The Nation Newspaper

Tag: NDIC

  • Senate strips CBN of powers to recommend appointees into NDIC Board to President

    Senate strips CBN of powers to recommend appointees into NDIC Board to President

    The Senate on Tuesday stripped the Central Bank of Nigeria (CBN) of powers to recommend candidates to the President for appointment as Managing Director/Chief Executive Officer and board members of the Nigerian Deposit Insurance Corporation (NDIC).

    Under the new arrangement, the Red Chamber amended the NDIC Act and gave the President powers to directly appoint qualified persons into the board of the agency without input from the CBN.

    The new provision is contained in the NDIC Act amendment Bill which was read for the third time and passed by the red chamber on Tuesday during plenary.

    The resolution of the Senate followed its consideration and adoption of the recommendations of the Senate Committee on Banking, Insurance and other Financial Institutions that considered the Bill chaired by Senator Adetokunbo Abiru (APC – Lagos East).

    The Bill titled: “Nigeria Deposit Insurance Corporation Act No 33 of 2023,” was sponsored by Senator Adetokunbo Abiru (APC – Lagos East) and all members of the Senate Committee of on Banking, Insurance and other Financial Institutions.

    Presenting the report, Abiru said the amendment Bill was meant to strengthen the capacity of the Nigeria Deposit Insurance Corporation’s capacity to safeguard depositors, ensure the stability of financial institutions, and promote trust in the banking system.

    He said the bill would also make the NDIC, more effective, safeguard its independence and autonomy and  bring it in line with current realities and best practices.

    He said the Bill consolidated the powers of the President to appoint the Chairman and members of the board of the NDIC while the Central Bank  of Nigeria (CBN) which hitherto recommended prospective appointees to the President would now concentrate on its supervisory roles in the banking sector.

    According to him, the NDIC board based on the new amendment to its Act, would focus on the examination of the banks.

    He noted that despite the fact that the NDIC Act 2023 made substantial improvements to the 2006 Act, its implementation had been contentious.

    He noted that the stakeholders had consistently engaged in series of appeals on the need for an amendment of the Act to address all the issues that have been raised concerning it.

    Abiru said, “The Nigerian Deposit Insurance Corporation (Amendment) Bill, 2024, is thus a critical piece of legislation aimed at strengthening the Nigerian financial system.

    “The proposed amendments will enhance the NDIC’s capacity to safeguard depositors, ensure the stability of financial institutions, and promote trust in the banking system.

    “Given the rapidly evolving nature of the financial sector, this Bill represents a timely response to the challenges and opportunities that lie ahead.”

    Besides, Abiru said that the current Bill would lay to rest once and for all, the claims that the bill that was assented to by former President Muhammadu Buhari, was materially different from what was passed by the 9th National Assembly.

    “To further empower the corporation by guaranteeing its independence in performing its statutory functions in line with Section 1 (3) of the principal Act.

    “The principal (2023) Act curiously restricts the President’s power to appoint the Managing Director and Executive Directors and provides that they are to be to persons recommended by the Central Bank of Nigeria Governor.

    “The (2024) bill (now)  seeks to amend this provision to bring it in line with and in consonance with Mr. President’s power of appointment as enshrined in the Constitution of the Federal Republic of Nigeria 1999 (as amended).

    “The provisions of the Principal Act which makes the Permanent Secretary, Ministry of Finance the Chairman of the Board is also being reviewed.

    “This is because the workload and busy schedule of that office is such that makes such appointment untenable.

    “The importance of the need for the Minister of Finance to constitute an Interim Management Committee for the Corporation within 30 days after the expiration or termination of the tenure of the Board is also introduced in the bill.

    “This is to forestall the recent situation where the Corporation faced challenges in its operations as a result of the absence of a board,”

    Abiru said.

    Abiru said  there was a general agreement among stakeholders of the importance of the NDIC as it was set up for the purpose of the protection of depositors and to guarantee the settlement of insured funds when a deposit-taking financial institution can no longer repay their deposits, thereby helping to maintain financial system stability.

    He said, “Considering the above therefore, the general consensus among stakeholders was that it is important that the legal framework is reviewed.

    “This is to make the Corporation more effective to discharge its functions, safeguard its independence and autonomy and to bring it in line with current realities and best practices.

