Daud Olatunji
The Nigeria Deposit Insurance Corporation (NDIC) has liquidated a total of 651 banks over the last three decades, according to Pamela Roberts, Deputy Director of NDIC’s Enugu Zonal Office.
PLATFORM TIMES reports tbst the liquidation of the failed banks was carried out following the revocation of their licences by the Central Bank of Nigeria .
This revelation was made during the NDIC Financial Correspondents Association of Nigeria (FICAN) workshop, organized by the Communications and Public Affairs Department (CPAD) in Lagos.
Roberts provided insights into the agency’s journey in managing bank closures in Nigeria.
In her presentation titled Effective Bank Closure: The NDIC’s Experience and Current Innovations, Roberts disclosed that the corporation had handled 18 bank closure episodes since its inception, 35 years ago.
She explained that the CBN revokes licences of banks when they fail to respond to all regulatory efforts applied to address their distress and appoints NDIC as their liquidator.
She added that the NDIC liquidates thwv651 banks in 30 years after the banks failed, forcing the CBN to revoke their licences.
She disclosed that the failed banks involved 50 Deposit Money Banks (DMBs), 55 Primary Mortgage Banks (PMBs), and 546 Microfinance Banks (MFBs).
Roberts explained further that the NDIC follows a structured process for closing banks, broken into three key stages: pre-closing activities, closing activities, and post-closing activities.
She explains that Bank closures are typically a result of bank failures, which she said occur when financial institutions are unable to meet regulatory standards or become insolvent.
Highlighting the NDIC’s extensive experience, Roberts detailed the closure of banks over the years, with notable episodes spanning from 1994 to 2024.
Some of these banks, she noted, were challenging to locate after their licenses were revoked.
“Since 1994, we have witnessed several bank closure episodes. There are instances where the license of a bank was withdrawn, but the bank could not be traced for physical closure,” she said, referencing difficulties in tracking some defunct banks.
The closure episodes began in 1994, with four banks being shut down in the first two rounds of closure.
“The third episode, which took place in 1995, saw the NDIC close the Republic Bank. One of the more significant events occurred on January 16, 1998, during the fourth episode when 26 banks were simultaneously shut down.
“Between 2002 and 2024, the NDIC embarked on a series of closures, including notable cases such as Savannah Bank in 2002, whose closure was contested in court, leading to the restoration of its license, though the bank has yet to resume operations.
“Another major event occurred in 2006, when 14 banks had their licenses revoked by the Central Bank of Nigeria (CBN), with three regaining their licenses through court orders.
In one of the largest mass closures, the NDIC shut down 224 Microfinance Banks (MFBs) in 2010, although 121 of these institutions later had their licenses restored after a capital verification exercise by the CBN.
The most recent closure took place in 2024, marking the 18th episode, during which several bank licenses were revoked as part of the ongoing effort to maintain the stability of the financial system.
Roberts did not shy away from the challenges encountered by the NDIC in executing bank closures
She pointed out that the initial episodes in 1994 were hampered by a lack of skilled and competent staff, though she noted that the situation has since improved.
“The narrative has changed,” Roberts stated, emphasizing that the corporation has significantly improved its capacity to manage bank closures.
Other challenges included hostile environments during closure exercises, the sheer volume of work involved in shutting down multiple banks at once, inadequate resources, and prolonged litigation.
Despite these hurdles, the NDIC has continued to evolve its approach, ensuring that financial institutions that fail to meet regulatory requirements are dealt with efficiently to protect depositors and maintain confidence in Nigeria’s banking system.
The Managing Director and Chief Executive of the Nigeria Deposit Insurance Corporation (NDIC), Mr. Bello Hassan, has reiterated the Corporation’s unwavering commitment to protecting Nigerian depositors and maintaining financial stability.
In his welcome address , Hassan stressed the importance of deposit insurance in preventing banking crises and instilling confidence in the nation’s financial system.
Themed “Strengthening Nigeria’s Financial Safety-Net – The Role of Deposit Insurance,” the workshop comes at a critical time when Nigeria’s financial system is facing evolving global challenges.
Hassan emphasized that NDIC’s primary mandate—providing deposit insurance cover, supervising financial institutions, and resolving distressed banks—remains essential to the country’s economic stability
“The NDIC plays a crucial role in maintaining confidence in our financial system by protecting depositors and ensuring that their funds are promptly reimbursed in the event of bank failure,”
Hassan said, addressing business editors, finance correspondents, and stakeholders in the banking and financial sectors.
A notable highlight of Hassan’s address was the recent closure of Heritage Bank following the revocation of its operating license by the Central Bank of Nigeria (CBN) on June 3, 2024.
The MD revealed that NDIC was appointed liquidator of the bank, overseeing an orderly resolution and ensuring depositors were promptly reimbursed.
The NDIC’s swift action in reimbursing depositors showcased the Corporation’s efficiency. Within just four days of the bank’s closure, the NDIC began paying depositors, with a maximum insurance cover of N5 million per depositor.
The use of Bank Verification Numbers (BVN) enabled a seamless process by identifying depositors’ alternate accounts, allowing NDIC to pay 84.98% of depositors with BVN-linked accounts.
Hassan highlighted this as a significant innovation, reducing the bureaucratic hurdles depositors often face in the wake of bank failures.
“This approach eliminated the need for depositors to fill out forms or visit NDIC offices, thereby simplifying the reimbursement process,”
Hassan explained. “It also significantly cushioned the negative impact of the bank’s failure, especially with the recent increase in deposit insurance coverage from N500,000 to N5 million.”
Deposit Insurance: A Safety Net for Financial Stability
Hassan stressed the importance of deposit insurance as a critical financial safety net, noting that the NDIC works closely with the CBN to ensure the stability of Nigeria’s banking sector. .
“Confidence is key in the maintenance of financial system stability, and deposit insurance reassures depositors, instilling trust in the banking system, especially during times of uncertainty,” Hassan said.
He further elaborated on NDIC’s role over the past three decades, focusing on its contributions to safeguarding the most vulnerable depositors and preventing bank runs during periods of economic turbulence.
The MD also noted that the Corporation’s activities have expanded to include greater consumer protection measures, evolving with the dynamics of the financial system.
Do you want to share a story with us? Do you want to advertise with us? Do you need publicity for a product, service, or event? Contact us on WhatsApp +2348183319097 Email: platformtimes@gmail.com
We are committed to impactful investigative journalism for human interest and social justice. Your donation will help us tell more stories. Kindly donate any amount HERE
