N103.509bn paid to uninsured depositors of liquidated banks — NDIC
By Moses Adeniyi
The Nigeria Deposit Insurance Corporation (NDIC) has disclosed that no less than N103.509 billiion as at the end of December 2022 has been paid to uninsured depositors of liquidated banks in the Country.
This is just as the Corporation reiterated that about N11.835billion has been paid to insured depositors of various categories of banks including Deposit Money Banks (DMBs), Micro-Finance Banks (MFBs), and Primary Mortgage Banks.
The Corporation disclosed that as at September, 2022, 100 per cent liquidation dividends have been declared for 20 failed banks, disclosing that beneficiaries of those institutions have been coming for their payments.
According to the Managing Director, Nigeria Deposit Insurance Corporation (NDIC), Mr. Bello Hassan, the efforts of the Corporation at insuring deposits and ensuring depositors and shareholders of failed banks get their deposits and dividends respectively, were aimed at building the stability of the financial system in the Country for stronger reliability and confidence.
Bello who spoke at the NDIC Editors Forum, themed, “Deposit Insurance System (DIS) and Financial System Stability” for 2022, said to push financial inclusion to get more Nigerians incorporated into the banking system, deposit insurance in the Country was important to boost the confidence of majority in the system.
“Deposit Insurance is one of the critical services required for more financial stability. It is one of the core safety net within the financial system, so that more people would begin to have more confidence into the banking system and get formally on-boarded.
“Deposit Insurance is to ensure that a depositor does not lose his deposit in the event that a bank is liquidated. Because if a bank is liquidated, in most cases you discover that it has more liabilities than assets, so which means potentially depositors are going to lose money and that is why deposit insurance must be taken to ensure they don’t lose (their) money,” Bello said.
He added that the NDIC Act reviewed last in 2006 is under expeditious consideration in the National Assembly to review its provisions to meet with the dynamics of the financial system.
Presenting a paper titled “Contributing to Public Confidence in the Financial System: Examining Critical Issues in Deposit Guarantee and Bank Liquidation,” at the editors forum, NDIC Director, Claims Resolution Department, Mr. Kazeem Sule, noted that on compliance audit carried out on the Corporation by the International Association of Deposit Insurers (IADI) in 2011, NDIC has been established to be compliant with deposit coverage, with a coverage capacity of 97 percent of depositors.
He said, “Even with the N500,000 for each of those categories of banks, including the DMBs, Primary Mortgage Banks, Payment Service Banks, and N200,000 for Micro-Finance Banks, 97 per cent of total deposits within the banking system,” has been under the Corporation’s coverage.
According to him, the Corporation which started with deposit coverage limit of N50,000 in 2006, grew its coverage to deposit guarantee limit of N500,000 in 2010, and for Micro-Finance Banks from N50,000, to N100,000 and now covers N200,000.
“The essence is to ensure that whatever guarantee limit you have, it’s enough to create confidence within the system that depositors can leave their money in the bank and be assured that if the bank fails, you don’t need to panic, and where we have recoverable assets, even those that have beyond the guarantee limit are still paid. So, it is a reinforcement of essential criteria of IADI which says that ‘DI system is said to be fully compliant if it covers majority of the depositors,’ particularly the small and unsophisticated ones, that’s to create system of confidence within the financial system for stability,” he said.
The challenges highlighted by the Corporation which it believes the bill under review would go a long way to address include, judicial misleading verdicts such as distinguishing NDIC assets against that of financial institutions; protracted legal actions; delayed resolution.
Others are low level of awareness of the Corporation’s mandate; poor record keeping in most financial institutions affecting liquidation process, recovery of assets to prove status of debtors, and affecting litigations.
He said the Corporation in discharging its duty to protect depositors, has continued to pay depositors of failed banks to guide against financial instability in the Country.
According to him, the NDIC runs the explicit insurance system on a formal structure established by an Act of parliament, guiding its operations, emphasising that the Corporation does not wait until banks fail, but takes precautionary measures to ensure NDIC insured banks “are run in a safe and secured manner by supervising their activities to prevent failure.”
