NDIC Liquidates 425 Banks in 22 Years

Nigeria Deposit Insurance Corporation (NDIC) at the weekend said it participated in the 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, 325 Micro Finance Banks and 51 Primary Mortgage Banks.

Mr. John Abiodun, assistant director, Insurance and Surveillance Department of the NDIC 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 litigation challenging the revocation of their operating licence.

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.

Some of the early morning signals according to him are aggressive growth and excessive competition for deposits, shareholder’s squabbles, frequent changes in management and ownership, change in major business lines.

Others are failure to meet the minimum Capital Adequacy Ratio  of ten per cent, rising non-performing loans to total credit ratio of above five per cent, failure to meet the prevailing minimum liquidity ratio of 30 per cent, high total expense to total income ratio and high incidences of fraud.

“NDIC has effective resolution is a series of systemic action designed to end a bank’s distressed condition and it is aimed at ensuring minimum disruption to the payment system, speedy payment to insured depositors and quick realization of assets for the benefits of uninsured depositors and creditors.

“The adoption of various bank problem resolution options had helped to enhance confidence in the nation’s banking system thereby promoting financial system stability,” he said.