500-9 Ext. 2267, 2252; Fax: +234-1-2703802
Nigeria International Bank Limited (Citigroup)
Address: Head Office: 1, Idowu Taylor Street, Victoria Island, Lagos
Phone: +234 1 4613060-74 Ext. 1219
Oceanic Bank International Nigeria Ltd
Address: Head Office: Waterfront Plaza, Plot 270, Ozumba Mbadiwe Avenue, Victoria Island, Lagos
Phone: +234 1 2705010-9; Fax: +234 1 2705066
Skye Bank Nigeria Ltd.
Address: Head Office: 3, Akin Adesola Street, Victoria Island, Lagos
Phone: +234 1 2627760-9; Fax: +234 1 2627598
Stanbic IBTC Bank Ltd.
Address: Head Office: I.B.T.C. Place, Walter Carrington Crescent, Victoria Island, Lagos
Phone: +234 1 2626520-40; Fax: +234 1 2626541/2
Standard Chartered Bank Nigeria Ltd.
Address: Head Office: 105b, Ajose Adeogun Street, Victoria Island, Lagos
Phone: +234 1 3262000, 2626801-5; Fax: +234 1 2626814, 3201659
Sterling Bank Nigeria Ltd.
Address: Head Office: 20 Marina, Lagos Island, Lagos
Phone: +234 1 2690380-8; Fax: +234 1 2693256
Union Bank Of Nigeria Plc.
Address: Head Office: Stallion Plaza, 36 Marina, Lagos
Phone: +234 1 2668105, 2668043, 2646011, 2667216; Fax: +234 1 2669873, 2644306
Unity Bank Nigeria Ltd.
Address: Head Office: Plot 497, Central Business District, Abogo Largema Street, Abuja
Phone: +234 9 6701082-9; Fax: +234 1 5238759
United Bank For Africa Plc. (UBA)
Address: Head Office: 57, Marina, Lagos
Phone: +234 1 2644651-700, 4701416, 2642284; Fax: +234 1 2642287
Wema Bank Plc
Address: Head Office: Wema Towers 54, Marina Lagos Island, Lagos
Phone: +234 1 2669236, 2669713; Fax: +234 1 2668303
Zenith Bank Plc
Address: Head Office: Plot 84, Ajose Adeogun Street, Victoria Island, Lagos
Phone: +234 1 4618301, 4618321, 4618311, 2703141; Fax: +234 1 2618212
b) Related Agencies
1. Central Bank of Nigeria (CBN) is the body charged with the function of issuing legal tender currency, promote monetary stability and sound financial system, and act as banker and financial adviser to the Federal Government.
For more information you can visit its web site at www.cbn.gov.ng
2. Corporate Affairs Commission (CAC) is the body charged with the responsibility of administering the provisions of the Companies and Allied Matters Act, including the regulation and supervision of the formation, incorporation, registration, management, and winding-up of companies.
For more information you can visit its web site at www.cac.gov.ng
3. Federal Ministry of Finance (FMF) is the Government Department charged with the administration of Federal Government fiscal policies, planning and managing of Government projects, national budgets, incomes and liabilities accruable to the Federal Government of Nigeria.
For more information you can visit its web site at www.fmf.gov.ng
4. National Insurance Commission (NAICOM) is the body charged with the responsibility of ensuring the effective administration, supervision, regulation and control of insurance business in Nigeria.
For more information you can visit its web site at www.naicomonline.org
5. National Pension Commission (PenCom) is a body mandated to regulate, supervise and ensure the effective administration of pension matters in Nigeria.
For more information you can visit its web site at www.pencom.gov.ng
6. Securities and Exchange Commission (SEC) is a corporate organisation charged with the function of registering all securities proposed for subscription by the public or to be sold in the market. it also has responsibility to maintain surveillance over securities market as well as protect its intergrity.
For more information you can visit its web site at www.sec.gov.ng
7. Abuja Securities and Commodity Exchange Plc (ASCE) is an exchange for commodities and futures in Nigeria
For more information you can visit its web site at www.abujacomex.com
8. The Nigerian Stock Exchange (NSE) is the exchange that provides the platform for the trading in stocks and the settlement of transactions resulting thereafter.
For more information you can visit its web site at www.nigerianstockexchange.com
10. Federal Inland Revenue Service (FIRS) is a federal government agency charged primarily with the responsibility of accessing , collecting, and accounting for the various taxes due to the federal government.
For more information you can visit its web site at www.firs.gov.ng
c) International Agencies
MANAGING STAKEHOLDERS’ EXPECTATIONS
Stakeholder management has come to assume prominence in the corporate world due to the ever increasing need for organizations to deliver value to all who have stakes in their existence. Indeed, there seems to be a growing consensus, from the volumes of literature on the subject, that meeting stakeholders’ expectations is crucial to the very existence of organizations.
NDIC AND STAKEHOLDERS’ MANAGEMENT
Since inception, the Corporation had striven to satisfy the expectations of its multiple stakeholders in keeping with its objectives of value delivery. Although the Corporation is a public institution in which every Nigerian has a stake, its specified statutory responsibilities had necessitated the delineation of its relevant and immediate stakeholders as well as focusing on their satisfaction. To manage the stakeholders’ expectations also requires a good understanding of their expectations, which the Corporation tried to decipher from the terms of its mandate, public surveys that were conducted and years of operational experience. Highlighted below are some of the various stakeholders, the relevance of their stakes, their expectations and the Corporation’s stakeholder management efforts.
STATUS OF THE STAKEHOLDERS, THEIR EXPECTATIONS AND THE CORPORATION’S CORPORATE RESPONSE
As a public institution with a unique mandate, the Corporation’s enabling Act sets the tone for determining who its stakeholders are. Accordingly, the Corporation’s major stakeholders had been identified to include:
i. Depositors of insured deposit-taking financial institutions;
ii. Insured deposit-taking financial institutions;
iii. The Central Bank of Nigeria;
iv. The Federal Ministry of Finance;
v. The National Assembly;
vi. The Media;
vii. The Corporation’s Employees; and
viii. The General public.
The efforts of the Corporation towards meeting the expectations of the above listed stakeholder since inception are discussed below:
Depositors of Insured-Deposit Taking Institutions
From the mandate of the Corporation, the primary reasons for its existence is the protection of depositors of licensed banks and other deposit-taking financial institutions. Depositors are also the reason why banks exist. Should there be loss of confidence in the banks by depositors, the payment system in the country will be greatly threatened and so will be the entire financial system.
Secondly, it is the deposits in banks that represent the basis for assessment of premium, which banks pay to the Corporation. It is within these contexts that the Corporation considered depositors as very critical (primary) stakeholders in the running of the Corporation, recognizing their stakes as both legitimate and requiring urgent attention. Depositors’ expectations from the Corporation derived either from what they understood to be the Corporation’s official mandate regarding the protection of their insured deposit as stipulated in its enabling Act or from their self defined expectations. The Corporation gauged depositors’ expectations to include:
Protection of deposits in the event of bank failure;
Effective oversight function on the banks in a manner that reduced distress and failure situations in the banking system;
Periodic review of coverage levels;
Prompt payment of guaranteed amount in the event of bank failure; and
Payment of uninsured deposits in the form of liquidation dividend.
It is on record that over the years, the Corporation had successfully managed those expectations to the requirements and limits of its mandate. Those efforts had resulted in positive outcome in terms of engendering public confidence in the banking system. In the final analysis, the depositors had enjoyed reasonable level of protection and services from the Corporation.
