NDIC and safety of banking system

Most Nigerians have not forgotten the numerous bank failures of the late eighties and early nineties that necessitated the banking consolidation of 2008. These volatile cycles were due largely to policy summersaults, regulatory weakness and lack of corporate governance in the banking system.  The Nigerian Deposit Insurance Corporation NDIC was established as a risk minimiser […]

Most Nigerians have not forgotten the numerous bank failures of the late eighties and early nineties that necessitated the banking consolidation of 2008. These volatile cycles were due largely to policy summersaults, regulatory weakness and lack of corporate governance in the banking system.
 The Nigerian Deposit Insurance Corporation NDIC was established as a risk minimiser with the broad mandate of deposit guarantee, bank supervision, as well as provision of mechanism for orderly resolution of failures, including bank liquidation.
It is clear that the current management led by Alhaji Umaru Ibrahim is taking measures to save collapsing banks seriously. The measures include moral suasion, continuous interaction with bank managers/owners, imposition of Holding Actions on distressed banks to restrict operations, encouraging self-restructuring, and rendering of financial assistance to banks.
Recently too, the Ibrahim led management brought some revolutionary and novel schemes that have been developed to deal with banking failure resolution. 
For example, NDIC in collaboration with other regulatory authorities, embarked on some reforms that have enhanced quality of banks, established financial stability, enabled healthy financial sector evolution and ensured the financial sector’s contribution to the real economy.
The reforms led to the removal of the executive management of 8 banks, injection of N620 billion into 10 critically affected banks to ease their liquidity problems, acquisition of Intercontinental Bank, Oceanic Bank and Fin Bank by Access Bank, Ecobank and FCMB respectively.
The reforms also led to the acquisition of and injection of fresh capital into Union Bank by a core investor and AMCON, establishment of 3 bridge banks by NDIC and subsequently acquired by AMCON. 
The bridge banks are: Mainstreet Bank (which acquired assets and assumed liabilities of former Afribank), Keystone Bank (for former Bank PHB) and Enterprise Bank (for former Spring Bank).AMCON injected N679 billion into the bridge banks. The bridge banks ensured continuity of banking services of the affected banks, preserved depositors’ funds and none of the banks’ employees lost their jobs.
 On corporate governance, the special examination by NDIC and other regulators revealed that boards and executive managements of some banks were not equipped to run their institutions effectively as shown by as the overbearing influence of their chairmen/CEOs, particularly in family controlled banks, poor leadership, ineffective board committees, non-adherence to the code of corporate governance and weak ethical standards. These findings informed the comprehensive reforms embarked on by the regulatory authorities.
 The current management has continued to ensure that the public policy objectives of NDIC are vigorously pursued and achieved. The Corporation’s mission is to protect depositors and contribute to the stability of the financial system through effective supervision of insured institutions, provision of financial and technical assistance to eligible insured institutions, prompt payment of guaranteed sum and orderly resolution of failed insured institutions.
In order to achieve its vision and be effective in the delivery of its mission, the affairs of the NDIC have continued to be guided by sound corporate governance practice.
In order  to enthrone sound corporate governance practice ,  NDIC under Alhaji Ibrahim adopted  many initiatives, including  a Charter and Code of Corporate Governance for its Board which are hinged on sound governance structures, enhanced relations and protection of the right of stakeholders, sound risk management and internal audit, greater disclosure and business sustainability.
NDIC Board also complies fully with the Code of Corporate Governance put together for all regulators under the auspices of the Financial Services Regulation Coordinating Committee (FRSCC). NDIC has also put in place a Code of Conduct for its Bank Examiners to ensure that they act in a manner that would promote the integrity, image and reputation of the NDIC.
 Even in the immediate past era of impunity and non-accountability by public office holders, NDIC complied with the provisions of relevant Acts of the Federal Government of Nigeria with regard to disclosure of information on its operations to stakeholders and the general public.
It publishes its Annual Report and Statement of Accounts which are made available to NDIC’s shareholders, the Public Accounts Committee of the Senate & House of Representatives, the CBN and Federal Ministry of Finance as well as the banking public. KPMG has been continuously assessing the structure, functions, operations and personnel of the Board to ensure compliance with all government mandated codes for Boards as well as against international best practices.  
 To enhance the effectiveness of deposit insurance systems through promoting guidance and international cooperation, NDIC has been an active member of the International Association of Deposit Insurers (IADI). IADI is a global standard setter similar to Basel Committee on Banking Supervision (BCBS), Financial Stability Board (FSB) and International Association of Insurance Supervisors (IAIS).
  NDIC is now poised to achieve more milestones in sustaining the stability of the Nigerian financial system. The Corporation has proposed amendments aimed at addressing some challenges facing the Nigerian banking system and intends to fully comply with the IADI core principles of Deposit Insurers based on the 2011 assessment. Some of the proposed amendments are Public Policy Objectives, Tenure, Removal, filling vacancy in the Board; Conflict of interest, General Reserve Fund; Payment of insured Deposits following inability of insured institutions to meet obligations to its depositors; Examination and Report of Examination; The Corporation as Conservator; Payment of insured deposit pending action in court and dealing with parties at fault in Bank Failure.
 The Nigerian banking system is much stronger than it was before the reforms as shown by the various performance indicators.
The Board, Management and staff of NDIC have played critical roles in charting the path for a robust, safe and stable banking system in Nigeria. Good governance flows from competence, probity, honesty and being ethical in our conduct as well as a value system that promotes trust.
  Ademu-Etteh, a public affairs analyst, writes this piece from Abuja