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NDIC moves to pay depositors of failed banks

Posted by From John-Abba Ogbodo, Mathias Okwe and Pascal Nwigwe, Abuja on 2006/02/01 | Views: 1292 |

NDIC moves to pay depositors of failed banks

DEPOSITORS, whose funds are trapped in the 14 banks, which the Central Bank of Nigeria (CBN) recently revoked their licences for failing to meet the N25 billion capital base, may soon heave a sigh of relief.

DEPOSITORS, whose funds are trapped in the 14 banks, which the Central Bank of Nigeria (CBN) recently revoked their licences for failing to meet the N25 billion capital base, may soon heave a sigh of relief.

The National Deposit Insurance Corporation (NDIC) is working out an arrangement to pay them the proposed guaranteed N200,000 minimum deposit as against the statutory N50,000 in the settlement of such funds.

If the arrangement works, the depositors may receive their money in the next two months.

As the NDIC sets the stage for the funds repayment, the House Committee on Judiciary yesterday said it would hold a meeting with the National Judicial Council (NJC) with a view to looking at the legal bottlenecks on the way of NDIC payments of claims and frivolous court injunctions restraining it from carrying out certain functions.

The committee chairman, Alex Nwofe, who spoke at the end of its session yesterday, noted that indiscriminate injunctions from courts over the issue of payments of claims to depositors had over the time hamstrung the operations of the NDIC in the liquidation of banks.

Although Nwofe did not categorically mention the period of the meeting, he said that it would not be too long in view of the urgency of the matter.

An estimated sum of N177 billion, according to the CBN and NDIC, is trapped in the affected banks. About N107 billion of the amount is said to be uninsured. However, depositors, especially individuals and private sector depositors, have been assured of 100 per cent payment of their deposits, according to the CBN governor, Prof. Charles Soludo.

The Speaker of the House of Representatives, Alhaji Aminu Bello Masari, yesterday at the public hearing for a bill to repeal the NDIC Act 1988, gave assurance that an expeditious consideration would be given to the bill to enable the NDIC apply the new amount in the settlement of claims.

Masari, who was represented by his deputy, Mr. Austin Opara, told the conference that the National Assembly as an institution as well as legislators were also victims of the failed banks saga as they have huge deposits trapped in them.

The Guardian learnt that one of the affected banks, with a branch at the National Assembly Complex in Abuja, was a banker to the National Assembly as well as to individual members.

Opara said that the proposed N200,000 minimum amount to be paid the depositors was inadequate and sought for an upward review. He also charged his colleagues to work on the bill to become an Act of Parliament for immediate application by the NDIC in the settlement of claims to depositors.

The management of the NDIC led by the Managing Director, Mr. Ganiyu Ogunleye, had explained that the N200,000 was arrived at after surveys in 1999 and 2004 as well as global best practices and that the amount represented about 90 per cent of deposits in the industry.

He also clarified that the deposit guaranteed scheme was targeted at protecting small savers because it was expected that big time savers were supposed to be concerned with how their banks were being managed and take proactive steps to salvage their deposits.

Ogunleye stated that in carrying out the core function of deposit insurance, NDIC had made modest achievements since it started operations, adding that it had extended financial assistance to distressed banks, the most significant of which was in 1989, when 10 banks were granted Accommodation Bill Facilities worth N2.3 billion.

He said: "In collaboration with the CBN, the NDIC resolved distress in banks, which helped to stabilise the banking system. While three banks were recapitalised by their owners, four were sold to new investors, and 36 had their licences revoked, 34 of which are being liquidated.

The NDIC said that "the Corporation paid insured deposit claims to depositors of 34 banks in liquidation. Even though the liquidation of Peak Merchant Bank is yet to commence, the NDIC said it had taken the initiative to pay insured deposits to its depositors.''

The establishment of NDIC was informed by the need to protect depositors in the event of bank failure, to promote savings, inculcate sound banking habits, and ensure effective supervision of banks and other deposit-taking financial institutions.

The proposed amendments, apart from the minimum guaranteed deposit insurance scheme, which are aimed at making the Corporation more efficient and effective in the discharge of its statutory mandate, include the:

recognition that the Central Bank of Nigeria presently has the overall responsibility for monetary and banking policies;

flexibility introduced in determining and fixing premium rates such that the Board of Directors of NDIC could effect a downward review or allow the adoption of differential premium;

need to restore the power of NDIC to decisively handle distress in banks and other insured financial institutions;

need to restore the power of NDIC to act as liquidator of insured financial institutions, which hitherto existed under Section 38 (3) of BOFIA, but which was inadvertently deleted in 1998;

need to provide protection to directors, officials or agents of NDIC against adverse claims for actions taken bona-fide in the discharge of their responsibilities; and

provision to confer on the Court of Appeal original jurisdiction to determine application for injunctive reliefs against the Corporation.

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Comments (3)

Abieyuwa(Edo, Nigeria)says...

Otasowie means evening life is better than morning life. There is an error in your “evening life is better than evening life”?

Naija g(Houston, Minnesota, US)says...

Sokari doesn’t mean joy. Joy is Biobela. Go to the village and ask the meaning of the name.

Fay(Katy, Texas, US)says...

Actually translates to bravehearted.