NDIC Assures Customers of Failed MFBs, PMBs 100% Coverage

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James Emejo and Nume Ekeghe

The Nigeria Deposit Insurance Corporation (NDIC) has said it will soon commence the payment of depositors of the 154 microfinance banks (MFBs) and six Primary Mortgage Banks (PMBs) whose licences were revoked by the Central Bank of Nigeria.

The Managing Director and Chief Executive of the NDIC, Umaru Ibrahim, disclosed this while speaking at the opening ceremony of a workshop for financial journalists in Benin yesterday.

He said the corporation would pay 100 per cent of the funds of the depositors of the affected financial institutions.

Ibrahim, who was represented by the Director, Insurance and Surveillance Department, Muhammed Umar, noted that the NDIC has commenced verification of insured depositors and would soon commence paying verified claims to appropriate depositors in fulfilment of its core mandate.

According to him, records form the verification process showed that majority of the depositors especially in the MFBs, have less than N200,000 in their accounts.

This he said meant that the NDIC pay-out would cover 100 per cent of the depositors.

Some of the financial institutions whose licences were revoked had failed to carry on the type of banking business for which their licences were issued over period of more than six months, while others had gone into voluntary liquidation.

The affected institutions were closed because some were found to have insufficient assets to meet their liabilities, while others had their capital to risk-weighted assets ratio and regulatory capital below the minimum prescribed by the CBN.

Ibrahim, assured that the NDIC would continue to work closely with CBN to ensure effective supervision of the banks and ensure strict adherence to rules and regulations guiding banking operations.

This is with a view to protecting depositors against fragrant disregard of extant rules by management of financial institutions thereby mitigating the occurrence of unlawful insiders’ dealings, weak internal control and overall non-compliance to prudential guidelines.

He further said the NDIC, in collaboration with all relevant key players in the nation’s financial system, would continue to work on several initiatives to accelerate financial literacy and financial inclusion, especially among rural communities nationwide so as to promote inclusive growth in Nigeria.

The NDIC boss noted that to further enhance financial system stability, the corporation, “has embarked on various public awareness campaigns explaining the role and responsibilities of the customers to their banks, and vice versa.”

“This will essentially instil market discipline on the part of the depositors to ever be more vigilant in choosing financial institutions to bank with.”

Speaking on the defunct Skye Bank, he said “at the moment, all those that contributed to the failure of the bank are being investigated by relevant law enforcement agencies to determine their culpability or otherwise in the failure of the bank.

“The NDIC is monitoring the progress of the investigations and those found guilty would be prosecuted to serve as deterrent to others.”

Also on the establishment of Polaris Bank, he stated that it “is the exclusive responsibility of the NDIC as provided for under its enabling Act,” establish a bridge bank.

“It is important to stress that while the roles of the CBN and the NDIC complement each other, a clear distinction exists in their roles in the handling of failed or failing financial institutions.

“The NDIC, in collaboration with the CBN, adopted bridge bank option to resolve the failure of Skye Bank Pic. This involved the organisation and incorporation of a bridge bank, Polaris Bank Limited, to take-over the assets and liabilities of the defunct Skye Bank Plc.

“A bridge bank is a temporary bank which is created to operate a failed bank until a buyer can be found.

“The benefits of a bridge bank are not far-fetched. The resolution option is less disruptive to rendition of bank services, unlike outright liquidation or depositors’ pay-out. The pay-out option for example, would have resulted in depositors not assessing their deposits as they would be paid their guaranteed deposits only, in the first instance.

“Subsequently, payment of excess uninsured deposits would remain uncertain, protracted and entirely dependent on the level of realizable assets. However, with the bridge bank option, depositors of the defunct Skye Bank Plc, are guaranteed access to their total deposits. Bridge Bank is also less costly to the entire macro economy.

“With this expert arrangement, the Polaris Bank was able to guaranteed the seamless and continuous banking operations in the 277 branches of the bank, over 6000 jobs were saved and depositors have unhindered access to deposits in excess of N949.60 billion as at June 2018.”