    Read Also: Senate okays refund of N25bn to Kebbi, Nasarawa

    “This is particularly because the Corporation plays a vital role in safeguarding the interests of depositors and promoting confidence in the financial sector.

    “The evolving challenges in the global and domestic banking environments necessitate the amendment of the current law to keep pace with these developments and ensure the NDIC remains fit for purpose.”

    Abiru said over 30 written memoranda and numerous oral submissions were received. All the written memoranda and oral presentations at the hearing supported the bill.

    Senators approved that the Bill be read for third time and passed when the recommendation of the committee was put to voice vote by the Deputy Senate President, Barau Jibrin who presided over plenary.

  • No failed bank insured depositor will lose funds, says NDIC

    No failed bank insured depositor will lose funds, says NDIC

    Nigeria Deposit Insurance Corporation (NDIC) has assured that no failed bank insured depositor will lose their funds should there be any failure.

    Speaking at the 2024 Customer Service Week celebration in Abuja yesterday, NDIC Managing Director, Bello Hassan, commended the workers for their efforts.

    He urged them to renew their dedication to serving their core stakeholders-depositors of failed banks.

    This followed the innovative tools deployed to resolve deposit issues related to the defunct Heritage Bank.

    The innovative approach enabled the NDIC to begin settling insured depositors of Heritage Bank, whose license was revoked by the Central Bank of Nigeria (CBN) in June 2024, within just four days of the revocation.

    So far, 93per cent of depositors with balances below N5million have been compensated.

    However, he urged them not to become complacent, but rather to continue building on the corporation’s core mandate to achieve even greater success.

    Emphasizing that it is the only way to ensure the Corporation’s stakeholders remain a top priority in the delivery of services, the MD said: “I would like to commend our staff, who have displayed exemplary performances and dedication in fostering a culture of exceptional customer service, particularly payments to depositors of the failed Heritage Bank.

    “As you are all aware, Customer Service Week is an international celebration that recognizes the vital importance of customer service and the individuals who serve and support customers daily.

    “This year’s theme, ‘Above and Beyond’ encapsulates the spirit of collaboration and the unwavering commitment of the Corporation to service delivering to our stakeholders.

    Read Also: NDIC commits to customer-centric service

    “Today, I would like to reflect on the essence of exceptional customer service and how going above and beyond can transform not only our relationships with customers but also enhance our core mandate.

    “As you all know, our passion for what we do drives us to create a positive, stakeholder-centric culture that exceeds expectations”.

    Given this, the Managing Director noted that this year’s theme is appropriate as it aligns with the organisations vision and emphasized the importance of employees recommiting themselves to meeting customer satisfaction to strengthen confidence in the organisation’s ability to fulfill its mandates.

    He said: “The theme for this year, ‘Above and Beyond’, speaks to our commitment to working with excellence, and understanding that reflects our shared values, and providing solutions in our unique environment where competition is fierce and surpasses expectations.

    “What sets us apart is our ability to deliver outstanding customer service, in ways that create a lasting impact.

    “Exceptional customer service is not the responsibility of single nurturing but a culture that prioritizes customer satisfaction, which will not only improve individual experiences but also build a lasting reputation for excellence.

    “As we celebrate this Customer Service Week and look beyond delivering exceptional services to our stakeholders, let us celebrate the power of outstanding service, foster collaboration with our colleagues, and promote a culture of effective service delivery.

    “I also urge you all to embrace this week, which will be filled with insights, inspirations, and innovations.

    “Let us join forces to elevate the standard of service excellence, striving to make every interaction meaningful, every service unforgettable, and to exceed customer expectations”.

    The National Coordinator of Service Compact With All Nigerians (ServiCom), Nnenna Akajiemeli, in her keynote address, commended the workers of the Corporation for their excellent service delivery to their publics.

    A key highlight of the event was the testimonies from several depositors of the failed Heritage Bank, who shared how they effortlessly received their claims after providing the requested information to the NDIC.

  • NDIC commits to customer-centric service

    NDIC commits to customer-centric service

    Following the successful deployment of innovative tools to resolve deposit issues related to the defunct Heritage Bank, staff of the Nigeria Deposit Insurance Corporation (NDIC) have been encouraged to renew their dedication to serving their core stakeholders-depositors of failed banks.

