Bello Hassan, FCA, is the managing director/chief executive of the Nigeria Depodit Insurance Corporation (NDIC). In this interview on the sidelines of the Annual Business Editors and FICAN Seminar, in Gombe, he clarified some issues bordering on limits on insured deposits, stressing that Nigeria’s standard remains about the world’s best because of its coverage (about 97 per cent) and the robust dimension of its implementation.
The NDIC boss also touched several other issues in the operations of the corporation, highlighting reasons for the proposed amendment to the NDIC Act.
Excerpts:
By Amechi Ogbonna
There is every reason to believe that bank charges are driving customers crazy. How can this dilemma be resolved?
I think the issue of charges has been largely addressed and this workshop is one of the mediums in which finance correspondents can help us to disseminate information to the public.
The Central Bank of Nigeria (CBN) has already issued guidelines that strictly regulated charges should be made to customers within the banking system and so it is for us now to do more enlightenment to the banking public so that they can know what these charges are. The document is available on the CBN website and it has already been standardised and so all we need to do is to sensitise the banking public to be aware that such document exists so that they are not to be duly over charged by the banks and, where customers discover that they are over-charged, they can petition the CBN or the NDIC and it will be investigated. If the bank is found guilty of over-charging the customers, then they will be directed to make the appropriate refund. In several instances, it has happened and banks have refunded the customers who were over-charged.
What additional measures should regulators put in place to checkmate rising cases of fraud in the system?
You know that as banks have stringent controls and internal procedures, fraudsters themselves are also doing everything to perfect their illegal acts or ways of perpetuating fraud. So, our advice to institutions is that they should at all times strengthen their risk management control practices as well as internal control procedures to safeguard their assets.
I am sure that, by the time they do that, there will be a downward trend in the level of fraud in the banking system.
With the state of Nigeria’s economy, how would you rate banks? Heathy, partially healthy or struggling?
There is no doubt that we are currently passing through turbulent times occasioned by the COVID-19 pandemic and I am happy to note that regulators have taken proactive measures to make sure that the industry remains safe and sound, and, looking at the key financial service indicators, Capital Adequacy, Liquidity, NPL ratio, among others, are all looking good, which means that we can confidently say that the banking industry is safe and sound.
If you are to recommend amendment to the NDIC Act, what areas are you going to look at?
There are lots of areas that I think the NDIC Act needs to be amended and, like I said, the NDIC is a liquidator and, at the point of liquidation, we try to recover their assets, especially the ones that are in liquidation. I think one of the challenges that we are facing today is the slow recovery process and, if the act is to be amended, I think it is important that the corporation should be sufficiently empowered to recover those assets as quickly as possible so that we can pay depositors in good time.
Why is the Gombe seminar so important to you as NDIC’s managing director?
We are all excited about the Gombe run of the 18th edition of the NDIC Workshop for Business Editors and members of the Finance Correspondents Association of Nigeria (FICAN). For me, I am extremely thrilled that this will be my maiden meeting with members of the group from the Lagos axis, along with the opportunity to address all the esteemed members of the organisation since my assumption of duty as managing director/CEO of the Nigeria Deposit Insurance Corporation.
I recall that, on Wednesday, June 30, 2021, I had the singular honour and privilege of hosting the combined executives of the Lagos and Abuja chapters of FICAN, who paid a courtesy visit to the management of the corporation. I reliably gathered that the combined delegation was the first of its kind to visit the corporation. Prior to that historic visit, I was briefed about the harmonious relationship that exists between the corporation and the body of business editors and finance correspondents as well as the invaluable support you have given to the corporation in the over 30 years of our existence.
It was on the strength of the special relationship that your chapter of FICAN, in its wisdom, conferred an award of special recognition on the NDIC for its support and efforts to sustain the growth of financial journalism in Nigeria during the 30th anniversary conference held in Lagos on September 25, 2021. That award fully underscored how far we have come together and, today, I have the great honour of interfacing with you all at this annual event, which we hope will be sustained and strengthened in the years to come.