Indeed, managing depositors’ expectations in the last twenty years had been synonymous with the Corporation’s activities over the same period, because virtually every official decision and action taken by the Corporation was geared towards the protection of depositors and the preservation of their confidence in banking. However, some specific mention of such efforts will be made here on how the Corporation directly or indirectly managed or influenced the expectations of depositors.
a. Public Awareness:
Since its inception, the Corporation recognized the need to carry bank depositors and other members of the public along with a view to creating market discipline in the banking system and facilitating the implementation of the DIS scheme. The Corporation believed that enlightened depositors would be able to make informed decisions regarding where to place their deposits and to monitor the performance of the banks. This in turn would reduce the chances of bank failure and sustain depositor confidence in the banking system. Accordingly, the Corporation published information about the financial conditions and performance of deposit-taking financial institutions on a regular basis, embarked upon public enlightenment campaign to create awareness about its existence and about the rationale and values of deposit insurance scheme.
b. Stakeholder Survey:
The Corporation recognized also that in addition to its general public awareness campaign, a satisfactory management of depositors’ expectations would require some inputs from them, which should add value to its general administration of the deposit insurance scheme. In that regard, the depositors and other stakeholders as well as the general public became targets of periodic public surveys aimed at gathering relevant stakeholder information. Among surveys conducted in this regard were those of 1994, 1999 and 2004. The surveys revealed vital information such as the awareness gap about the deposit insurance system among the banking public and facilitated review of policies as well as strategies for enhancing depositor awareness.
c. Support for Banks in the Interest of Depositors:
Managing depositors’ expectations in the implementation of DIS also requires sustained efforts to ensure that there are no disruptions to the payment system. However, the first challenge to the Corporation occurred in 1989 when the banking system experienced liquidty crisis sequel to the Federal Government directive to all public-sector institutions to withdraw their deposits from commercial and merchant banks to the Central Bank. That resulted in “about N8.7 billion deposit loss to the banking system … and some banks were clearly unable to meet their commitments” (NDIC, Annual Report, 1989: 10). The situation posed a big stakeholder management challenge to the Corporation, especially coming on the heel of its establishment. In order to prevent chaos and loss of depositor confidence in the banking system, the NDIC drew accommodation bills to the tune of N2.3 billion for the affected banks in order to regain liquidity. Even though some of the banks later failed due to insolvency, the action was a mark of successful stakeholder management.
Claim settlement is a statutory obligation of the Corporation to depositors. Over the years, the Corporation had four (4) major episodes of claims settlement. The first was in 1994 and 1995, the second in 1998 and the third was in 2000, while the fourth was in 2006. The first case involved five banks with few branches. The real test case for the Corporation in claims settlement was in 1998 when the licences of 26 banks were revoked leading to the crystalisation of deposit insurance reimbursement obligation in significant proportion. The Corporation was conscious not only of its responsibility, but also of the need to satisfy the expectations of the teaming depositors. A good stakeholder achievement for the Corporation then was its ability to take payment centres closer to depositors all over the country and to continue for years to attend to late claims beyond the statutory period of 18 months after which a claim was deemed to have lapsed. The Corporation was indeed not unmindful of the low level of awareness and the illiteracy level among the small depositors.
Furthermore, after the policy-induced revocation of the operating licences of 13 banks in 2006, the depositors’ interest remained central in the failure resolution decisions of the Corporation. On appreciation of the circumstances under which the banks failed, the CBN guaranteed full payment to private depositors. The Corporation on its part, introduced the Purchase and Assumption (P&A) option, in order to facilitate prompt access to deposits trapped in the failed banks. Under the option, the private sector depositors were guaranteed full recovery of their deposits while continuity of banking services was assured as the acquiring banks offered banking services in the same premises used by the failed banks.
e.Review of Coverage Level
In response to developments in the financial services industry, the Corporation undertook a survey which indicated that the initial coverage level fixed at N50,000, was inadequate. Subsequently, new coverage limits of N200,000 and N100,000 were proposed for deposit money banks and micro finance banks/ primary mortgage institutions respectively. However, in response to the dynamics of the industry and in order to address the public concern for increase in the coverage levels, the coverage levels were further increased from N200,000 and N100,000 to N500,000 and N200,000 for deposit money banks and micro finance banks/ primary mortgage institutions respectively.
The Insured Deposit-taking Financial Institutions:
It is worth noting that the legal status of the insured institutions witnessed some changes since the Corporation commenced operation twenty years ago due to government regulatory reforms. As at the end of 2008, the insured deposit-taking financial institutions were the Universal Banks, the Micro Finance Banks (MFBs) and the Primary Mortgage Institutions (PMIs).
Deposit-taking financial institutions were, by operational necessity, stakeholders in the running of the Corporation. Their stake was informed by several reasons. First, although the Corporation existed primarily to protect insured deposits, deposit-taking financial institutions were the vehicles through which deposits were received and managed. The Corporation therefore took interest in how the deposits were managed.
Second, it was the insured deposit-taking institutions that paid premium to the Corporation. Third, the premium paid by deposit-taking institutions was the source of the Deposit Insurance Fund, which the Corporation maintained and from which reimbursements were made when the payment of insurance claims crystallized. The ability of the Corporation to meet its insurance obligations was highly dependent on how much of the deposit insurance fund it had been able to build. Also, as a public institution with a stake in general public interest, the Corporation’s focus on the banks went beyond its immediate mandate of protecting depositors’ interest to the promotion of stability of the entire financial system which was dominated by banks.
It is within the above stated contexts that the Corporation regarded the deposit-taking financial institutions as primary stakeholders in the running of the Corporation and recognized their stakes as commanding urgent attention. Based on its relationship with the banks, the Corporation deciphered banks’ expectation to include:
Consultation with them on major regulatory matters affecting their operations;
Provision of financial and technical assistance to them should the need arise;
Minimising premium burden on them; and
Value-adding bank supervision
Over the years, the Corporation had been sensitive to the concerns of its stakeholders. At commencement of its operation, the banks had expressed reservations over such issues as charging premium on inter-bank placements. Although the Corporation had at the time explained its position, it was not unmindful of the concerns of the banks. In 2007, after a comprehensive assessment of the situation, the Corporation gave a premium relief to the banks by removing inter-bank placements from assessable deposits.
Another issue some banks objected to was the mandatory participation in the deposit insurance scheme. The objection was made particularly by the large banks which had the belief that their failure was a remote possibility. However, although the Corporation at the time also explained, with empirical citations, that bank failure was no respecter of size, it was not unmindful of the need to reward good risk management system. Thus, in January2008, although mandatory participation still remained in force, a partial resolution of the concern was made by the introduction of differential premium assessment system (DPAS). The DPAS removed the worries that some banks subsidized the risk of others, which was the bane of flat premium assessment.
The Central Bank of Nigeria
The Central Bank of Nigeria is the apex regulator of the banking industry and is part owner of the Corporation by virtue of its 60% equity holding. The Corporation shares bank supervision and failure resolution responsibilities with the CBN. As a stakeholder and part-owner, the CBN expected the Corporation to deliver in the following major areas:
Good corporate governance;
Collaborative supervision of the banks;
Effective resolution of bank failures; and
Contribution to financial system stability.
At the corporate level, not only did the CBN have a seat on the board of the Corporation but had served as the Chair of the Board in the first few years of its establishment. At the operational level, the Corporation partnered with the CBN on bank supervision and failure resolution matters. For instance, they partnered to conduct examination of banks. On routine examinations a mutually agreed upon plan was made by the two institutions prior to examinations to avoid duplication of efforts. It is noteworthy also that the two institutions collaborated to come up with a bank rating system and jointly conceptualized and development and deployment of the Electronic Financial Analysis Surveillance System (e-FASS) that facilitated the submission of periodic bank returns real time online. They similarly collaborated on how best to handle resolution of failing and failed banks.
Federal Ministry of Finance:
The Federal Ministry of Finance (FMF), through FMF incorporated, had 40% share capital in the Corporation and by this a power relationship was established. More than that, however, the Federal Ministry of Finance served as the supervising ministry of the Corporation. In the absence of the Board, major approvals needed by the Corporation were considered and granted by the Ministry. The Corporation therefore considered it as a primary stakeholder in its operations. In much the same way as the CBN, the Ministry’s expectations from the Corporation was the pursuance of good corporate governance as that was critical to the achievement of other organizational objectives.
Since inception, the Corporation had tried to operate by the dictates of its mandate and to comply with the requirements of good corporate governance to meet the expectations of the Ministry, which was also the watchdog of the government on its activities. In respect of corporate governance practice, the Corporation’s performance and activities revolved around 4 key elements of sound regulatory governance namely: independence, accountability, transparency and integrity. These were aptly captured in its strategic plan.
The National Assembly
The National Assembly, which is the highest law making body in the country, had a stake in the Corporation by virtue of its general oversight functions on major national institutions and through its legislative authority. It was therefore a key stakeholder in the governance of the Corporation.
By the strength of its position as the highest law making body in the country and with oversight powers on the implementation of government policies, the expectations of the National Assembly on the Corporation was to ensure sound corporate governance and effective discharge of responsibilities.
It is worth noting that the Corporation had at different times honoured the invitation of relevant oversight committees of the National Assembly to appear before it for briefing. The committees included Banking and Currency, Public Accounts and Federal Character. On other occasions, the Corporation hosted some of the committees that came for oversight function and were given maximum cooperation. As part of the Corporation’s contribution to legislative oversight, it invited relevant members of the Assembly to its seminars to broaden their understanding of deposit insurance issues.
