Sunday Trust online

NDIC and depositors of failed banks

There is nothing soothing to a depositor of a failed bank than to guarantee payment of his or her hard earned money trapped in the affected bank. And, banking procedure or procedures, are not as simple as reminding the akara seller she owed you some uncollected change when you bought some bean cake from her the other day. It is a meticulous exercise of examination and cross-examination of books and records, often going back many years to determine the integrity of data and transactions. So, while Nigeria Deposit Insurance Corporation—the officiating referee in the failed bank liquidation and resolution game—is busy sanitizing the muddled waters brought about by deliberate weak governance and insider abuses of some bank managers; how fair is it for some so-called stakeholders in the banking sector of the economy to conclave and accuse the NDIC of incompetence?

But, the 582,204 Nigerian depositors who were paid cumulatively the sum of N6.6 billion out of the total insured deposit of N17.8 billion of the 48 deposit money banks (DMBs) in-liquidation since 1994 will testify to the contrary. With these huge number of Nigerians depositors around or their families to bear witness one needs not to engage the likes of the Chairman of Independent Shareholders Association of Nigeria (SAN), Mr. Sunny Nwosu, or his co-traveller, Mr. Boniface Okezie, who were recently quoted by Daily Champion newspaper to have accused the NDIC of “woeful performance”.
However, their outpouring criticisms smack of a typical Nigerian geo-ethnic chauvinist who perpetually leaves in denial of the facts on ground to satisfy his bruised ego. In the area of bank liquidation, which is one of the key functions of the corporation involving realization of assets from debt recovery and sale of physical assets of closed banks, the NDIC had realised a cumulative sum of N19.5 billion which was appropriated to various claimants of 45 closed DMBs as at December 30, 2012. In a similar exercise, the sum of N1.98 billion was realised in respect of the 103 closed MFBs during the same period. The Corporation had also raked in N24.68 billion out of N178.92 billion debts owed the closed 45 DMBs and N42.63 million recovered from the 103 closed MFBs in-liquidation as at December 2012. From these proceeds, the corporation had paid N83.45 billion as liquidation dividend to depositors whose claims were in excess of the insured sums and N1.122 billion to 421 creditors of closed DMBs.
That was not all, fourteen (14) of the thirty-four (34) which were liquidated banks prior to 2006 bank consolidation regime had declared 100 percent over and above their insured deposits (liquidation dividend), indicating that all their depositors and creditors had fully received all their claims. The 14 odd affected banks are ABC Merchant Bank Ltd, Alpha Merchant Bank Plc, Amicable Bank of Nigeria Plc, Commercial Trust Bank, Continental Merchant Bank Ltd and Co-operative and Commerce Bank. The rest are ICON (Ltd) Merchant Bankers, Ivory Merchant Bank, Kapital Merchant Bank, Merchant Bank of Africa, Nigeria Merchant Bank Plc, Pan African Bank Ltd, Premier Commercial Bank Ltd and Rims Merchant Bank Ltd.
Therefore, it amounts to sheer naivety for anyone to accuse the NDIC of being not proactive towards the payment of guaranteed sums to depositors of the failed banks. After all, the NDIC Act requires the corporation to effect the payment of insured sums to depositors of any failed bank within 90 days of the revocation of the bank’s operating licence by the CBN. It is on record for who cares to monitor that NDIC has been able to keep pace with this provision, in fact sometimes beating the deadline. Delays only arise if the affected banks challenge the CBN in courts over the revocation of their licences.
Bulk of depositors who have not claimed their deposits are usually those who have since abandoned their accounts even before the liquidation of the banks, which is a phenomenon called: Dormant Accounts. Should anyone blame the Corporation for the attitude of such depositors who in any case, often, have very small balances not exceeding N5,000.00.
Another demonstration of its pro-activeness which Nigerians will not easily forget was the establishment of three bridge banks namely: Mainstreet Bank Limited, Keystone Bank Limited and Enterprise Bank Limited on August 5, 2012 to assume the assets and liabilities of the defunct Afribank, BankPHB and Spring Bank respectively. The three (3) defunct banks had failed to pass the CBN/NDIC joint stress test conducted on the 24 DMBs in August 2009 consequent upon which the CBN revoked their banking licences. According to the NDIC: ‘’the bridge bank option was adopted in the interest of depositors and to prevent outright liquidation, which would have had dire consequences for depositors, employees of these banks and thus undermine public confidence in the banking system’’. It is instructive to state that the NDIC’s intervention facilitated the take-over of the assets and assumption of their liabilities by the three new (bridge) banks. In addition, it safeguarded the banks’ total deposit liabilities of N809.4 billion and 6,667 jobs in the affected banks.
It is laughable to accuse NDIC management of inability to separate itself from the CBN or Federal Ministry of Finance. How can that be possible? Are the accusers not aware of the ownership structure of the NDIC? What manner of stakeholders are they in the financial sector of the Nigerian economy if they don’t know that NDIC ownership structure is 60 percent CBN and 40 percent Federal Ministry of Finance? Is that the practice worldwide to isolate the deposit insurance bodies from the central banks?
Collaboration between these three critical arms of the Financial Sector of the economy is not only desirable but imperative if they are to perform their functions of oversight over the nation’s economy in general and the baking sub-sector in particular. All the achievements of the NDIC we mentioned above in paying out depositor insured funds are as a result of close collaboration with the CBN. 
Furthermore, stakeholders in the banking sector can bear witness to the innovative posture of the NDIC in resolution of the failed bank institutions. For instance, following the successful conduct of the outright liquidation of the 35 banks that failed pre-consolidation (1994-2003), the NDIC adopted the novel initiative of Purchase & Assumption (P&A) in 2006 to resolve the failure of thirteen (13) banks that could not meet the CBN N25 billion minimum capital requirements for DMBs. My search shows as at December 31, 2011 P&A arrangements had been concluded for eleven (11) banks.
But, it could be quite understandable, why the so called representatives of Shareholders Association directed their hostility to NDIC instead of blaming their past bank management’s recklessness and irresponsible behaviours, which resulted in the demise of their banks. I will only advise them to eschew bitterness and face the reality of the market and contribute to the strengthening of corporate governance in the entities in which they invested. They should stop chasing shadows.                    
Hassan contributed this piece from Abuja and can be reached via  This email address is being protected from spambots. You need JavaScript enabled to view it.

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