Remember that, last week, I had the privilege to meet and address the gathering of your esteemed colleagues from the Abuja axis at the Ibadan run of the workshop. The experience left a positive impression on me. The high esteem I have for the FICAN membership was further reinforced by the quality and intensity of their engagement along with the report from their syndicate sessions.
For me, this workshop remains a very important part of our capacity-building initiative for the media, towards a well-informed reportage and sensitisation of stakeholders on the mandate of the corporation and the developments within the financial services industry.
It is to this end that the corporation expanded the scope of the workshop to include representatives of the civil society organisations and corporate affairs managers of banks in 2014 and 2020, respectively, to broaden the scope of engagements with our strategic stakeholders.
Under my watch, the corporation will not only sustain the legacy of this workshop but also seek ways to strengthen it, in the overall interest of financial journalism and the stability of the banking system in general.
Choice of the year’s theme
Theme of this year’s workshop: “Enduring Extreme Disruptions: Resilience and Reinvention for Banking System Stability and Deposit Insurance,” was apt considering that economies across the globe have continued to grapple with the devastating impact of the COVID-19 pandemic.
It has, therefore, become expedient and highly desirable for supervisors to come up with appropriate strategies necessary to build resilience into our financial system as we seek to provide the much-needed support to the Federal Government’s economic recovery.
Already, I highlighted the key policy direction of the current management team of the NDIC under my leadership as we continue to reposition our operations in response to the challenges posed by the COVID-19 pandemic disruptions.
Misunderstandings about NDIC coverage
I would like to address the seemingly simple but knotty issue of the NDIC’s deposit insurance coverage limits that has always been misunderstood by stakeholders.
This is because the issue is so fundamental and needs to be thoroughly interrogated, in the interest of all depositors, in order to sustain the corporation’s rich legacies and the multiple ingenuous operational landmarks it was able to achieve in its over-three decades of existence despite daunting challenges.
I was made to understand that the issue also provoked strong reactions during some of the presentations at the workshop held in Ibadan, because most of the concerns are predicated on the lack of adequate understanding of the principles, rationale and realities that informed the determination of our coverage limits. That is why we urge the media, through this forum, to make Nigerian depositors aware that the NDIC’s maximum coverage limits of N500,000.00 per depositor per commercial, merchant and non-interest bank, primary mortgage bank and mobile money operator, as well as N200,000.00 per depositor per microfinance bank remain the most adequate and robust in the world.
Participants at the Ibadan workshop had criticised that the coverage limits as not only small but required urgent upward review in order to engender stronger public confidence in the banking system.
Nonetheless, I need to reiterate that, as it is today, these limits are not only adequate, they are also consistent with the extant provisions and recommendations of the International Association of Deposit Insurers (IADI) in its Core Principle for Effective Deposit Insurance System on the determination of coverage limits.
IADI principle on deposit insurance
The IADI Core Principle No. 8 on coverage limits specifically requires that the thresholds should be limited, credible with the capacity to fully cover substantial majority of bank depositors, while the rest remain exposed to ensure market discipline. It provides that deposit insurance coverage should also be consistent with the deposit insurance system’s public policy objective.
Its also important to know that the coverage limits are not designed to be static but subject to periodic reviews to ensure that they are consistent with the public policy objectives of the deposit insurance system.
Review of payment limits
It has become imperative to know that the corporation had successfully reviewed upward the coverage limits from N50,000 at inception in 1989 to N200,000 in 2006 and N500,000 in 2010.
In the same vein, the corporation notes that, in 2016, 2017, 2018 and 2019, the total number of accounts in the deposit money banks stood at 83.0 million; 99.1million; 112.0 million; and 128.4 million, respectively. Out of these numbers, the N500,000 coverage limit fully covered 99.4 per cent; 97.6 per cent; 97.5 per cent; and 97.6 per cent of accounts, respectively. What these figures entail is that only less than 3 per cent of accounts/depositors are not fully covered by the prevailing coverage limits. The implication of this is that, in the event of failure of a bank, above 97 per cent of depositors would be fully covered by the corporation.