There is no denying the fact that today the media, whether print or electronic play significant role in fostering human development. The media provides information on socio- economic and political events; economic activities are facilitated by the media through spread of relevant information to both the urban and the geographically isolated dwellers; it mobilizes people to participate in governance. It assists government to maintain law and order through information dissemination. It spreads information to people on government services and expenditure and on their rights and obligations.
While the media is available to provide the above publicity services, the Corporation, on the other hand, recognized that for deposit insurance scheme to succeed, the general public must be well aware of is existence, purpose and operational modalities. This therefore called for close partnership with the media. However, given that reportage of events and developments is greatly influenced by the reporters’ perceptions, worldviews, and personal biases, the Corporation found it imperative to manage its relationship with the media in order to achieve its desired public advocacy objectives. In this context, therefore, the Corporation considered the media as an important stakeholder in its operations.
Having noted the importance of public advocacy to the success of its mandate and the role of the media in that regard, the Corporation, from the on-set patronized its services through purchase of airtime and newspaper spaces to reach out to its target groups and the general public. However, in its desire to ensure accurate reportage and effective communication with target groups, the Corporation undertook to educate the media personnel themselves on the functions and activities of the Corporation with a view to enhancing their capacity to adequately communicate deposit insurance issues and related challenges. It was also believed that such exposure would acquaint the media professionals with the intricacies of the deposit insurance scheme and the banking business and therefore enable them to disseminate information that would promote financial system stability.
Towards this end, the Corporation institutionalized an annual workshop for business editors and members of the Finance Correspondents’ Association of Nigeria (FICAN). Through the annual workshops, the Corporation had succeeded in imparting substantial knowledge to the business editors and the finance correspondents on deposit insurance, the banking system and the financial system as a whole.
The employees of any organization are often described as the most critical resource of that organization as they are central to the management of other resources of the organization as well as the implementation of the organisation’s business strategies. From the onset, the Management of the Corporation was conscious of the nature and enormity of its responsibility as well as the challenge of manpower requirement for running the organisation. Among the challenges were that although deposit insurance could easily be situated within the general financial services industry, it was a specialized service that required a crop of specially trained personnel.
Based on a survey conducted by the Corporation in 2004, it summarized its employees’ expectations in the following dimensions:
Competitive compensation package that would create and sustain the motivation needed for the job of the Corporation;
Training and development that would create well informed, highly skilled and versatile workforce;
Career path that would keep the hopes and aspirations of employees flying;
Reward system that would sustain the morale of eployees;
Conducive work environment that would minimize physical and mental stress to the barest minimum; and
Organisational culture that was supportive of hard work, loyalty, respect, transparency, accountability and employee socialization.
In managing the above expectations of its valued employees, the Corporation formulated policies which facilitated employee well-being and discipline so as to achieve organizational goals. In its approach to staff compensation, the Corporation had, in the last 20 years, been guided by its understanding of both its status as a public institution and its supervisory role in the banking industry. As a public institution, the Corporation was concerned about public probity and the need to utilize resources judiciously. On the other hand, its supervisory role in the banking industry dictated the need for an average standard in compensation relative to the industry, which was to ensure recruitment and retention of skilled workforce. Accordingly, therefore, the Corporation, over the years, implemented financial compensation packages that kept the morale of the staff high and ensured high performance standards.
In the last 20 years, the Corporation had been actively involved in voluntary actions executed outside the statutory mandate, and which were basically intended to positively impact on its various stakeholders. Apart from being a public institution, which should ordinarily partake in courses of action that serve public interest, the Corporation had a stake in promoting social responsibility. Firstly, substantial size of the members of the public especially bank depositors, were its stakeholders, and the Corporation would want them to feel the impact of its existence through its contributions to socio-economic development.
Secondly, even members of the public that were not direct stakeholders in the Corporation were potential users of banking services.
Among the objectives of the Corporation was to promote banking culture and to preserve public confidence in the banking system. Thus, any social programme or project in the name of the Corporation would serve to raise its public image.
This in turn was likely to facilitate the patronage of what it stood for, such as inculcating banking habit. It was against that background that the Corporation pursued its social responsibility programmes in the following areas:
Endowment of Chairs In Tertiary Institutions:
In its effort to promote educational excellence and fulfill part of its social responsibility, the Corporation instituted, in 1994, an endowment fund and prize awards for institutions of higher learning in the country. Under the scheme, grants were made to several Universities. A total of 9 Universities benefited from the endowment of Professorial Chairs in different academic fields by 1995. Similarly, in 1996, thirty one (31) Universities benefited from cash award prizes ranging with some Universities getting 2 prize awards.
Financing Projects in Tertiary Institutions:
This represents a response to the challenge thrown by the Federal Government in 2003 to the Bankers’ Committee on the deplorable state of the infrastructural facilities in the higher institutions of learning in the country. Thus, in 2003, the Board of the Corporation approved a grant of N130 million to be disbursed at the rate of N10 million each to 13 selected Federal Universities. Two Universities each from the six geopolitical zones of the Country and one from Abuja were selected for the grant. The projects executed included lecture halls, academic offices, hostels, theatre, provision of laboratory equipment, internet facilities and cybercafé/ computer centres that were considered essential for effective learning.
INTERNATIONAL NETWORKING WITH OTHER DEPOSIT INSURANCE SYSTEMS
In order to promote cooperation among different deposit insurance organizations as well as promote the stability of the international financial system, the International Association of Deposit Insurers (IADI) was founded in Basel, Switzerland in May, 2002. The vision of the Association is “sharing deposit insurance expertise with the world.” The forum provides deposit insurance practitioners opportunity to discuss leading issues in deposit insurance, net-working and information sharing.
The genesis of IADI was the Working Group on Deposit Insurance established by the Financial Stability Forum (FSF) in 2000. The Working Group, in turn, was established following the findings of the Study Group on Deposit Insurance, which the FSF constituted in 1999. The Working Group and the Study Group were headed by Mr. Jean Pierre Sabourin of the Canada Deposit Insurance Corporation.
Currently there are 52 member organizations, 6 associates, 3 observers and 12 partners. Member organizations are entities that, under law or agreements, have a deposit insurance system and have been approved for membership in the Association. (Nigeria, USA, Bangladesh, Sudan, Bulgaria, Canada, Russia, India, Trinidad and Tobago, Bahamas, Zimbabwe, Kenya, Hong Kong etc.). Associates are entities that do not fulfill all criteria to be a member, but are considering the establishment of a deposit insurance system, or are part of a financial safety net and have a direct interest in the effectiveness of a deposit insurance system. (Bank of Mangolia, Monetary Authority of Singapore, Bank of Algeria, etc). Observers are interested parties that are profit or not-for-profit entities which do not fulfill the criteria to be an associate but have a direct interest in the effectiveness of deposit insurance systems; may include international organizations, financial institutions and professional firms. (Bearing Point Inc., Deloitte & Touche LLP, Excel Technology International, Goodmans LLP). Partners are not- for profit entities, such as international financial institutions that enter into a cooperative arrangement with the association in the pursuit and furtherance of the objects of the association. (Asian Development Bank Institute, Association of Supervisors of Banks of the Americas (ASBA), The South East Asian Central Banks (SEACEN) Research and Training Center, etc).
The Corporation joined IADI as a founding member in 2002 and was the pioneer Chair of the Africa Regional Committee (ARC) of the Association. Also, the Corporation’s Managing Director/Chief Executive Officer (MD/CEO), Mr. G. A. Ogunleye, OFR, was a pioneer member of the Executive Council of IADI. In addition, the Corporation had one of its staff as a member of the Association’s Research and Guidance Group (RCG).
As a founding member, the Corporation, since 2002, had participated in several fora organized by both IADI (Annual Conferences) and its member deposit insurers (Regional Committee Annual Meetings) to share experience with other members as well as share information on relevant issues and policies for strengthening deposit insurance mechanisms. The international networking had been mutually beneficial, through exchange of information at the level of IADI and collaboration among member agencies. The Corporation had contributed significantly to the sound growth and development of the IADI. In particular, staff members of the Corporation had been very active in, and integral to, several research projects aimed at enhancing deposit insurance effectiveness across the globe.
In 2004, the Corporation hosted the first international conference on deposit insurance organized by the Africa Regional Committee of the IADI in Abuja, Nigeria. As part of its activities in 2007 and in order to encourage the introduction of explicit Deposit Insurance System as well as strengthen the existing systems in Africa, the Corporation, under the auspices of the Africa Regional Committee (ARC) of the IADI, hosted an international workshop on deposit insurance. The theme of that workshop was “Bank Resolution and Differential Premium.” The workshop, drew its facilitators from Africa, Turkey, and Canada, and was attended by 35 delegates from Kenya, Tanzania, Zimbabwe, Cameroun, and Nigeria.
