The Central Bank of Nigeria recently issued the Framework for the Licensing and Regulation of Payment Service banks (PSBs) and stipulated that Deposit Insurance Coverage be extended to all relevant depositors.
The Nigeria Deposit Insurance Corporation (NDIC) which has the mandate of Insuring Deposit liability of all licensed deposit taking financial institutions has designed a Differential Premium Assessment System (DPAS) Matrix for the Payment Service Banks (PSBs) and has also proposed an Insurable Limit to the Depositors in the event of failure.
2.1 The Framework issued by the Central Bank of Nigeria (CBN) stipulated that deposit insurance be extended to the Payment Service Banks in a bid to promote financial inclusion for low income earners and the unbanked.
2.2 PSBs are deposit taking institutions and as stipulated under Section 17(1) of the NDIC Act of 2006 as amended; “Every insured institution being a licensed bank or deposit taking financial institution to which this Act relates, shall be obliged to pay to the Corporation, a premium to be determined by the Board.
3.0 PROPOSED DIFFERENTIAL PREMIUM
The Corporation is proposing a total Differential Premium Assessment System (DPAS) Rate of 20 Basis Points (0.20%) comprising of a Base Rate and Add-ons of 0.10% each. The 0.10% Add-ons shall be divided into 70% and 30% for Quantitative and Qualitative factors respectively as tabulated below:
|S/N||Quantitative Parameters||Add-Ons (Score)|
|1.||Capital Adequacy < 10%||30%|
|2.||Maintaining less than 75% of Deposit liabilities in CBN/FGN Securities at any point in time||35%|
|3.||Non Placement of Excess Operational Float with DMBs||20%|
|4.||Total Expense to Total Income < 75%||15%|
|S/N||Qualitative Parameters||Add-Ons (Score)|
|1.||Poor Internal Control||15%|
|2.||Late Rendition of Returns||10%|
|4.||Poor Risk Management System||20%|
|5.||Non Implementation of Examiners’ Recommendations||15%|
|6.||Dealing in Non Permissible Activities||25%|
4.0 CONSIDERATION FOR THE PROPOSED DPAS RATE
The following factors were considered in arriving at the proposed rate:
- PSBs are currently required to maintain not less than 75% of their total deposit liabilities in Treasury Bills (TBs) and other short-term Federal Government debt instruments at any point in time. Thus, the banks are by regulation restricted from using depositors’ funds to transact any form of risky business;
- PSBs are also to place all funds in excess of Operational Float with DMBs;
- PSBs are not allowed to grant any form of loans, advances and guarantees, thereby limiting their Credit Risk;
- PSBs are to operate in the rural areas in order to promote Financial Inclusion;
- PSBs will be dealing with small unsophisticated depositors who are the target of NDIC as per its Public Policy Objectives.
5.0 PROPOSED INSURED AMOUNT
The sum of Five Hundred Thousand Naira Only (₦500,000.00) is proposed as the Maximum Deposit Insurance Cover (MDIC) for the Depositors of PSBs. This is in line with MDIC of Deposit Money Banks (DMBs), Mobile Money Operators (MMOs), Primary Mortgage Banks (PMBs) as well as our drive towards a harmonized Insurance cover and financial inclusion.
In order to ensure that the DPAS for Payment Service Banks meets the yearnings and aspirations of the stakeholders especially the Depositors, we are presenting the above proposals for comments, observations and contributions to enable the Corporation come up with a final document that will meet international standards as well as the peculiarities of our environment.
Inputs should reach the following address within three (3) weeks from the date of this publication.
Insurance and Surveillance Department
Nigeria Deposit Insurance Corporation
Plot 447/448 Constitution Avenue
Central Business District
PMB 284, Garki Abuja
Contributions can also be submitted via email to firstname.lastname@example.org