The Nigeria Deposit Insurance Corporation (NDIC) yesterday said it had approved the reduction of insurance premium paid by Deposit Money Banks from 0.5 per cent to 0.35 per cent.
The new premium-based insurance rate of 0.35 per cent, according to the corporation, is expected to take effect from next year.
Umar Ibrahim, Managing Director/Chief Executive, NDIC, disclosed these at the 25th anniversary press conference held at the corporation’s headquarters in Abuja.
The decision to reduce the insurance premium, he said, was part of the corporation’s contribution not only to failure resolution, but to the Financial Stability Fund.
This, he added, would help the corporation reduce cost of funds incurred by deposit money banks, thus ensuring stability of the banking sector.
He said, “Another contribution to failure resolution by the NDIC is in its contribution to the Financial Stability Fund by the downward review of premium payable by banks through a reduction of the assessment rate from 50 to 40 and further to 35 basis points.
“That was done to encourage banks in their contribution to the Financial Stability Fund and reduce the cost of funds by deposit money banks.”
Shedding more light on the development,, Zaccheaus Anate, director, Insurance and Surveillance Department, NDIC said the 0.35 per cent reduction on insurance premium would commence from next year.
He said when the premium was first reduced in 2010 from 0.5 per cent to 0.4 per cent, the corporation was able to reduce the amount of insurance premium paid by banks by N53bn.
He said, “In support of the financial stability fund, in 2010, we reduced the premium based rate from 0.5 per cent to 0.4 per cent and that took effect from 2011 up to this year and that is for four years and for this four year period, we have had a reduction of N53bn as a result of reduction in the base rate from 0.5 to 0.4.
“Now, from next year, there is going to be an additional reduction in the base rate from this 0.4 per cent to 0.35 per cent from next year and definitely that will lead to additional reduction for banks.
“We want to make sure that we reduce premium burden for banks and also to make sure that the deposit insurance is fairly priced. We want to support the banks to make sure they succeed.”
Giving a performance of the corporation in the last 25 years in the area of distress resolution, the NDIC MD said that as at the end of August, it had paid a cumulative sum of N93.64bn as liquidation dividend to 250,497 depositors
He also noted that the NDIC had declared a final dividend of 100 per cent of total deposits in respect to 14 closed banks as at December 2013.
This, according to him, is an indication that all depositors in those banks had fully recovered their deposits.
Furthermore, Ibrahim stated that the sum of N1.72bn was declared as dividends to 699 creditors of the nine banks.
Out of that amount, the corporation, he explained, had paid the sum of N1.19bn to 424 creditors who filed their claims as at August 31, 2014.
Similarly, he added that the corporation had paid liquidation dividend to 453 shareholders of Alpha, Pan African and Nigeria Merchant Bank, which stood at N2.03bn as at August 31, 2014.
With regards to liquidation activities, he stated that the corporation had made a lot of achievements in ensuring that depositors of liquidated banks suffer as little loss as possible.
He said. “Following the revocation of the operating licenses of insured DMBs in 1994, 1995, 1998, 2000, 2003 and 2006, as well as the 103 MFBs in 2010, 83 in 2013 and 26 PMBs, the NDIC ensured the prompt payment of insured sums and dividends to uninsured depositors and other eligible claimants.
“A cumulative amount of N6.82bn was paid to 528,277 insured depositors of the 48 DMBs in-liquidation as at August 31, 2014.
“While for the 186 closed MFBs, the cumulative amount of N2.75bn had been paid to 80,059 verified depositors as at 31st August, 2014.”
Despite these achievements, the MD, however lamented that the corporation is still being faced with a lot of challenges.
Some of them are its inability to locate some of the closed Primary Mortgage Banks whose licenses were revoked by CBN; litigations by former shareholders of closed banks and creditors of the closed banks.
Others are unsatisfactory rendition of returns by some MFBs; and delays in the legal and judicial process in relation to failed banks cases.
For instance, he said till date, Peak Merchant Bank one of the 36 banks closed between 1994 and 2003 is still contesting the withdrawal of its license in court while Savannah Bank is yet to resume operation after court had passed judgment in its favour.
This, he lamented had made it difficult for innocent depositors of the two banks to have access to their trapped funds.
He also said awareness about the corporation’s activities remains low despite all the efforts to improve it, noting that a recent survey on public awareness commissioned by the corporation, indicated that the level of awareness was about 40 per cent.
Despite the challenges facing the corporation, the NDIC boss said the board, management and staff are determined to ensure that it achieves its broad mandate of protecting depositors and providing a stable financial system in Nigeria.