Also, in 2008, as part of its contributions to the building of capacity among middle level personnel in existing DIS in Africa and those intending to establish new deposit insurance systems, the Corporation under the auspices of the ARC hosted another international workshop on deposit insurance. The theme of the 2008 workshop was “Deposit Insurance System (DIS) Coverage and Public Awareness”. The workshop drew participants from Kenya, Tanzania, Zimbabwe and Nigeria. Key officials from Malaysia, Taiwan and IADI Headquarters (Switzerland) were among the facilitators at the workshop.
The Corporation had also in the last few years received staff of deposit insurance agencies from sister African countries for study tours/attachment programmes. Some of the agencies included the Deposit Insurance Protection Board of Tanzania, the Deposit Protection Board of Zimbabwe, Commission Bancaire de’Afrique Centrale (COBAC) of Cameroun as well as Delegates from Banque Centrale Des Etats De L’ Afrique De L’ Ouest (BCEAO) in Senegal.
What is Deposit Insurance?
A. Deposit Insurance is a component of a country’s financial safety net, set up primarily to protect depositors in case their bank or any other insured financial institution fails or is unable to make payments on deposits. The other components of the safety net are the supervisory and regulatory framework and the lender of last resort facility of the Central Bank.
Under Decree 22 of 1988 now replaced with the Nigeria Deposit Insurance Corporation (NDIC) Act No 16 of 2006, the NDIC is responsible for managing the Scheme established under the provisions of the Act.
The Scheme provides a formal system for the Government to address problems which may arise in the financial sector. It also helps in maintaining confidence in the financial sector as well as encouraging savings.
Nigeria is among many countries around the world which have explicit deposit insurance schemes.
Q. Why is Deposit Insurance necessary?
A. Financial institutions differ from most industrial and commercial enterprises in that they depend mainly on deposits mobilized from the public for their working capital and are highly leveraged. If a financial institution is unable to meet its obligation to depositors due to operational problems or business failure, anxious depositors may cause a run on the bank as well as other healthy institutions. The stability of the financial system and social order in general would also be at risk. Moreover, most depositors have small deposit amounts and therefore cannot cost-effectively collect information on the financial institutions they do business with. The government has therefore established a deposit insurance mechanism, under which the NDIC is empowered to provide protection for small depositors and contribute to financial and social order.
Q. What is the role and function of the NDIC?
The NDIC’s role is to administer the deposit insurance system (DIS) in Nigeria and protect depositors. The Corporation provides incentives for sound risk management in the Nigerian banking system, and promotes as well as contributes to the stability of the financial system. The NDIC manages two deposit insurance funds, the DIF for universal banks and the Special Insured Institutions Insurance Fund (SIIF) for licensed Microfinance Banks (MFBs) and Primary Mortgage Institutions (PMIs).
Q.Which financial institutions are covered by Deposit Insurance?
A. The deposit-taking institutions covered are:
Universal banks (or deposit money banks)
Microfinance banks (MFBs)
Primary mortgage institutions (PMIs)
Q. How can I be sure that a financial institution has Deposit Insurance coverage?
A. To identify insured financial institutions, look out for an NDIC decal (sticker) displayed in the head offices and branches of all insured institutions or call our Help Line 09 460 1280; and 09 4601032 or visit our website: www.ndic.org.ng.
Q. Which financial institutions are not covered by Deposit Insurance?
A. Financial institutions not covered by Deposit Insurance Scheme include:
Development Finance Institutions such as Bank of Industry, Federal Mortgage Bank, Nigeria Agricultural, Cooperative and Rural Development Bank and Urban Development Bank
Unit Trusts/Mutual Funds
Pension Fund Administrators (PFAs)
Q. What deposits are insured by the NDIC?
A. The majority of funds received by a deposit-taking financial institution in its normal course of business are insured. These are:
Savings Account Deposits
Current Account Deposits
Time or Term Deposits
Foreign Currency Account Deposits
Q. Are foreign currency deposits in Nigerian financial institutions insured?
Yes. However, payments of insurance obligations are made in Nigerian currency, the Naira.
Q. What monies are not insured by NDIC?
A.NDIC does not insure monies invested in:
Even if these investments were bought from insured institutions. NDIC does not also insure:
Federal Government Treasury Bills, Bonds and Notes as these instruments are backed by the full faith and credit of the Federal Government of Nigeria.
Finally, NDIC does not insure:
Inter-bank placements; and
Insider deposits (i.e. deposits made by staff, directors and other connected parties)
Deposits held as collateral for loans
Q. What is the basic insurance coverage under the Scheme?
A. The basic insurance coverage limit is N500,000 (principal and interest combined) per depositor, per insured universal bank; and N200,000 (principal and interest combined) per depositor, per insured PMI/MFB.
Q. Do I have to pay insurance premiums?
A. No. Premiums are paid by insured institutions.
Q. Can I increase my coverage by depositing my monies in several insured institutions?
A. Yes. Deposits by the same depositor in different institutions are insured separately and therefore enjoy coverage of N500,000 per depositor in the case of universal banks or N200,000 per depositor in the case of PMIs/MFBs. However, to gain additional protection, deposits must be held in separate institutions and not different branches of the same institution
Q. Can I increase my coverage by opening several accounts in the same insured institution?
A. No. You cannot increase coverage by putting your monies into several accounts in the same ownership category and in the same insured institution. However, if the owners of the accounts are different, coverage is separate. The most common ownership categories are Individual (Single), Joint, Business and Trust Accounts.
Q. Who administers deposit insurance system in Nigeria?
A. The NDIC, a government – owned institution, established by Decree 22 of 1988 and now replaced with Nigeria Deposit Insurance Act No. 16 of 2006, is the agency empowered to administer the deposit insurance system in Nigeria, thereby protecting depositors. The Corporation provides incentives for sound risk management in the Nigerian banking system, and promotes as well as contributes to the stability of the financial system. The NDIC manages two deposit insurance funds, the DIF for universal banks and the Special Insured Institutions Insurance Fund (SIIF) for licensed Microfinance Banks (MFBs) and Primary Mortgage Institutions (PMIs).
Q. Is Deposit Insurance The Same As A Conventional Insurance?
A. No. Deposit insurance is different from conventional insurance in several respects. Some of the differences include the following:
a. Different Purposes
The purpose of deposit insurance is to protect the rights and interest of depositors, maintain credit order, and promote the sound development of the financial industry. It is designed to serve the public welfare with no profit-earning motive. Conventional insurance companies providing property and life insurance, on the other hand, are commercial types of insurance.
b. Different Beneficiaries
Under the deposit insurance system, insured institutions pay insurance premiums to the NDIC, which uses these funds to protect the depositors of the insured institutions. If an insured institution goes out of business or is unable to pay its deposit liabilities, the NDIC will reimburse the depositors of the failed institutions by law. The insured institution therefore is different from the beneficiaries (the depositors). With property and life assurance policies, the insured party can designate itself or another party as the beneficiary. When an insurance incident occurs, the insured party or beneficiary of a property or life assurance will claim compensation from the insurance company. The insured party can also be the beneficiary.
c. Different Functions
With property and life insurance, claims are paid by the insurer after an insurance incident. Deposit insurance claims are also paid after an insurance incident. However, the deposit insurance system in Nigeria takes active measures to keep such insurance incidents from occurring. When a financial institution experiences trouble, the NDIC uses the Early-Warning System, Off-site monitoring of insured institutions, assistance and other measures, to help the insured institution return to sound operations. It is when the troubled insured institution does not respond favourably to the measures that the insurance incident is deemed to have taken place and claims are thereafter paid.
d. Different Policy Role
Deposit insurance also plays a policy role as part of the financial safety net. In addition to fulfilling deposit insurance responsibilities toward the insured institutions which are unable to perform their deposits payment obligations or are non-viable, the deposit insurance system helps the government to establish mechanisms for withdrawing problem financial institutions from the market in order to effectively prevent the occurrence of systemic risk.
e. Different Conditions for Participation
In deposit insurance, best practice dictates that participation should be compulsory. Participation in conventional insurance contract is generally voluntary.
f. Different Coverage Levels
Under deposit insurance, best practice prescribes that the amount of coverage should be limited, whereas in the case of conventional insurance, coverage may be full.
Q. Who are the Insured Institutions Under The Deposit Insurance Scheme in Nigeria?
A. Insured institutions are all deposit-taking financial institutions licensed by the Central Bank of Nigeria (CBN) such as
Universal Banks (deposit money banks);
Micro-finance Banks – (MFBs); and
Primary Mortgage Institutions (PMIs).
