Uche Usim, Abuja
The Nigeria Deposit Insurance Corporation (NDIC) at the weekend said participated in liquidation processes of 425 financial institutions in the country since it was established in 1988. A breakdown of the 425 liquidated banks during the period showed that 51 of them were Deposit Money Banks, while 325 Micro Finance Banks in addition to 51 Primary Mortgage Banks.
The Assistant Director, Insurance and Surveillance Department of the NDIC Mr. John Abiodun, made the revelation at the 2020 Finance Correspondents Association of Nigeria forum in Abuja.
According to him, the Corporation has successfully paid in full the deposits of customers of 18 DMBs that were both insured and uninsured by leveraging on its efficient and diligent liquidation activities and procedures.
He also revealed that settlements have been put on hold for depositors of Fortune International Bank, Triumph Bank and Peak Merchant Bank due to litigations challenging the revocation of their operating licences. He lamented that the effectiveness of the NDIC’s efforts in failure resolution had been hampered by a number of challenges.
Some of these challenges Abiodun listed include; delays in revocation of the licenses of terminally distressed banks, depositor and creditor apathy and ignorance, delay in filing claims, and recovery of debts owed the failed banks”.
He said the NDIC is also concerned about the legal actions of owners of closed banks; protracted litigations; disposal of low quality physical assets of the closed banks and provision of timely liquidity support.
Abiodun gave some of the causes of bank failure to include insider abuse, abusive ownership and weak board of directors, weak corporate governance, poor risk management process, inadequate capital, weak regulatory and supervisory measures as well as economic and political factors. He said, “Liquidation of a failed bank through revocation of license becomes the final bus stop when all efforts made by the shareholders and regulatory authorities do not yield the desired result.
“Once a bank’s license is revoked, NDIC takes over for liquidation.” Abiodun explained that before the corporation liquidates a bank, it looks out for deficiencies observed known as early warning signals that raise red flags.