    The innovative approach enabled the NDIC to begin settling insured depositors of Heritage Bank, whose license was revoked by the Central Bank of Nigeria (CBN) in June 2023, within just four days of the revocation.

    So far, 93% of depositors with balances below N₦5m have been compensated.

    Speaking at the 2024 Customer Service Week celebration in Abuja on Tuesday, NDIC Managing Director, Bello Hassan, commended the workers for their efforts.

    However, he urged them not to become complacent, but rather to continue building on the corporation’s core mandate to achieve even greater success.

    Emphasizing that it is the only way to ensure the Corporation’s stakeholders remain a top priority in the delivery of services, the MD said: “I would like to commend our staff, who have displayed exemplary performances and dedication in fostering a culture of exceptional customer service, particularly payments to depositors of the failed Heritage Bank.

    “As you are all aware, Customer Service Week is an international celebration that recognizes the vital importance of customer service and the individuals who serve and support customers daily.

    “This year’s theme, ‘Above and Beyond’ encapsulates the spirit of collaboration and the unwavering commitment of the Corporation to service delivering to our stakeholders.

    “Today, I would like to reflect on the essence of exceptional customer service and how going above and beyond can transform not only our relationships with customers but also enhance our core mandate.

    “As you all know, our passion for what we do drives us to create a positive, stakeholder-centric culture that exceeds expectations.”

    Read Also: Etsu Nupe cautions NDIC on vigilance

    Given this, the managing director noted that this year’s theme is appropriate as it aligns with the organisation’s vision and emphasized the importance of employees recommitting themselves to meeting customer satisfaction to strengthen confidence in the organisation’s ability to fulfill its mandates.

    He said: “The theme for this year, ‘Above and Beyond’, speaks to our commitment to working with excellence, and understanding that reflects our shared values, and providing solutions in our unique environment where competition is fierce and surpasses expectations.

    “What sets us apart is our ability to deliver outstanding customer service, in ways that create a lasting impact.

    “Exceptional customer service is not the responsibility of single nurturing but a culture that prioritizes customer satisfaction, which will not only improve individual experiences but also build a lasting reputation for excellence.

    “As we celebrate this Customer Service Week and look beyond delivering exceptional services to our stakeholders, let us celebrate the power of outstanding service, foster collaboration with our colleagues, and promote a culture of effective service delivery.

    “I also urge you all to embrace this week, which will be filled with insights, inspirations, and innovations.

    “Let us join forces to elevate the standard of service excellence, striving to make every interaction meaningful, every service unforgettable, and to exceed customer expectations.”

    The national coordinator of service compact with All Nigerians (ServiCom), Nnenna Akajiemeli, in her keynote address, commended the workers of the Corporation for their excellent service delivery to the public.

    A key highlight of the event was the testimonies from several depositors of the failed Heritage Bank, who shared how they effortlessly received their claims after providing the requested information to the NDIC.

  • NDIC pays 94% insured depositors of Heritage Bank

    NDIC pays 94% insured depositors of Heritage Bank

    Nigeria Deposit Insurance Corporation (NDIC) said it has successfully paid 94 per cent of insured depositors of the defunct Heritage Bank.

    Managing Director (MD) of the corporation, Bello Hassan broke the news yesterday at the ongoing FICAN workshop, themed “Strengthening Nigeria’s Financial Safety -Set: The role of NDIC” in Lagos.

    The Central Bank of Nigeria (CBN) revoked the bank’s license on June 3, 2024, after it consistently failed to meet its statutory obligations to depositors, despite multiple interventions by financial regulatory authorities.

    Hassan said the corporation began settling insured depositors with balances below N5 million within four days of the bank’s closure, setting a new benchmark for swift action.

    The corporation however attributed the delay in settling the remaining depositors to administrative constraints, such as depositors’ irregular records, Bank Verification Number (BVN) irregularities, and unavailable alternate accounts, among other issues.

    Read Also: Africa’s demand for permanent UNSC seat

    The corporation also reiterated that deposits exceeding N5 million will be paid once the asset verification, recovery, and disposition processes of the defunct bank are completed.

    Hassan emphasized that in today’s rapidly evolving financial landscape, maintaining the stability of Nigeria’s banking sector remains a top priority for the NDIC.