Membership is compulsory as provided under the NDIC Act No 16 of 2006.
Q. How can the public find out if a financial institution is insured by the NDIC?
A. To identify insured financial institutions, look out for an NDIC decal (sticker) displayed in the head offices and branches of all insured institutions or call our Help Lines 09 460 1280; and 09 4601032 or visit our website: www.ndic.org.ng.
Q. Which financial institutions are not covered by the NDIC?
A. Financial institutions not covered by the NDIC include:
Development Finance Institutions such as Bank of Industry, Federal Mortgage Bank, Nigeria Agricultural, Cooperative and Rural Development Bank and Urban Development Bank
Unit Trusts/Mutual Funds
Pension Fund Administrators (PFAs)
Q. How Does The NDIC Assess Premium and Who Pays For The Insurance Premium?
A. Participating institutions are required to pay annual premiums to the deposit insurance system administered by the NDIC. The premium is assessed based on participating institutions’ total assessable deposit liabilities as at 31st December of the preceding year. The assessable deposit liabilities are total deposits with the exception of some deposits listed in Section 16 of the NDIC Act 2006. The NDIC Act 2006 (Section 16(2)), has given the Corporation the power to adopt any premium assessment system to reflect developments in the industry in particular and the economy in general.
Q. How Does The NDIC Protect The Deposit Insurance Fund?
A. The NDIC protects the Deposit Insurance Fund (DIF) by investing the Fund in safe but liquid financial instruments such as Treasury Bills, Federal Government Bonds and instruments of similar nature.
Q. Does The NDIC Finance Its Operations From The DIF?
A. No, the Corporation finances all its overhead and administrative expenses from its investment income. The main sources of income of the NDIC are the proceeds from investment of the DIF in securities issued by the Federal Government. The DIF is used only for paying insured deposits when an insured institution fails as well as for granting financial assistance to deserving participating institutions.
Q. Does the Supervisory Functions of the NDIC duplicate that of the Central Bank of Nigeria (CBN)?
A. No. There is no duplication of supervisory functions, rather what exists is collaboration. For instance there is a framework whereby the Corporation collaborates effectively with the Central Bank of Nigeria through a joint committee on supervision at which both organizations are represented at very senior level. Secondly, in order to avoid duplication of supervisory functions, the two institutions share banks for examination purposes on an annual basis and when such examinations are concluded, the examination reports are exchanged. The supervisory efforts of the two institutions are sometimes conducted jointly when the need arises. Indeed, the involvement of the NDIC in bank supervision has reduced the examination cycle from about once in two years to once a year.
The Corporation supervises banks basically, to protect depositors. Banking supervision is a core function of the Corporation as it seeks to reduce the potential risk of failure and ensures that unsafe and unsound banking practices do not go unchecked. It also provides the oversight required to preserve the integrity of, and promote public confidence in, the banking system. The Corporation carries out its supervisory responsibilities through on-site examination and off-site surveillance of insured institutions.
Q. How Does The NDIC Protect Bank Depositors Against Loss?
A. The NDIC protects bank depositors against loss through:
a. Deposit Guarantee
This is perhaps the most significant and distinct role of the Corporation. As a deposit insurer, the NDIC Act 2006 guarantees payment of deposits up to the maximum insured sum (N500,000.00 to a depositor in universal banks and N200,000 to a depositor in MFBs and PMIs) in the event of the failure of a participating financial institution. Balances in all deposit accounts held in the same right and capacity by a depositor in all branches of the closed insured institution, net of outstanding debts, are aggregated to determine the maximum insured amount.
b. Bank Supervision
The Corporation supervises banks to protect depositors, ensure monetary stability and effective/efficient payment system as well as to promote competition and innovation in the banking system. Banking supervision seeks to reduce the potential risk of failure and ensures that unsafe and unsound banking practices do not go unchecked. It also provides the oversight functions required to preserve the integrity of and promote public confidence in the banking system.
c. Failure Resolution
The Corporation is empowered to provide financial and technical assistance to failing or distressed banks in the interest of depositors. The financial assistance can take the form of loans, guarantee for loan taken by the bank or acceptance of accommodation bills. On the other hand, the technical assistance may take the following forms: take-over of management and control of the bank; change in management; and/or assisted merger with another viable institution.
Q. How Does The NDIC Establish The Ownership Of A Deposit?
A. The NDIC relies on deposit account records kept by a failed bank as well as on the proofs presented by the depositor.
Q. As a Depositor Must I Apply For The Deposit Insurance Coverage?
A. No, a depositor does not need to. Under the Nigeria deposit insurance system, eligible deposit accounts in insured institutions are automatically insured at no charge to any depositor.
Q. When is Insured Deposit Payable?
A. Deposit insurance is payable only when an insured institution has been closed as a result of action taken by the Central Bank of Nigeria.
Q. What Methods of Payment Does the NDIC Use In Meeting Its Obligations To Depositors of a Failed Institution?
A. The NDIC could pay depositors of a failed insured institution either by transfer to a financial institution with instructions to effect payments to depositors on its behalf, or directly by means of issuing cheques up to the insured limit which will be collected at the NDIC’s designated centres, usually the closed bank’s offices.
Payments could also be made through Purchase and Assumption, whereby a healthy bank assumes part or all of the deposit liabilities of a failed insured bank.
Q. What Does a Deposit Transfer involve?
A. The NDIC transfers an amount equivalent to the total insured deposits of a failed insured institution to another financial institution under an agreement which will enable depositors of the failed insured institution to collect their entitlements from the financial institution.
Q. How are the Insured Sums Collected?
A. Insured sums are collected by depositors on filing their claims through the completion of relevant forms provided by the Corporation. In addition, they have to furnish the Corporation with account documents such as unused cheque books, old cheque stubs, passbooks, fixed deposit certificates, etc. Each depositor would also be required to identify him/herself with a valid identification document such as National ID Card, Driver’s Licence or International Passport. After verification of ownership of the account as well as the account balance, the depositor would be duly paid the insured sum by cheque or deposit transfer through an Agent Bank or Acquiring Bank.
Q. What Should A Depositor Of A Failed Bank Do If He or She Loses Passbook or Savings Documents?
A. The depositor would be required to present a Police report along with a sworn affidavit duly certified by the Court. The depositor would also be required to identify himself/herself with a valid identification document like National ID Card, Driver’s Licence or International Passport.
Q. Can a Depositor Leave His/Her Deposit With The Transferee Institution?
A. Yes, a depositor, if he/she wishes, can open an account with the transferee institution for the full amount or part of his/her deposit.
Q. Does The NDIC Protect The Interests Of Creditors Or Shareholders Of A Bank?
A. The primary mandate of the NDIC is to protect depositors. However, through supervision to ensure safety and soundness of banking institutions, the interest of creditors and shareholders are also protected. In the event of bank failure, creditors and shareholders could be paid liquidation dividends after depositors had been fully reimbursed.
Q. What is Liquidation Dividend?
A. This is a payment made to depositor of a failed insured institution in excess of the insured sum. While the insured sums are paid from the Corporation’s Deposit Insurance Fund (DIF) or Special Insured Institutions Fund (SIIF), liquidation dividends are paid from funds realized from the sale of the assets and recoveries of debts owed to the failed insured institution.
Q. What is the Current Insured Limit And Why Is It Limited To A Fixed Sum?
A. The insured limit is currently a maximum of N500,000 for each depositor in respect of deposits held in each insured universal bank and N200,000 for each depositor in Microfinance Bank and Primary Mortgage Institutions in same right and capacity. The amount to be reimbursed has to be definite. Limited coverage is to minimize moral hazard through excessive risk taking by bank management and depositors. Unlimited coverage could constitute a perverse incentive for excessive risk-taking.
Q. If a Depositor Has an Account in the Main Office of a Participating Institution And Also At a Branch Office, Are These Accounts Separately Insured?
A No. The main office and all branches are considered to be one institution. Therefore, the accounts would be added together and covered up to the maximum insured sum.
Q. If A Depositor Has Deposit Accounts In Different Insured Banks, Will The Deposits Be Added Together For The Purpose Of Determining Insurance Coverage?
A. No. The maximum insurance limit is applicable to deposit in each of the participating banks. In the case of a bank having one or more branches, the main office and all branch offices are considered as one bank. In summary, if a person has many accounts in one bank, all the deposits are taken together as one account even if the deposits are in various branches of the same bank. On the contrary, however, if a depositor has accounts in more than one bank, they are insured independently up to the maximum insured sum per bank.
Q. Is The Insurance Protection Increased By Placing Funds In Two or More Types of deposit Accounts in the Same Participating Institution?
