Cases of Banks’ Frauds on the Rise-NDIC

Nigeria Deposit Insurance Corporation (NDIC) yesterday released its 2012 report and statement of accounts, which showed that banks in the country reported a total of 3,380 cases of frauds involving a ₦17.97 billion loss to the industry.

Bank fraud is the use of potentially illegal means to obtain money, assets, or other property owned or held by a financial institution, or to obtain money from depositors by fraudulently posing as a bank or other financial institution.

The reported cases of frauds represents a 43.7 per cent rise compared to 2,352 cases in 2011 while the expected/contingent loss rose by ₦455 million (10.9 per cent) from ₦4.072 billion reported in 2011.

The expected/contingent loss in 2011 however fell by 36.4 per cent from ₦28.40 billion in 2011, to ₦18.04 billion last year.

The corporation, however, noted the significant improvement in the financial standing of the nation’s banks in 2012, as they (banks) pooled a total of N525.34 billion pre-tax profit compared with the N6.71 billion loss reported at the end of 2011.

The return to profit, as contained in the 2012 NDIC report and audited statement, according to a statement by the corporation, was helped by the improved capitalisation resulting mainly from the activities of the Asset Management Corporation of Nigeria (AMCON), which acquired toxic assets in the industry.

This acquisition led to healthier balance sheets for the banks.

As a further sign of the improved health condition of the banks, the NDIC said the industry’s total assets improved by 10.91 per cent from N21.89 trillion in 2011 to N24.58 trillion in 2012.

Total loans and advances at N8.15 trillion represented a third of total assets, out of which 54.97 per cent or N4.48 trillion went to the real sector of the economy, compared with N3.88 trillion (or 53.37 per cent) and N3.51 trillion (or 48.95 per cent) in 2011 and 2010, respectively.

“Of particular note was the rising trend in the banking industry’s credits to the agric sector which stood at 3.60 per cent of total loans and advances in 2012 compared to 2.15 per cent and 3.11 per cent recorded in 2010 and 2011, respectively,” the statement added.

The corporation also expressed grave concern over the failure to assess financial condition and performance of 555 micro finance banks (MFBs) in the country on a continuous basis during the year.

It said in 2012, “310 out of the 323 MFBs that rendered returns had met the minimum paid-up capital of N20 million. A total of 302 MFBs had capital adequacy ratio of more than 10 per cent.”

Also, the NDIC said it has so far paid N73.58 billion as liquidation dividend to 250,209 depositors of banks that went under over the years, up to December 31, 2012.

Of this amount, the corporation said it paid a cumulative N6.82 billion to 528,212 insured depositors of closed banks by December 31, 2012, compared with N6.68 billion paid to 527,942 depositors in 2011.

The 2012 payout and beneficiaries could have been higher, the NDIC said, but for the unwillingness of many depositors to file their claims.

“It is pertinent to indicate that a total of 14 out of the 34 banks-in-liquidation prior to 2006 had declared a final dividend of 100% of their total deposits, indicating that all depositors of the affected closed banks had fully recovered their deposits,” the NDIC said.

The report further rated one of the nation’s existing 20 banks “marginal,” while 10 are “sound” and nine others “satisfactory,” following which the corporation concluded that “the industry could be considered to be relatively stable in 2012 (as there) was no unsound bank in the banking industry as at 31st December, 2012.”