    He said the handling of depositors’ claims from the defunct Heritage Bank was a testament to the NDIC’s crucial role in maintaining stability within the nation’s financial sector.

    Saying that the NDIC is indispensable in safeguarding depositors and fostering trust in the banking system, Hassan explained that the corporation employed innovative mechanisms to ensure the success of this effort, preventing any erosion of public confidence in the financial system.

    He said: “This was achieved using the bank verification numbers as a unique identifier to locate depositors’ alternate accounts with other banks without the need to fill forms or visit NDIC offices.

    “This innovative approach has indeed enabled the payment of more than 80 per cent of depositors’ BVN-linked accounts to date. The prompt payment of depositors, coming at a time when the corporation had also recently increased the deposit insurer’s coverage from N500,000 to N5 million in deposit money banks, significantly cushioned the negative impact of bank failure, especially during the current challenging economic climate. This achievement is consistent with the provisions of the International Association of Deposit Insurers Co-Principle 15, which emphasizes the timely payout of depositors of failed banks,” he said.

    “Having largely reimbursed depositors their insured deposits, the corporation is committed to ensuring that depositors with balances exceeding N5 million are also paid the balance of their deposits”.

    Emphasising the critical role of the media in raising public awareness about the NDIC’s activities and mandate to stabilize the nation’s financial ecosystem, “The NDIC’s broader mandate goes beyond immediate depositor reimbursement.

    “Its efforts to protect depositors with balances exceeding the insured amount of five million naira, through the liquidation of assets and debt recovery from failed banks, exemplifies its long-term commitment to financial stability.

    “Confidence is key in maintaining the financial system’s stability, and the role of deposit insurance cannot be overemphasized,” the MD remarked, highlighting how NDIC continues to build trust in Nigeria’s banking system through timely and effective interventions.

    He noted that to raise public awareness about the NDIC’s role, finance journalists play a crucial part in shaping perceptions of financial institutions.

    Given this, the MD said the corporation found it expedient to organize the workshop for members of the Finance Correspondents Association of Nigeria (FICAN) across all media platforms to deepen their understanding of how deposit insurance supports financial stability.

    “Your dedication in promoting the understanding of the NDIC’s mandate and activities has been pivotal in deepening public trust in Nigeria’s banking system. By equipping finance journalists with the knowledge needed to accurately report on the sector, NDIC hopes to foster greater transparency and trust in Nigeria’s financial institutions.

    “In turn, a well-informed public will be better positioned to navigate the complexities of the banking sector and make informed decisions about their finances,” he said.

    The Director of Communications and Public Affairs, Bashir Nuhu also noted that the 2-day workshop provided a platform to discuss the prospects of deposit insurance in Nigeria.

    “As the financial system continues to evolve, NDIC is committed to innovation, ensuring that its services keep pace with global best practices,” Nuhu added.

  • NDIC allays fears, gives Nigerian banks clean bill of health

    NDIC allays fears, gives Nigerian banks clean bill of health

    The Nigeria Deposit Insurance Corporation (NDIC) has reassured Nigerians about the stability of the nation’s deposit money banks, urging them not to worry.

    The corporation emphasised that all active banks are safe and sound, encouraging Nigerians to continue their banking activities without fear.

    Reaffirming its commitment to the safety of depositors’ funds in all licensed banks, the NDIC stated, “Members of the public are enjoined to continue their banking activities without fear, as all other banks remain safe and sound.”

    The NDIC also addressed account holders of the defunct Heritage Bank whose deposits exceeded the insured amount of N5 million.

    It advised them to be patient, as the payment of their deposits beyond the insured amount would depend on the availability and realization of the bank’s assets, which would be distributed as liquidation dividends.

    Read Also: Fed govt deploys 10,000 agro rangers to boost food security

    Furthermore, the organization highlighted that following the revocation of Heritage Bank’s banking license by the Central Bank of Nigeria (CBN) on June 3, 2024, the NDIC, as the appointed liquidator, commenced the payment of insured deposits just four days after the bank’s liquidation.

    These details were revealed in a statement on Sunday by the corporation’s director of communication and public affairs, Bashir Nuhu, who reiterated the organization’s responsibilities to banks and their depositors.