A. No, Deposit insurance is not increased merely by dividing funds held in the same right and capacity among the different types of deposits available. For example, demand, time and savings accounts held by the same depositor in the same right and capacity are added together and insured up to the maximum insured sum.
Q. If A Husband And Wife Or Any Two Or More Other Persons, Have, In Addition To The Individually-Owned Accounts Of Each, A Valid Joint Account In The Same Insured Bank, Is Each Account Separately Insured?
A. Yes. If each of the co-owners has personally signed a valid mandate card and has a right of withdrawal on the same basis as the other co-owners, the joint account and each of the individually-owned accounts are separately insured up to the insured maximum sum.
Q. If A Person Has An Interest In More Than One Joint Account, What Is The Extent Of His Or Her Insurance Coverage?
A. As long as the combination of the joint accounts is not the same, the account will be insured separately up to the maximum insured limit. Where the joint accounts are owned by the same combination of individuals then the accounts will be added and the total insured up to the maximum insured sum.
Q. Are Accounts Held By A Person As Executor, Administrator, Guardian, Custodian, Or In Some Other Similar Fiduciary Capacity Insured Separately From His Or Her Individual Account?
A. Yes. If the records of the bank indicate that the person is depositing the funds in a fiduciary capacity such funds are insured separately from the fiduciary’s individually-owned account. Funds in an account held by an Executor or Administrator are insured as funds of the deceased’s estate. Funds in accounts held by guardians, conservators or custodians (whether court-appointed or not) are insured as funds owned by the ward and are added to any individual accounts of the ward in determining the maximum coverage. Account in which the funds are intended to pass on the death of the owner to a named beneficiary, are considered testamentary accounts and are insured as a form of individual account. If the beneficiary is a spouse, child or grand-child of the owner, the funds are insured for each owner up to a total of the maximum insured sum separately from any other individual accounts of the owner. In the case of a Revocable Trust Account, the person who holds the power of revocation is considered the owner of the funds in the account.
Q. When An Account Is Held By A Person Designated As Agent For The True Owner Of The Funds, How Is The Account Insured?
A. The account is insured as an account of the principal or true owner. The funds in the account are added to any other accounts owned by the owner and the total is insured to the maximum sum.
Q. Is An Account Held By Either A Company Or Partnership, Insured Separately From The Individual Accounts Of Shareholders Or Partners?
A. Yes. If the Company or Partnership is engaged in an independent activity, its account is separately insured to the maximum insured sum. The term Independent activity means any activity other than one directed solely at increasing insurance coverage.
Q. If A Depositor Has More Than The Maximum Insured Amount As Deposit In A Closed Bank, Is He Entitled To Any Further Claim For The Amount Of His Deposit In Excess Of The Maximum Insurance Paid By The NDIC?
A. Yes. In a situation where the amount of depositors’ fund in a closed bank exceeds the maximum insured amount, the owners of such accounts will share, on a pro-rata basis, in any proceeds from the liquidation of the bank’s assets with other general creditors, including the Corporation.
Q. Will The NDIC Offset a Deposit Balance held By a Customer Against The Balance Due On the Loan?
A. The NDIC will offset the balance on a deposit account, including any uninsured portion, against a loan if the loan and deposit are held by the same person or persons.
Q. Does the Borrower’s Obligations to the Institution Continue After the Institution is Closed?
A. Yes. When acting as Liquidator of a closed institution, the Corporation is acting on behalf of all creditors of that institution and its obligation is to collect all loans promptly and efficiently along with other assets of the institution.
Q. What Does Purchase And Assumption (P & A) Mean?
A. Purchase and assumption (P & A) is a merger-type transaction which involves purchasing the assets of a failed bank and assuming its liabilities by another insured bank(s).
Q. What Does Open Bank Assistance (OBA) Mean?
A. Open Bank Assistance (OBA) is a situation where a failed insured institution is allowed to continue to operate in the same name as a going concern. It may involve change in ownership and management of the bank; injection of fresh funds in the form of equity and/or loan capital; and re-organisation and overhauling of the bank including rationalization of staff and branches.
Q. What Is A Bridge Bank?
This is a situation whereby a failed bank is turned over to a new bank specifically set up to assume the assets and liabilities of the failed bank. The bridge bank would permit continuity of banking services to all customers and fully protect all the depositors and creditors of the failed bank.
Q. How can the public contact NDIC about questions and suggestions regarding deposit insurance?
NDIC has set up the following contact channels to provide customer service to the public:
For obtaining quick answers to your questions, call our help-line service: 09 460 1280; and 09 4601032.
Personnel working in the financial services industry can send comments to NDIC by mail to: The Managing Director/Chief Executive Officer, Nigeria Deposit Insurance Corporation, Plot 447/448 Constitution Avenue, Central Business District, P.M.B. 284, Abuja.
Information on NDIC and the deposit insurance system can be accessed from our website at: www.ndic-ng.com. You can also submit comments or questions through the web site.
Q HOW DOES THE NDIC PROTECT DEPOSITORS OF MFBs AND PMIs AGAINST LOSS
A. Each insured Microfinance Bank and Primary Mortgage Institution must meet high standard of safety and soundness in its banking practices. Adherence to these standards is determined through regular routine and special examinations by the Regulatory Authorities: the CBN and the NDIC. If despite these precautions, an insured MFB/PMI gets into financial difficulties and must be closed for purpose of liquidation, the NDIC will be on hand with cash to relieve a depositor up to the maximum of N200,000.00.
Q. DOES THE NDIC PROTECT THE INTERESTS OF CREDITORS OR SHAREHOLDERS OF A FAILED MFB OR PMI?
A. No. The primary mandate of the NDIC is to protect depositors. However, the creditors and shareholders could be protected through the supervision activities of the Corporation i.e ensuring high safety, and soundness standards which ensures that the institutions continue to exist as going concerns thereby protecting all stakeholders.
Q. WHAT IS THE PREMIUM RATE TO BE CHARGED ON DEPOSIT LIABILITIES OF MFBs AND PMIs?
A. MFBs and PMIs are to pay 8/16 of 1% (i.e. 50 basis points or 0.05%) of their certified deposit liabilities for the preceding year as premium for deposit insurance.
Q. WHAT IS BASIC INSURANCE PROTECTION AFFORDED A DEPOSITOR OF A MFB OR PMI?
A. The basic insured limit for a depositor is N200,000.00. A depositor is thus insured up to N200,000.00 in the aggregate with respect to deposits he or she holds in the same right and capacity in each MFB and PMI including branches if any. (The terms “Right and Capacity’’ refer to the nature of ownership of deposits, such as individual, joint or trust deposits).
Q. WHY IS THE DEPOSIT INSURANCE COVERAGE LIMITED TO A FIXED SUM OF N200,000?
A. The scheme was designed to protect small depositors since they are more in number and less informed about the safety and soundness of depository institutions. The insured sum had recently been reviewed upwards from N100,000 to N200,000 for MFBs and PMIs in response to developments in the financial services industry in particular and the economy in general.
Q. WHAT WAS THE BASIS OF ARRIVING AT THE GUARANTEED SUM OF N200,000?
A. The maximum Deposit Insurance Coverage was arrived at through a survey and research carried out on deposit structure in insured institutions. It was established that over 90% of depositors had balances of N200,000 and below in their accounts with each Microfinance bank/Primary Mortgage Institution.
Q. WHAT TYPES OF DEPOSITS ARE INSURED?
A. All types of deposits held in insured MFBs and PMIs are covered by NDIC insurance including:
Time / Fixed Deposits.
Other financial products introduced purposely to mobilize deposits.
Inter-bank takings including Money at call from other banks
Q. WHAT TYPES OF DEPOSITS OF A MFB OR PMI ARE NOT INSURED?
A. The under listed deposits are not insured.
Collateralized deposits. (Deposits that are used to secure credit facilities).
Insider deposits. (Deposits of Board Members, Management and Staff of the Institution)
Funds lost by the insured institution due to robbery, theft and embezzlement.
Donor funds i.e funds obtained by MFBs/PMIs for unlending to their customers.
Collections i.e taxes, deposits for shares and monies collected from the public on behalf of government agencies or other organizations for services or products provided where the PMIs and MFBs serve as collection agents and the funds are remitted at agreed intervals to the CBN or a designated commercial bank.
Q. Why are Directors and Staff deposits not covered by the DIS while deposits of shareholders are covered?
A. Directors and staff deposits are not covered in order to create incentive for them to manage their institutions in a safe and sound manner and also to ensure good corporate governance practices. On the other hand, deposits of shareholders are covered since they are not involved in day to day running of their institutions.
