November 29, 2021

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NDIC to unveil risk-based deposit insurance for banks

The Nigerian Deposit Insurance Corporation (NDIC) is working to introduce a risk-based deposit insurance premium for Deposit Money Banks (DMBs) and other insured financial institutions.

When this happens, banks will pay an annual deposit insurance premium based on their accessed risks. This premium cost will no longer be universal but based on each bank’s risks exposure.

Managing Director and Chief Executive of the Nigeria Deposit Insurance Corporation (NDIC), Bello Hassan, stated this on Wednesday at a workshop organized for Business Editors and Finance Correspondents Association of Nigeria (FICAN) in Ibadan.

He said, “We have commenced the review of our approach to the determination of premium by banks to make it more risk-based, such that, the probability of the risk crystallizing, becomes a major factor in the pricing methodology of our premium going forward.” 

He also said the slow recovery and realization of assets and litigation of former shareholders are affecting the liquidation process of some financial institutions whose licences were revoked by the Central Bank of Nigeria (CBN).

NDIC is the financial sector insurer, covering all deposit risks for the regulated sector, According to its operational data, NDIC as of June 2021, has insured 975 financial institutions. The breakdown has 32 Deposit Money Banks (DMBs), 876 Micro Finance Banks (MFBs), 34 Primary Mortgage Banks (PMBs), three Payment Service Banks (PSBs) and 30 Mobile Money Operators (MMOs).

In terms of deposits that have been insured across the financial institutions, Nigeria’s financial sector insurer has a cumulative N11.76 billion of insurance for 535,815 depositors in June.

Among these, the DMBs or commercial banks account for the largest chunk of N8.27bn for 443,946 depositors (bank customers) while the MFBs have N3.38bn for 90,336 depositors and the PMBs have N0.11bn for 1,533 depositors.

While calling for further collaboration, Hassan said: “This has become more important to us, given the need to improve on our processes in resolving liquidated financial institutions. Some of the obstacles bedevilling the efficient and timely resolutions of liquidated institutions, such as slow recovery and realization of assets, as well as litigation by erstwhile shareholders and creditors of closed banks can only be addressed through effective collaboration,” said the NDIC head.

The bank’s head also said the corporation would reconsider a framework to make it easier to support insured institutions that have difficulties following calls for NDIC to provide support to such firms.

Hassan said, “We have identified the need to reconsider our framework, to provide realistic terms and conditions that will enable qualifying insured financial institution promptly access technical and or financial support, in line with S.(2)(1)(b) of the NDIC Act, whilst also protecting the

Corporation from possible downside risks.”