The Chairman, Senate Committee on banking, Insurance and Other Financial Institutions, distinguished Senator (Prince) Bassey Otu, distinguished Members of the Committee, the Executive Director (Ops) and Executive Director (Corporate Services);
Ladies and Gentlemen,
It is indeed my pleasure to welcome you all to this Retreat on the proposals to amend the NDIC Act, 2006. I am sincerely grateful to our respectful and distinguished Senators for finding time out of your tight schedule to attend this Retreat which is an indication of your commitment towards ensuring that the NDIC is properly positioned to discharge its mandates more effectively. This Retreat no doubt would afford the Management of the Corporation the opportunity to explain the salient features and the rationale for the proposed amendment.
Permit me distinguished Senators to provide this brief insight. The Nigeria Deposit Insurance Corporation was set up by the NDIC Decree No. 22 of 1988, with the primary mandate of insuring deposit liabilities of licensed deposit-taking institutions. Deposit Insurance is part of the safety net arrangement needed to maintain financial stability and public confidence in the financial system.
The NDIC was designed as a risk minimizer with broad mandate and not merely a pay box. As a risk minimizer, the mandate of the Corporation includes bank supervision, failure resolution and liquidation of failed financial institutions.
However, not long after promulgation of the 1988 Act, it became evident that it was not adequate for effective deposit insurance system. The efforts to review that law after a protracted process, yielded result with the repeal of the 1988 Act and enactment of the NDIC Act 2006 by the National Assembly in December 2006.
Although, the 2006 Act addressed some of the identified weaknesses in the repealed 1988 Decree, there were still a lot of lapses that needed to be addressed especially in the light of the challenges and developments that emerged, particularly during the global economic meltdown, and the corporate governance issues that came to the fore. The distinguished Senators may also wish to note that a number of countries had embarked on the review of their legislation in order to address such emergent challenges in the areas of Banks Supervision and Distress Resolution.
In the case of Nigeria, the experiences garnered from previous bank closures where the Corporation was unable to refund depositors’ funds trapped in some closed banks, not because there was no money to pay, but because the legal framework which enabled needless litigation by erstwhile owners of such closed banks underscored the need for further review of the Corporation’s enabling statute to facilitate the prompt settlement of depositors. The Corporation has over the years taken several measures to address these challenges, and one of the critical success factors is having a robust legal framework that will empower the Corporation to take prompt actions in addressing the problems of insured financial institutions.
Following the interest shown by the National Assembly to empower the NDIC for greater effectiveness, the House of Representatives during the hearing of a Private Bill to amend the Act in 2008 invited stakeholders to submit memoranda. This afforded the Corporation the opportunity to submit its proposed amendments. The proposals were eventually incorporated in the Bill which passed through some legislative processes including 1st & 2nd reading and public hearing before the sixth Session of the Assembly came to an end in May 2011.
The delay however became a blessing in disguise as it afforded the Corporation the opportunity to further update the proposal to address some other emerging challenges, particularly to incorporate key issues from;
i. the lessons learnt during the study tour by the Board of Directors of the Corporation to sister Insurance Agencies such as Korea Deposit Insurance Corporation and that of Hong Kong.
ii. the recommendations of International Association of Deposit Insurance assessment tour of NDIC. The IADI report indicated that the Corporation needed to review its enabling law to be fully compliant with the eighteen (18) core principles of effective deposit insurance practice.
In this regard, the Corporation updated the proposals earlier forwarded to the National Assembly and has come up with a reviewed version taking into consideration the above lessons. The Corporation had the opportunity to attend similar retreat with the Honourable Members of the House of Representatives Committee on Banking and Currency in June 2012 to deliberate on these proposals. It was indeed a huge success as the Honourable Members exhibited their commitment and support for a stable and vibrant financial system through the instrumentality of the law.
As Members of this distinguished Committee of the Upper Chamber of the National Assembly, we have no doubt of your commitment and support. It is our hope that this Retreat will provide you with the opportunity to critically examine the proposals, while at the same time, giving the Corporation the opportunity to provide you with insights, clarifications and explanations on the reasons that informed specific proposals. Some of the key issues contained in the proposed amendments include;
* to state clearly in the Act the Public Policy Objectives of the Deposit Insurance Scheme as well as the Mandates of the Corporation.
* review provisions relating to the tenure and removal of part-time board members in other to enhance Corporate Governance practices of the Corporation.
* enhancing the debt recovery capability of the Corporation;
* prompt payment of depositors’ funds inspite of pending legal/court actions;
* dealing with Directors, Officers and other parties at fault in bank failure;
* enabling the Corporation to gain access to information on subsidiaries of insured institutions;
* enhancement of Deposit Insurance Funds [DIF];
* protection of the assets of the closed banks/NDIC against attachment;
* strengthening the enforcement powers of the Corporation to enhance effective supervision of insured institutions.
Mr Chairman, distinguished Senators , we sincerely believe that this Retreat will also afford the Committee members the opportunity to appreciate the challenges faced by the Corporation and as critical stakeholders, you will bring your enormous wealth of experience to bear in considering the proposed amendments to enable the Corporation meet those challenges. More importantly we hope that beyond the Retreat, the Committee would do all that is within its powers to ensure that the proposed amendments are passed into law at the shortest possible time and within the lifespan of the 7th legislative session.