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NDIC plans strategies to speed up failed banks’ resolutions

Ololade Omosan-Agie

The Nigeria Deposit Insurance Corporation (NDIC) is evolving strategies to ensure swift resolutions in the event the Central Bank of Nigeria (CBN) revokes the licence of a distressed and insured financial institution.

The Managing Director, NDIC, Bello Hassan who stated this at the 2021 Finance Correspondents Association of Nigeria Workshop held in Ibadan on Wednesday, said that the review will be implemented in line with Section (2) subsection (1) of the NDIC Act.

He added that the Corporation is also considering other reforms to ensure that it delivers on its mandate to ensure the stability of insured institutions.

Hassan said, “In the area of Deposit Insurance, as a key mandate of the Corporation, we have evolved a strategy which accentuates our existing framework.

“The initiative, strives to ensure that the insurance cover is adequate to support this objective within the banking sector. In addition, considering the importance of the optimum Funding Ratio in deposit insurance, we are developing an effective methodology for determining a realistic Target Funding Ratio for the Corporation.

“Furthermore, there have been recent calls on the Corporation to enhance the provision of support, to insured institutions that are facing financial difficulties.
“To this end, 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.

Hassan noted that the Corporation is also mulling the review of its determination of premium by banks to make it more risk-based.

Explaining the rationale behind the review, he said, “Essentially we want to make it risk based looking at the various factors that could impact on the viability of the bank to be able to say that maybe this is the number of banks that might likely collapse and if they collapse do we have sufficient funding to be able to make that payout?”

He added that the revised framework will enable the NDIC accurately determine the amount that will be sufficient to meet any liability that might crystallize on the deposit insurer.

Speaking further, the NDIC boss said that the Corporation is collaborating with relevant stakeholders to ensure that it discharges its responsibilities efficiently without hindrances, following the revocation of licenses of any insured institution by the Central Bank of Nigeria.

He said that this move has become critical, given the need to improve on its processes in resolving liquidated financial institutions.

Hassan pointed out that some of the challenges hindering the efficient resolution of the liquidated institutions such as slow recovery and realization of assets as well as litigations by erstwhile shareholders and creditors of closed banks can only be addressed through effective collaboration.

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