Q. IS THE INSURANCE PROTECTION INCREASED BY PLACING ONE’S FUNDS IN TWO OR MORE TYPES OF DEPOSIT ACCOUNTS IN THE SAME MFB OR PMI?
A. No. Deposit Insurance is not increased merely by dividing funds owned in the same right and capacity among the types of deposits in the same MFB or PMI. For example, current and savings accounts owned by the same depositor in the same right and capacity in the same MFB or PMI are added together and insured up to N200,000.00.
Q. IF A DEPOSITOR HAS DEPOSIT ACCOUNTS IN SEVERAL DIFFERENT INSURED MFBs AND PMIs, WILL THE DEPOSIT BE ADDED TOGETHER FOR THE PURPOSE OF DETERMINING INSURANCE COVERAGE?
A. No. The maximum insurance cover of N200,000.00 is applicable to deposits in each licensed MFB or PMI. In the case of a MFB or PMI having one or more branches, the main office and all branch offices are considered as one institution. In summary, if a person has many accounts in one MFB or PMI, all the deposits are taken together as one account even if the deposits are in various branches of the same institution. On the contrary, however, if a depositor has accounts in more than MFB or PMI, they are insured separately up to a maximum of N200,000.00 per institution.
Q. WHAT IS THE PRIORITY OF PAYMENT OF LIABILITIES OF FAILED MFBS/PMIS?
A. Section 50 of the Banks and Other Financial Institutions Act provides that where a bank is unable to meet its obligations or suspends payment, the assets of the bank shall be available to meet all deposit liabilities of the bank and such deposit liabilities shall have priority over all other liabilities of the bank..
However, after depositors are fully paid, the ranking of other creditors is as provided in the Companies and Allied Matters Act (CAMA), namely:;
– Preferred Creditors,
Q. WHAT SORT OF ASSISTANCE CAN THE CORPORATION RENDER TO INSURED INSTITUTIONS?
A. The Corporation can render financial and or technical assistance depending on the peculiar situation of the insured institution. Financial assistance could be in form of interest-bearing loans that must be paid back on stated terms. Technical assistance could take the form of advisory services, restructuring, staff training, or take-over of management.
Q. IS THERE ANY ARRANGEMENT IN PLACE BY THE CORPORATION TO WAIVE OR REDUCE PREMIUM PAYABLE OVER TIME FOR INSURED INSTITUTIONS?
A. Section 12(2) of the NDIC Act 16 of 2006 provides that subject to stated conditions, part of the Corporation’s surplus can be applied to reduce premium payable by insured institutions. Furthermore, the Corporation would consider adopting differential premium assessment such that premium payable by MFBs and PMIs would be based on their risk profile.
Q. IS THERE ANY TAX ADVANTAGE IN PREMIUM PAYMENT
A. Yes. Premium paid under the Deposit Insurance Scheme is an allowable expense for tax purpose. Hence, payment of premium reduces the tax burden.
Account Agreement: The contract governing your open-end credit account, it provides information on changes that may occur to the account.
Account History: The payment history of an account over a particular period of time, which includes the number of times the account was past due or over drawn.
Account Holder: A person or group of persons designated and authorized to transact business on behalf of an account. The signature of the account holder which is filed with the bank authorizes that person to conduct business on behalf of the account.
Account Payable: Obligations to pay for goods or services that have been acquired on credit from suppliers, accounts payable is a current liability in the balance sheet.
Accounts Receivable: Money which is owed to a company by a customer for goods and services provided on credit, accounts receivable is treated as a current asset in the balance sheet.
Accrued Interest: Interest that has been earned but not yet paid.
Acquiring Bank: In a merger, the bank that absorbs the bank acquired. The acquiring bank purchases some or all of the assets and assumes some or all the liabilities of the bank acquired.
Adverse Selection: The tendency for higher-risk banks to opt for deposit insurance and lower-risk banks to opt-out of deposit insurance when membership in a deposit insurance system is voluntary.
Assessment Base: The base on which the deposit insurer determine the premium or contribution made by member institutions to the Deposit Insurance Fund needed to pay the insured depositors.
Bank: A limited liability company, licensed by the Central Bank, to carry on the business of banking.
Bank Failure: closing of an insolvent bank by the licensing authority.
Bank Insolvency: When a bank’s net worth becomes negative and could no longer meet any of its financial obligations when they fall due.
Bank Rating: A rating system designed by Bank Supervisors to evaluate the financial condition and performance of banks. It serves as an Early Warning System to detect emerging problems in banks to allow for prompt corrective actions. It provides both qualitative and quantitative approach of evaluating the factors that materially affect the condition, performance and growth of banks. The quantitative approach is undertaken by evaluating Capital Adequacy, Asset Quality, Management, Earnings and Liquidity (CAMEL) parameters. Qualitative Management factors considered include Adherence to Safe and Sound Policies (Compliance with laws and Regulations) and other fundamental factors.
Bank Run: A series of unexpected cash withdrawals, caused by a sudden decline of depositor confidence or fear that a bank will be closed by the licensing agency and depositors may suffer losses.
Bank Statements: This is a statement that can be requested at any interval, usually monthly from a bank giving details of transactions in a relevant account.
Basis Point: smallest measure used to measure changes in or differences between yields or interest rates, equal to one one-hundredth of one percentage point, or .01%.
Blanket Guarantee: A declaration by the government that all deposits and perhaps other financial instruments will be protected.
Benchmark: a standard or guideline to which other items or processes can be compared.
Bridge bank: This is a situation whereby a failed bank is turned over to a new bank specifically set up to assume the assets and liabilities of the failed bank for a specified period of time. The bridge bank would permit continuity of banking services to all customers and fully protect all the depositors and creditors of the failed bank.
Charges: This is the money paid to the bank for services rendered. e.g. overdraft fees, interest on overdraft and any charges that a business account normally incur.
Cheque: A cheque is a piece of paper produced by a bank for an account holder with account number, sort-code and number printed on it.
Cheque Book: A small, bound booklet of cheques.
Cheque Clearing: This is a process of getting money into the cheque receiver’s account from the cheque writer’s account.
Claim: An assertion of the indebtedness of a failed institution to a depositor, general creditor, subordinated debt holder, or shareholder.
Claim Settlement: This involves the processing, verification and settlement of claims filed by proven depositors of the closed banks. It also includes the payment of dividends to uninsured depositors and other creditors of the failed banks.
Clearing Bank: This is a bank that can clear funds between banks.
Coinsurance: An arrangement whereby depositors are insured for a pre-specified portion, less than 100 percent of their deposits.
Compulsory System: A deposit insurance system that all insured institutions must participate in to be member institutions according to law or agreement.
Contagion: Adverse effects of a single firm that become contagious throughout the industry.
Corporate Governance: The way in which an organisation is administered, directed or managed by its stakeholders.
Coverage Ratio: A financial ratio measuring number of depositors that would be protected by deposit insurance either by value or account in case of an insured institutions failure.
Credit Risk: The risk that promised cash flows from loans and securities held by financial institutions may not be paid in full.
Debt: Debt refers to a loan to a company that creates an obligation to repay on a particular date, referred to as the maturity date, as well as an obligation to pay a fixed amount of interest on a periodic basis.
Deposit: Monies lodged by the general public with any insured bank or financial institution whether or not it is for safe-keeping or for the purpose of earning interest or dividend, whether or not such monies are repayable upon demand, upon a given period of notice or upon a fixed date.
Deposit Insurance: Deposit Insurance is a system established by the Government to protect depositors against the loss of their insured deposits placed with member institutions in the event that a member institution is unable to meet its obligations to depositors.
Deposit Payout: The payment of insured deposits up to the maximum limit to each insured depositor administered directly or through Agent Banks. It entails an elaborate procedure which includes the verification of accounts and balances, the crediting of interest up to the day of closure, production of deposit register, and the procurement of cheques for payment including other logistics for payment.
Depositor Priority: Giving priority to depositors such that their claims are in settled in full before remaining creditors’ claims are settled.
Derivatives: An investment interest whose value is dependent upon the performance of other securities or factors outside of the actual performance of the derivative itself. E.g. stock option.
Differential Premium: A levy on a bank assessed on the basis of that bank’s risk profile. Under Differential Premium, bank pays premium based on its relative risk of failure.
Disclosure: A fact, condition, or any relevant information that is revealed unambiguously and publicly.
Distressed Bank: Distressed Bank is a bank with severe financial, operational and managerial weaknesses which have rendered it difficult for the bank to meet its obligations to depositors, customers, and the rest of the economy as and when due.