    As an example of its commitment, the Corporation highlighted the unprecedented payment of the insured N5 million maximum per depositor within a record time of just four days following the bank’s closure.

    The feat, according to the organization was achieved using Bank Verification Numbers (BVN) as a unique identifier to locate depositors’ alternate accounts in other banks.

    The statement clarified that any challenges or delays depositors might face in accessing their funds are likely due to necessary administrative procedures.

    It reads in part: “However, depositors with balances exceeding Five Million Naira have been paid the initial insured sum of five million naira, while the remaining balances (classified as uninsured deposits) will be paid as liquidation dividends upon realization of the defunct bank’s assets and recovery of debts owed to the defunct bank.

    “This unprecedented achievement of direct payment through BVN-linked alternate accounts without the need for depositors to visit NDIC offices or fill out forms marks a historic shift for the NDIC in the prompt reimbursement of depositors with payment of about 82.36% of the total insured deposit to date.

    “It is instructive to state that, the remaining 17.64% of the insured deposits yet to be paid were largely depositors whose accounts have post no debits (PND) instructions or have no BVN.

    “Others are those with no alternative accounts in other banks or accounts with KYC limit on the maximum lodgment per day and are yet to come forward for verification.

    “These categories of depositors are presently being contacted by the Corporation through telephone calls and text messages to come forward for verification.

    “As earlier mentioned in our press release, press conference, and advert in the print and electronic media, the verification can be done by visiting any of the Corporation’s offices or online at www.ndic.gov.ng/claims“.

    The corporation said notwithstanding, the significant progress recorded in the payment of the insured deposits, it is not unmindful of the uninsured deposits which constitute the larger portion of the total deposits of the defunct bank but working assiduously to resolve the issue

    “In this regard, the Corporation is already working assiduously to ensure that all depositors with amounts over the maximum insured amount of N5 million are timely paid through liquidation dividend from the realisation of the defunct bank’s assets.

    “The Corporation has already initiated the process of debt recovery and realisation of investments and physical assets of the defunct bank to ensure timely reimbursement of the uninsured depositors of the defunct bank.

    “Subsequently, after the full payment of both insured and uninsured portion of deposits, the Corporation will proceed with the payment of creditors in accordance with priority of claim as provided in the extant law.

    “We would like to reiterate that, all payments other than that of insured deposits, are subject to availability and realisation of assets of the bank in the form of liquidation dividend,” the statement added.

  • NDIC to name, shame Heritage Bank’s debtors

    NDIC to name, shame Heritage Bank’s debtors

    • Errant directors, board members to be sanctioned

    There were indications yesterday that the Nigeria Deposit Insurance Corporation (NDIC), which liquidated Heritage Bank loan defaulters, will soon publicise their names.

    Also, the executives and board members found complicit in the bank’s collapse are to be blacklisted by the NDIC.

    The decisions, said a source in the corporation, would help enforce discipline and accountability in the financial sector of the Nigerian economy.

    The Nation learnt that the “name and shame” strategy was designed to curb delinquencies and encourage a more responsible borrowing culture by bank customers.

    The source said: “Those who default in their loans can expect to be identified and potentially face significant reputational damage.

    “Our name and shame policy is part of broader efforts to enhance accountability and transparency within the industry.

     “The decision to publicly identify defaulters is not taken lightly. It is a necessary step to ensure that borrowers understand the consequences of their actions and to prevent similar situations in the future.”

      Under the amended NDIC Act, the corporation can prosecute any borrowers who default in paying their loan. If convicted, such borrowers would pay up to N10,000,000 fine or go to jail for five years, or both.

    Read Also: NDIC to pay Heritage Bank depositors N650 billion this week

    Errant corporate borrowers face even stiffer fines and additional daily penalties. 

    Some sections of the Act states that:

    *The corporation can blacklist bank executives and board members deemed responsible for the collapse of a financial institution. When blacklisted, such individuals will no longer hold similar positions in any other bank in the country; and

      *NDIC can recover debts owed to failing or failed insured institutions. If an obligor neglects or refuses to repay a debt secured by a mortgage, the NDIC can take possession of and dispose of the property to satisfy the debt. This includes selling, transferring, or managing the property in question.

