The Managing Director, Nigeria Deposit Insurance Corporation (NDIC), Bello Hassan has said that financial safety nets comprising of four key components/ functions of prudential Regulation & Supervision, Resolution, Deposit Insurance and Lender of Last Resort were created to promote financial stability at all times and manage eventualities of any financial crisis.
Speaking yesterday during the opening ceremony of NDIC Retreat with members of House of Representatives held in Lagos on the theme: “Strengthening Nigeria’s Financial Safety-Net: The Role of Deposit Insurance”, he said Central Bank of Nigeria (CBN) handles the Lender of Last Resort function, with the CBN/NDIC collaborating to address prudential Regulation & Supervision, with the last, Deposit Insurance, being undertaken only by the NDIC.
Hassan said the corporation remains poised to effectively implement its public policy objectives to ultimately achieve the vision of becoming “One of the Best Deposit Insurers in the World”.
He said the NDIC Act 22 of 1988 repealed and re-enacted in 2006, created the Nigeria Deposit Insurance Corporation (NDIC) as a government agency, charged with the responsibility for implementing the deposit insurance in the country.
“The Deposit Insurance Scheme provides a financial guarantee to protect depositors in the event of a bank failure and offers a measure of safety for the banking system. The ultimate objective is to protect small and unsophisticated savers who constitute the bulk of the depositors in the Nigerian banking system, as well as to ensure the stability of the system,” he said.
Hassan explained that right from inception, the NDIC was set up as a Risk minimiser with broad Mandates of Deposit Guarantee, Bank Supervision, Distress Resolution and Liquidation. Unlike Deposit Insurers that operate as a ‘pay-box’ as practiced in some other jurisdictions, the NDIC, as a Risk Minimiser, has the responsibilities to ensure the Safety and Soundness of our Financial system.
“It applies prompt corrective actions in order to reduce the incidence of bank failure through effective Supervision of licensed deposit taking financial institutions. It is this critical function of minimising the risk of financial crisis in the banking industry that determines the Corporation’s position as a vital part of the Nation’s financial safety net,” he said.
“In the over three decades of its existence, the Corporation’s effective implementation of its mandate has earned it a prestigious position as a major player in the international community. As a member of the International Association of Deposit Insurers (IADI), the NDIC has established itself as a leading influence in the practice and implementation of DIS on the African Continent.”
“Similarly, IADI’s recognition and the certification of the Corporation’s Academy as a Regional Centre of Academic Excellence for Capacity Building on the Deposit Insurance Scheme (DIS) for countries in Sub-Saharan Africa is also another testament of the NDIC’s international repute. It my pleasure to inform Mr Chairman and the Honourable Members that the NDIC’s achievements overtime in terms adoption and deployment of resolution tools is also amiably admired amongst deposit insurers in other jurisdictions”.
“However, with the ever-changing landscape of the financial environment impacted by new developments and policies, emerging technologies, payment systems and financial services, the Corporation must continue to address the gaps and inherent challenges that threatens the effective implementation of its Mandate.”
“Therefore, we remain resolutely committed to strengthening the deposit insurance framework; providing timely support to insured institutions as and when required; implementing faster and orderly resolutions of problem insured institutions; and assisting the monetary authority in its efforts at promoting stability in the nation’s banking system”.
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