Dual Control: Actions requiring approval by two persons, each being held accountable.
Due Diligence: In a corporate merger, it is a close examination of operations and management of a potential investment, by investors with a view to verifying material facts.
Enterprise Risk Management: is the comprehensive, systematic and disciplined process, by which an organization identifies, assesses, manages, monitors and reports on, at any point in time, the significant risks inherent in its objects, strategies, plans and affairs with a view to enhancing its long-term value to its stakeholders.
Ex-ante funding: The accumulation of a fund to cover deposit insurance claims in anticipation of the failure of an insured bank.
Explicit Deposit Insurance Scheme (DIS): Usually created by a legal instrument, it provides a formal framework with clear-cut rules and procedures for providing deposit protection, assessment and management of failed and failing deposit-taking institutions. The objectives of the scheme and other operational guidelines relating to such issues as ownership, funding, extent of deposit protection, membership, failure resolution options compatible with stated objectives etc are slated in the enabling statute.
Ex-post funding: An assessment levied after the failure of an insured bank to provide funds to cover deposit insurance claims.
Fiduciary Duties: A fiduciary duty is an obligation owed by all corporate directors and officers to the corporation by reason of the position of trust and confidence enjoyed by the director or officer. The two fundamental fiduciary duties are the duty of care and duty of loyalty. These obligations exist regardless of any statutory provision, although the duties may be set forth in statues if desired.
Financial Assistance: Economic assistance which could take the form of loans, guarantees, subsidies, tax allowance, contribution, or cost-sharing arrangements government agencies or deposit insurers.
Financial Institutions: Government agency or privately owned entity that collects funds from the public, and from other institutions, and invests those funds in financial assets, such as loans, securities, bank deposits, and income generating property.
Financial Instruments: A financial instrument evidencing an investment in a company or other economic entity made by the purchaser of the instrument for the purpose of earning an economic return through market appreciation, interest, dividends or a combination of these elements.
Financial safety net: A financial stability mechanism that usually comprises prudential regulation and supervision, the deposit insurance function, and the lender-of-last-resort function.
Flat-Rate Premium: A premium assessed at the same rate across all insured institutions.
Forbearance: Granting an extension of time to certain distressed banks from minimum regulatory requirements.
Foreign Exchange Risk: The risk that exchange rate changes can affect the value of a financial institution’s assets and liabilities located abroad.
Holding Actions: Imposition of restrictions on certain activities placed on distressed banks by regulatory/supervisory authorities to enable them undertake self-restructuring measures as a first line of self-salvaging action and to arrest further deterioration in their financial condition.
Implicit Deposit Protection System (IDPS): The IDPS is a discretionary approach adopted by monetary authorities for propping up some failing deposit-taking institutions in the system. Lack of explicit statutory obligation on the part of government to protect deposits, absence of any prior funding arrangement, lack of any formal rules and procedures for intervention and the use of ad-hoc administrative structures are some of the features of IDPS.
Insolvency Risk: The risk that a financial Institution may not have enough capital to offset a sudden decline in the value of its assets.
Insured Deposits: Types of deposits that are covered by a deposit insurance system.
Insured Deposits Transfer: This involves the transfer of the insured deposits of the closed bank to other sound bank(s) preferably those operating within the same vicinity as the closed bank. The bank(s) assuming the insured deposits would be given enough cash and/or riskless assets to cover the insured deposits transferred from the closed bank.
Interest Rate Risk: The risk incurred by a financial institution when the maturities of its assets and liabilities are mismatched.
Internal Control System: A system of objectives and controls designed to provide for the safeguarding of assets and the reliability of financial records.
Least-cost resolution: Implementing resolution alternative by the deposit insurer or other designated entity that is determined to be less costly to the system compared to other resolution alternatives, including the liquidation of the failed bank.
Lender-of-last-resort function: The provision of liquidity to the financial system by a central bank.
Limited-coverage deposit insurance: A guarantee that the principal and the interest accrued on protected deposit accounts will be paid up to a specified limit.
Liquidation: It is the orderly winding up of the affairs of a failed bank, realization of its assets and settlement of claims against it.
Liquidation Dividend: A payment made to depositor of a failed insured institution in excess of the insured sum. Liquidation dividend is paid from funds realized from the sale of the assets and recoveries of debts owed to the failed insured institution.
Liquidity Ratio: financial ratio measuring an entity’s ability to repay its short-term liabilities, measured by evaluating components of current assets and current liabilities.
Liquidity Risk: The risk that arises from the difficulty of selling an asset, or potential price distortion due to a lack of liquidity.
Loan Loss Provision: Reserves held by a bank or other lending institution against loans that are not repaid by the borrower.
Mandate: A mandate is a set of official instructions or statement of purpose of a firm or an organisation.
Market Discipline: A situation where depositors or creditors assess the risk characteristics of a bank and act upon such assessments to deposit or withdraw funds from a bank.
Market Risk: the risk incurred in trading assets and liabilities due to changes in interest rates, exchange rates, and other asset prices.
Market Value: Highest price that a marketable asset will bring in an open and competitive market, assuming that both buyer and seller are informed and acting independently.
Maximum Coverage: The amount a depositor can claim from the deposit insurer in the event of bank failures.
Mismatch: A situation in Asset-Liability management when assets and liabilities do not balance. Example when an asset is funded by a liability of a different maturity.
Moral Hazard: The incentive for additional risk taking that is often present in insurance contracts and arises from the fact that parties to the contract are protected against loss.
Moral Suasion: Persuasion through formal and informal influence rather than coercion employed by Central Banks and other Supervisory Agencies to make banks comply with rules and regulations.
Off-Balance Sheet Risk: The risk incurred by a financial institution as the result of activities related to contingent assets and liabilities.
Off-site Surveillance: basically involves maintaining constant surveillance over the activities of all insured banks through the analysis of their statutory returns and monitoring their compliance with laws and regulations.
On-site Examination: periodic review of a bank’s records by licensing agency or supervisory agency to determine adherence to laws and regulators as well as verify the quality of its assets. On-site Examination assesses the quality of assets, management, earnings, capital, and funds management, as well as bank’s internal control, audit, management information and accounting system.
Open Bank Assistance: Is a situation where a failed insured institution is allowed to continue to operate in the same name as a going concern. In may involve change in ownership and management of the bank, injection of fresh funds in the form of equity and or loan capital, and re-organisation and overhauling of the bank including rationalization of staff and branches.
Operational Risk: The risk that existing technology or support systems may malfunction or break down.
Pay box: A deposit insurer with powers limited to paying out the claims of depositors.
Prompt Corrective Action: A supervisory action to provide a timely and non-discretionary triggering mechanism for early intervention of problem financial institutions.
Purchase and Assumption Transaction: Is a merger-type transaction and it involves the purchase of some or all the assets of a distressed bank and assumption of all its liabilities by another sound insured bank(s).
Rebate: The return of part of a payment, representing some deduction from the full amount previously paid.
Receiver: The legal entity that undertakes the winding down of the affairs of an insolvent bank.
Receivership: The legal procedure for winding down the affairs of an insolvent institution.
Resolution: The disposition plan for a failed institution.
Risk Minimiser: A deposit insurer with powers to reduce the risks it faces. These powers may include the ability to control entry and exit from the deposit insurance system, assess and mange its own risks and may conduct examinations of banks.
Self-Dealing Transaction: A self-dealing transaction, also known as a conflict of interest transaction, occurs whenever a corporation enters into a contract or other business arrangement with a director, officer, or someone with whom a director or officer has a close personal or financial ties.
Self- Regulation: Can be defined as the system of checks and reviews put in place by an institution to ensure that no party diverts corporate resources to private gain. It includes private-member organisation called Self Regulatory Organisations (SROs).
Set-off: Detecting a claim of a creditor in an insolvent bank from a claim of the bank against the creditor.
Standing Order: A regular payment made out of a current account which is of a set amount and is originated by the account holder.
Systemic Risk: The risk that the failure of one counterparty to meet its obligation when due will result in the inability of other counterparties to meet their obligations when due, resulting in a collapse of the entire financial system.
Target Ratio: The level for the deposit insurance fund expressed as a percentage of total or insured deposits.
Too Big to Fail: Protecting uninsured depositors, creditors and others from loss when large banks fail in order to prevent the occurrence of a systemic risk.
Transparency: Transparency refers to the obligation to make full and readily understandable disclosure of all material facts and events.
Trust Account: A trust account is one set up by an individual, company, association or group (trustee) for the benefit of another party (beneficiary).
Uninsured Deposit: Types of deposits that are not covered by a deposit insurance system.