    Last week’s withdrawal of Heritage Bank’s licence by the Central Bank of Nigeria (CBN)   raised fresh concern about the stability of Nigeria’s banking sector and the conduct of its key players.

  • NDIC to pay Heritage Bank depositors N650 billion this week

    NDIC to pay Heritage Bank depositors N650 billion this week

    The Nigeria Deposit Insurance Corporation (NDIC) announced plans to pay 2.3 million depositors of Heritage Bank approximately N650 billion starting this week. This move follows the recent withdrawal of Heritage Bank’s operating licence.

    NDIC Managing Director Mr. Bello Hassan made this announcement during a briefing in Abuja. He explained that the majority of Heritage Bank’s depositors, 99.9 per cent, have less than N5 million in their accounts. This means the NDIC expects to process these insured deposits swiftly.

    There are about 4,000 depositors with more than N5 million in their accounts. Before losing its license, Heritage Bank had issued over N700 billion in loans. To manage the payment process, NDIC has deployed 400 staff members across the bank’s 116 branches and regional offices.

    Hassan advised that depositors with alternate bank accounts do not need to visit a bank branch. The NDIC will use their Bank Verification Number (BVN) to credit these accounts directly. However, depositors without alternate accounts must visit NDIC to provide the necessary information to receive their funds.

    Unfortunately, most Heritage Bank employees have lost their jobs due to the bank’s closure. Only a few staff members, particularly those with knowledge of the bank’s operations, will be retained.

    Mr. Hassan stated that NDIC now has enhanced powers to recover assets from Heritage Bank’s debtors. These powers include the ability to arrest, prosecute, and blacklist defaulters.

    Heritage Bank lost its license for failing to comply with prudential guidelines set by the Central Bank of Nigeria (CBN). These guidelines are designed to ensure the safety and soundness of banks by covering areas such as: Capital Adequacy, to ensure banks have enough capital to absorb potential losses; Liquidity Risk Management, by maintaining sufficient liquid assets to meet short-term obligations; Credit Risk Management, by assessing the creditworthiness of borrowers and setting lending limits.

    Read Also: UPDATED: Kaduna Assembly indicts El-Rufai, ex-commissioners for alleged siphoning of N423bn

    Others are, Risk Management Framework to identify and manage all relevant risks; Large Exposures to limit how much a bank can lend to a single borrower or related group; Loan Loss Provisioning by setting aside reserves for potential loan losses; Corporate Governance this is required to maintain strong governance practices, including a competent board of directors and sound internal controls and Anti-Money Laundering (AML) and Counter-Terrorist Financing (CFT) required to Implement controls to prevent illegal activities.

    While Mr. Hassan did not explicitly mention insider lending, he implied that Heritage Bank likely failed to meet guidelines in this area, which involves strict rules to prevent conflicts of interest in lending to bank insiders.

  • JUST IN: 99 percent of Heritage Bank’s depositors have balances less than N5m – NDIC

    JUST IN: 99 percent of Heritage Bank’s depositors have balances less than N5m – NDIC

    The Nigerian Deposit Insurance Corporation (NDIC) has said that ninety-nine percent of Heritage Bank depositors have total balances under N5 million.

    The Managing Director of the NDIC, Bello Hassan, disclosed this at a media conference on Wednesday, June 3, in Abuja,

    He said that the Heritage Bank was liquidated after the Central Bank of Nigeria (CBN) revoked its license due to a violation of Section 12 (1) of the BOFIA, 2020.

    Read Also: UPDATED: NDIC to pay Heritage Bank depositors N650bn this week

    According to the NDIC, there were 2.3 million depositors at Heritage Bank.

    Hassan claimed that the bank is currently verifying all depositors to provide insurance benefits of up to N5 million.

    He added that depositors with insured savings exceeding N5 million will be paid after the bank’s assets are liquidated.

  • UPDATED: NDIC to pay Heritage Bank depositors N650bn this week

    UPDATED: NDIC to pay Heritage Bank depositors N650bn this week

    The Nigeria Deposit Insurance Corporation (NDIC) announced plans to pay 2.3 million depositors of Heritage Bank approximately N650 billion starting this week. 

    This move follows the recent withdrawal of Heritage Bank’s operating license.

