Our attention has been drawn to the editorial published in The Nation, page 19 of Wednesday, December 3, titled: “Big Scandal”. The editorial which claimed that the N25 billion depositors’ funds recovered from 48 closed banks in the past 25 years is yet to be claimed by the bank customers is quite confounding. The relevant part quotes: “Whatever excuses it gives, NDIC has not done enough to return funds to depositors of failed banks, even after 25 years”. This statement is to say the least misleading.
The mandate of the Nigeria Deposit Insurance Corporation (NDIC) includes Deposit Guarantee, Banking Supervision, Failure Resolution and Banking Liquidation. Over the past 25 years, the NDIC has continued to discharge its mandate in an efficient and effective manner to attain its public policy objectives of protecting depositors and contributing to financial system stability.
In the area of Claims Settlement, the focus of the editorial, the NDIC has performed creditably. Out of the total deposits of ¦ 206.22 billion in the 48 deposit money banks (DMBs) at the dates of their closure in 1994, 1995, 1998, 2000, 2003 and 2006, the insured deposits stood at ¦ 12.19 billion of which a cumulative sum of N6.825 billion had been paid to 528,277 depositors of the DMBs as at September 30. Similarly, the corporation had reimbursed a cumulative sum of N2.756 billion during the same period to 80,059 insured depositors of 103 microfinance banks (MFBs) which were closed in 2010 and 83 in 2013.
In the same vein, a cumulative sum of ¦ 100.33 billion was received as liquidation dividends by 250,497 depositors of the 48 closed DMBs as at September 30. The payment of the liquidation dividends to depositors with claims in excess of the insured sums in the closed DMBs and MFBs was from the proceeds realised on the sale of the closed banks’ physical assets and recoveries from debts owed to them.
That is not all. The corporation had also paid cumulative liquidation dividend of N2.031 billion to 453 shareholders of Alpha Merchant Bank, Pan African Bank and Nigeria Merchant Bank as well as first liquidation dividend of ¦ 6,405,773.50 which was paid to seven depositors of Gulf Bank and ¦ 82,083,26223 to 23 shareholders of Rims Merchant Bank (in-liquidation) respectively as at September 2014. Similarly, 446 creditors of Cooperative and Commerce Bank (CCB) received the sum of ¦ 179,311,178.65 while 24 creditors of Premier Commercial Bank in-liquidation were paid ¦ 1,671,827.97 as dividend during the same period. It is also worth noting that the NDIC had declared a final dividend of 100 percent of total deposits to 14 closed banks, indicating that all the depositors of the banks had fully recovered their deposits.
It is imperative to draw the attention of your newspaper to some of the daunting challenges the NDIC had faced in its liquidation activities during the last 25 years.
At the time the banking licences of the 48 banks were revoked, the NDIC had to deploy some of its staff to the various bank head offices and their branches for up to one year to fast track the settlement of depositors’ claims. During that period, most of the depositors with large balances collected their money.
Most of the balances outstanding in the deposit registers of the closed banks today are small balances and had been abandoned by the account owners prior to the liquidation of the banks. These types of accounts dominate the deposit balances that are unclaimed by depositors.
It is also important to note that some of the closed banks did not maintain proper records of their customers’ addresses in the mandate cards and even where they were available, some of the depositors had relocated to unknown addresses. In addition, most of the customers at that time had no mobile phones or telephone lines as we have today. It was therefore very difficult to either contact or locate their current addresses.
It is only in this jurisdiction that the banking licence of a bank will be revoked and the owners who failed to take appropriate steps to turn around their bank would proceed to court to stop the NDIC from fulfilling its obligation to depositors. The legal action instituted by the owners of Peak Merchant Bank Ltd, Fortune Bank Plc and Triumph Bank Ltd which are still pending in various courts are classical examples.
In view of the fact that loans and advances usually constitute the largest portion of banks’ assets, it needs to be understood that the inability of the corporation to pay liquidation dividends to depositors with claims in excess of the insured sums and other eligible claimants has largely been impaired by all the factors indicated above.
Notwithstanding the above mentioned daunting challenges confronting the NDIC in discharging depositors’ claims settlement, the corporation had taken concrete steps to address the situation, which include but are not limited to the following:
First, when a bank is closed prior to commencement of initial payout, advertisements are placed in selected national dailies as well as commercial announcements and depositor protection awareness radio and television jingles in major local languages. Local announcements are also made in churches and mosques, requesting customers of the closed banks to go to appointed agent banks nearest to their bank branches and file their claims. Filing of claims is a simple process of providing evidence to show that the account belongs to you. That was the process employed for the 35 banks that were closed prior to bank consolidation in 2006.
Secondly, the accounts of the depositors who could not file their claims during the initial payouts were passed on to agent banks nearest to the closed banks’ branches where the depositors maintained accounts to continue payment to them. That was to save costs and avoid risks by the depositors from travelling long distances to collect their hard earned money.
Third, the situation was different for the depositors of the 13 banks closed after 2006 under the Purchase & Assumption (P&A) failure resolution option, as their deposit liabilities were transferred by NDIC to the banks that acquired their parent (i.e. closed) banks. Under that arrangement, a depositor had the option to collect his/her total money from the acquiring bank or continue to maintain an account with it. Many depositors chose to continue to enjoy banking services with the acquiring banks.
Fourth, in its efforts to improve payout in respect of the other 35 banks in-liquidation, the corporation initiated “depositors’ tracing” which involved locating the customer’s last known address appearing in the failed bank’s record in order to reach them. Although this effort yielded reasonable results, most of the depositors could not be located at their last known addresses.
Under Section 22 (4) of the amended NDIC Act, any depositor of a failed insured institution who fails to claim his/her insured deposit from the corporation within six years after the notice of payment to the depositors is published in two national dailies and electronic media houses, such depositors shall forfeit their claims to the corporation. However, the NDIC in the 2006 amendment of its Act sought and obtained powers for its Board to extend from time to time the period within which a depositor is required under the new Act to file claim for the payment of insured deposit in a failed bank.
In order to enhance its ability in the payment of liquidation dividends to uninsured depositors, the corporation designed a number of measures to facilitate debt recovery. Among these measures are appointment of debt recovery agents, pursue debt recovery through court processes, selling of some of the debts owed to the closed banks to Asset Management Corporation of Nigeria (AMCON) and obtaining the CBN’s approval to deny bad debtors to closed banks owing N250 million and above from accessing new facilities from any other bank operating in the country.
In conclusion, the NDIC, as a transparent organisation with the primary mandate of protecting depositors’ interest, is continuously determined to ensure that depositors of failed banks are promptly reimbursed. The corporation also wishes to put it on record that it will not abdicate its primary mandate of depositor protection. Instead, it remains resolute in partnering with key stakeholders, including the press to continue to protect depositors’ interest and also contribute to financial system stability.
• Birchi is Head, Communication & Public Affairs, NDIC
