Overview
Failure Resolution refers to the process of managing a bank that is
no longer financially viable, whether due to insolvency or inability
to meet its obligations.
A bank is considered to have failed when:
- It cannot meet withdrawal demands (illiquidity)
- Its liabilities exceed its assets (insolvency)
NDIC's Role in Failure Resolution
- Intervene early in troubled banks
- Provide financial and technical support
- Recommend license revocation
- Act as liquidator of failed banks
Failure resolution is carried out in collaboration with the Central
Bank of Nigeria (CBN), ensuring coordinated regulatory action.
Why Failure Resolution Matters
- Prevents panic in the banking system
- Ensures depositors are compensated
- Maintains continuity of financial services
- Reduces economic disruption
Legal and Regulatory Framework
- Banking laws (BOFIA)
- NDIC Act
- Contingency Planning Framework for Systemic Crises
Failure Resolution Approaches
NDIC adopts different resolution strategies depending on the severity
of the situation.
Financial Assistance (Open Bank Assistance - OBA)
What It Means
A failing bank is supported financially so it can continue operating.
- Direct loans
- Loan guarantees
- Acceptance of financial instruments
Technical Assistance
- Change in management
- Takeover of operations
- Assisted merger with a stronger bank
Purchase & Assumption (P&A)
A healthy bank purchases the assets of a failed bank and assumes its
liabilities, including deposits.
- Depositors retain access to funds
- Banking services continue without interruption
- Confidence in the system is preserved
Bridge Bank
A temporary bank created by NDIC to take over the operations of a
failed bank.
- Assets and liabilities are transferred
- Services to customers continue
- Temporary solution
Liquidation (Payout Option)
The bank is closed and NDIC pays insured depositors while selling
assets to recover funds.
- Insured deposits are paid promptly
- Uninsured deposits recovered gradually
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Overview
Claims settlement involves reimbursing depositors and creditors after a bank has been closed.
How It Works
Step 1: Verification of depositor records
Step 2: Payment of insured deposits
Step 3: Issuance of liquidator certificates
Step 4: Liquidation dividends over time
Who Gets Paid First
Insured depositors
Uninsured depositors
Creditors
Shareholders
Special Payment Options
Overview
Recovering assets of failed banks is essential for paying depositors and creditors.
Sources of Recovery
Loans and advances
Physical assets
Investments
Key Challenges
Poor financial condition of borrowers
Legal delays
Unsecured or poorly documented loans
Debtors avoiding repayment
NDIC Recovery Approach
Legal action against debtors
Engagement of professionals
Structured asset disposal
Recent Recovery Insights
₦34.98 billion recovered from loans
₦28.71 billion from physical assets
₦6.82 billion from investments
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Overview
NDIC ensures that depositors recover as much of their funds as possible.
Key Achievements
Payment of insured deposits across failed banks
Significant recovery of uninsured deposits
Some banks achieved 100% repayment of deposits
Dividend Payments
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Overview
Debt recovery is a major part of liquidation, as loans form the largest portion of bank assets.
Challenges
Asset Disposal Process
Types of Assets Sold
Landed properties
Vehicles
Investments
Financial instruments
Overview
NDIC works closely with the Central Bank of Nigeria to implement a coordinated resolution framework.
Key Features
Early intervention mechanisms
Clear thresholds for action
Structured resolution strategies
Resolution Options Used in Nigeria
Open Bank Assistance
Purchase & Assumption
Bridge Bank
Liquidation
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