    NDIC managing director, Bello Hassan made this announcement during a media briefing in Abuja. 

    He explained that the majority of Heritage Bank’s depositors, 99.9 percent, have less than N5 million in their accounts. 

    This means the NDIC expects to process these insured deposits swiftly.

    There are about 4,000 depositors with more than N5 million in their accounts. Before losing its license, Heritage Bank had issued over N700 billion in loans. 

    To manage the payment process, NDIC has deployed 400 staff members across the bank’s 116 branches and regional offices.

    Read Also: Heritage Bank: Reps to engage CBN, NDIC, stakeholders

    Hassan advised that depositors with alternate bank accounts do not need to visit a bank branch. 

    The NDIC will use their Bank Verification Number (BVN) to credit these accounts directly. 

    However, depositors without alternate accounts must visit NDIC to provide the necessary information to receive their funds.

    Unfortunately, most Heritage Bank employees have lost their jobs due to the bank’s closure. 

    Only a few staff members, particularly those with knowledge of the bank’s operations, will be retained.

    Hassan stated that NDIC now has enhanced powers to recover assets from Heritage Bank’s debtors. 

    These powers include the ability to arrest, prosecute, and blacklist defaulters.

    Heritage Bank lost its license for failing to comply with prudential guidelines set by the Central Bank of Nigeria (CBN).

    These guidelines are designed to ensure the safety and soundness of banks by covering areas such as: Capital Adequacy, to ensure banks have enough capital to absorb potential losses; Liquidity Risk Management, by maintaining sufficient liquid assets to meet short-term obligations; Credit Risk Management, by assessing the creditworthiness of borrowers and setting lending limits.

    Others are, Risk Management Framework to identify and manage all relevant risks; Large Exposures to limit how much a bank can lend to a single borrower or related group; Loan Loss Provisioning by setting aside reserves for potential loan losses; Corporate Governance this is required to maintain strong governance practices, including a competent board of directors and sound internal controls and Anti-Money Laundering (AML) and Counter-Terrorist Financing (CFT) required to Implement controls to prevent illegal activities.

    While Hassan did not explicitly mention insider lending, he implied that Heritage Bank likely failed to meet guidelines in this area, which involves strict rules to prevent conflicts of interest in lending to bank insiders.

  • Dissecting NDIC’s maximum deposit insurance coverage

    Dissecting NDIC’s maximum deposit insurance coverage

    By Shalom Nathaniel

    In the wake of the 2008 global financial crisis, the importance of deposit insurance has become more apparent than ever. Deposit insurance is a crucial safety net that protects depositors in the event of a bank failure, ensuring that their funds are secure and accessible.

    Deposit insurance is a government-backed programme designed to protect depositors in the event of a bank failure. The primary function of these programmes is to ensure that depositors have access to their funds, even if a bank becomes insolvent. This not only prevents financial losses for individuals and businesses but also helps to maintain trust in the banking system, which is essential for economic growth and stability.

    Following the Silicon Valley Bank (SVB) failures, considered the biggest bank run in history due to the speed and scale, several countries have taken steps to increase the coverage limits of their deposit insurance schemes, recognising the significant role these programmes play in maintaining financial stability, boosting customers’ confidence and preventing bank runs.

    Read Also: NDIC’s soothing balm on closed MFBs/PMBs depositors’ pain (1)

    In March 2023, three small-to-mid size U.S. banks failed in the span of five days – Silicon Valley Bank (SVB), Silvergate Bank, and Signature Bank, driven by a combination of technological, social, and industry-specific factors that enabled rapid and coordinated deposit withdrawals.

    The SVB failure was triggered by a bank run, where clients withdrew $42 billion in a single day after the bank announced it had sold its Treasury bond portfolio at a loss.

    Economic and financial experts have asserted that increasing deposit insurance coverage can have several benefits for both depositors and the banking system as a whole. One of the most significant advantages is that it can help to boost customer confidence in the banking system. When depositors know that their funds are fully insured, they are more likely to trust the banking system and maintain their deposits, which can help to prevent bank runs and maintain financial stability.

    In view of this development, the International Association of Deposit Insurers (IADI), in its Policy Brief 9 gave renewed attention to the level of deposit insurance coverage and the risks associated with high shares of uninsured deposits.