Therefore, from the foregoing statistics, it could be observed that the corporation’s deposit insurance coverage limits are not only adequate but robust enough to engender confidence in our banking system.
This historical and operational perspective could enable you assist the corporation in sensitising all our stakeholders with a view to correcting the misconception around the NDIC coverage limits.
I, therefore, call on the media, the civil society groups, along with the insured financial institutions, to ensure that there is change in the narrative.
Through a better understanding of our programmes and policies, we hope to not only be better informed in the coverage of our activities, but also be well-equipped to contribute to our advocacy and mobilisation for a better financial system.
Our management, will continue to keep our doors open to your suggestions and observations, while partnering with you on capacity-building and other areas of mutual benefit.
Delayed payment of liquidation dividend
You know debt recovery is a topical issue and really a challenging one for the deposit insurance scheme. Another agency that is also in charge of some form of resolution in the banking industry is the AMCON and so the two organisations have been grappling with some challenges, especially the issue of litigations involved, and, of course, the technicalities that are involved; so, whatever it is regarding recovery, we are also bound by the rule of law and must also follow the due process of law in pursuing debtors. As a self-regulatory and resolution agency, we have no choice than to follow the law.
Be that as it may, we are in the process of canvassing for the amendment of the NDIC Act and one of the areas we think that has to be amended is to strengthen the NDIC with capacity to pursue debtors under whatever circumstances.
There was a recent amendment to the BOFIA 2020 Act as that aspect has been strengthened in the sense that power has been granted by the CBN, NDIC and all resolution agencies to pursue debtors.
Other initiatives to strengthen the process
There are initiatives that we are invoking such that, apart from the law itself to go into dispute resolution mechanisms, the ADR, which is also a norm, in other words, we are deploying all aspects of our negotiations by way of applying the “carrot-and-stick” measure to pursue debtors, which we believe will assist us in recovering our debt.
Will this be a temporary process?
No. It is something that will be continuous, as it is part of our mandate as there are banks winding up while others have challenges here and there, which is a part of life.
Alleged sale of choice properties to friends and cronies
When people are not familiar with the processes things are usually done, they tend to make all manner of wild allegations, but if you go through our records, it is something we articulate year in, year out, and a look at the annual report will show you that, from inception till date, we have been very accountable and there is a specific chapter or section that deals with that aspect and so we are very ready to give account of what we have been doing and the summary of it all is that it is always encapsulated in our annual report.
We do engage in debt recovery, realisation of assets and liquidation processes. We do not just pay the initial liquidation coverage amount but we also go ahead to realise assets, which we deploy in paying the liquidation dividend.
Why do you term it as dividend?
We call it dividend because it is not part of, over and above, part of the amount insured and so, to that extent, anything that you realise is not something you are bound to pay but we now exchanged the process.
The Companies and Allied Matters Act (CAMA) states that companies should wind up after 2-3 years or 5 years but we have allowed the process to continue for the most part; 10-20 years back, if you file your claim with appropriate documentation, we will still pay you. So, as much as possible, we try to pay; but in terms of selling and all that, I cannot tell you because the process is transparent and very competitive. We always like to follow all the necessary checks and balances in terms of procurement purposes and other steps enshrined in the CAMA Act. We do not do such things in-house or hide but we do it in the open and advertise all the assets, which are subjected to competitive bidding and auctioning process.
It depends on the bank, as it differs from bank to bank. There are instances when we had to pay not just depositors but even shareholders who got their money back far more than what they invested and so it depends on the bank because realisation of assets depends on the asset you are dealing with and if we have to pay 100 per cent, we do so without hesitation.