NDIC Reviews Coverage Limit for Depositors of Primary Mortgage Banks

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James Emejo in Abuja

Following the approval of the Minister of Finance, Mrs. Kemi Adeosun, the Nigeria Deposit Insurance Corporation (NDIC) is to set a new maximum deposit insurance coverage (MDIC) for each depositor of Primary Mortgage Banks (PMBs) to N500,000 from N200,000.

The approval further enabled the corporation to extend the differential premium assessment system (DPAS) to the PMBs.

The minister’s approval was contained in a letter dated August 4, 2016, which emphasised the need for the NDIC to ensure that all the DMBs, PMBs and MFBs strictly adhere to sound risk management practices and entrench compliance to the CBN approved code of corporate governance standards.

In a statement signed by its Head, Communications and Public Affairs, Alhaji Hadi Birchi, the Corporation noted that as part of its statutory functions as a deposit insurer, Section 20 (2) of the NDIC Act 2006, empowers its board to periodically review the maximum deposit insurance coverage for licensed banks and other deposit taking financial institutions in accordance with changes in deposit structure, income levels and in line with global best practices.

The approval, which was granted by Adeosun in a letter dated August 4, 2016 emphasised the need for the Corporation to ensure that all the DMBs, PMBs and MFBs strictly adhere to sound risk management practices and entrench compliance to the CBN approved code of corporate governance standards.

As part of its statutory functions as a deposit insurer, Section 20 (2) of the NDIC Act 2006, empowers the Corporation’s Board to periodically review the maximum deposit insurance coverage for licensed banks and other deposit taking financial institutions in accordance with changes in deposit structure, income levels and in line with global best practices.
The NDIC said there was compelling need for an upward review of existing cover limits.

It said: “The MDIC review is carried out through studies and surveys and is aimed at ascertaining the adequacy or otherwise of the deposit insurance coverage level for insured institutions in Nigeria. The outcome of the most recent survey that was conducted in August, 2015 revealed the compelling need for the upward review of the current MDIC for the PMBs from N200,000 to N500,000 per depositor. The survey also revealed that the MDIC increase would cover 99% of depositors of the PMBs in Nigeria.”

It added: “The adoption of DPAS in assessing the annual premium payable by PMBs will promote better risk management in the banks in line with international best practices. Presently, over 120 countries across the globe have adopted DPAS as an objective method of insurance premium pricing.”