    IADI also noted that very high per depositor/account coverage rates are in place across most jurisdictions. It was found that globally, deposit insurers fully cover deposits of a very high share of depositors and that both in G7 and G20 jurisdictions, median coverage ratios were above 98 per cent.

    In Nigeria, Maximum Deposit Insurance Cover (MDIC) for depositors of deposit money banks (DMBs) was set at N50,000 at the inception of the Nigeria Deposit Insurance Corporation (NDIC) in 1989. The amount was set to allow 85 per cent of the total depositors in the nation’s insured banks to be 100 per cent covered.

    Subsequently, 96 per cent of all depositors were protected when the coverage ceiling was raised from N50,000 to N200,000 in 2006. The coverage limit of N100,000 was also set, for the first time, for microfinance banks (MFBs) and  primary mortgage banks (PMBs) depositors in the same year.

    In the year 2011, the coverage limits for DMBs increased from N200,000 to N500,000 and from N100,000 to N200,000 for depositors of MFBs and PMBs. The coverage level was further adjusted to N500,000 in 2016 for PMB depositors as well as subscribers of licensed Mobile Money Operators (MMOs). Coverage of N500,000 was equally extended to depositors of Payment Service Banks (PSBs) in 2020. Meanwhile the coverage for DMBs remained at N500,000.

    Stakeholders have over the years stressed that these maximum deposit insurance coverage limits were inadequate to protect customers in Nigeria because it failed to provide full coverage to significant portions of bank customers’ deposits. This left a substantial portion of deposits exposed to market discipline.

    In view of these, the recent move by the NDIC to raise the maximum deposit insurance coverage for all licensed deposit taking financial institutions was viewed as a welcomed development.

    The corporation, on Thursday, May 2, 2024, announced an increase in the MDIC of DMBs from N500,000 to N5,000,000. This change will now fully cover 98.98 per cent of depositors, up from the previous 89.20 per cent.

    For Microfinance Banks (MFBs), the coverage was increased from N200,000 to N2,000,000, protecting 99.27 per cent of depositors compared to 98.76 per cent previously. The maximum coverage for Primary Mortgage Banks (PMBs) was also raised from N500,000 to N2,000,000, ensuring 99.34 per cent of depositors are fully covered, up from 97.98 per cent.

    Additionally, the coverage for Payment Service Banks (PSBs) has been adjusted from N500,000 to N2,000,000, now covering nearly all depositors at 99.99 per cent. For Mobile Money Operators (MMOs), the pass-through deposit insurance for subscribers has been increased to N5,000,000 per subscriber.

    The revised coverage will significantly increase the total value of deposits covered by deposit insurance, from around 6-14 per cent previously to 21-43 per cent across the different banking sectors.

    While announcing the increases, the NDIC Managing Director, Bello Hassan, emphasised that the revised coverage is a strategic balance between protecting depositors and ensuring the stability of the financial system. The changes aim to extend protection to a larger percentage of the population, enhance financial inclusion, and mitigate the potential destabilising effects of bank runs.

    He said the adoption of the revised maximum deposit insurance coverage is supported by the NDIC’s current funding, expected annual premium collection, enhanced supervision that would reduce the likelihood of bank failures, effective bank resolution frameworks, and other funding arrangements provided by the NDIC Act No. 33 of 2023.

    Besides, he said the total amount in the NDIC’s Deposit Insurance Funds is now in excess of N2 trillion and gives the NDIC the ‘firepower’ to take on the new maximum deposit insurance coverage levels for all licensed deposit-taking financial institutions. This ensures the increased protection can be sustained without placing undue burden on financial institutions.

    The money is made up of current balances in all the four deposit insurance funds managed by the NDIC including, the Deposit Money Banks (DMBs); Primary Mortgage Banks and microfinance banks; non interest banks; and the payment service banks.

    Hassan also assured that the increase in maximum deposit insurance coverage will not affect the premium payments from financial institutions since the NDIC now operates with a risk-based premium framework which assesses each bank’s premium based on the risk perception on the defined parameters already known by the banks.

    “If a bank is able to manage its risk properly, it may end up paying the base rate which is 35 basis points, but if it does not, it will end up paying a higher premium which could range up to 65 basis points. So the ball is in their court,” the MD had said.