Abuja – Mr. Bello Hassan, the Managing Director, Nigeria Deposit Insurance Corporation (NDIC) Bello Hassan, on Tuesday emphasise the need for a system-wide approach that will involve collaborative efforts of financial safety-net participants and regional deposit insurance systems in managing crises in the insurance sector.
Hassan made this emphasy in Abuja at the ongoing International Association of Deposit Insurers (IADI) Africa Regional Committee (ARC) workshop with the theme: “Normality in Turbulent Periods; the Stabilizing Role of Deposit Insurance“
The workshop which brings together Deposit Insurance organisations from more than 15 African countries seek to explore issues such as the role of deposit insurance in early detection and timely intervention in resolving bank failures as well as crisis management and strengthening operational resilience of deposit insurance agencies.
The Apex deposit insurance boss said that the 2007-09 global financial crises and the COVID-19 pandemic exposed the relevance of deposit insurance in stabilising turbulent banking systems and as buffer for financial system stability.
Hassan said: “As we are all aware, the fabric of the global financial stability is constantly being threatened by one form of crisis or the other. The potential threats at present, include the Russia-Ukraine war, cyber threats posing increasing risks to financial institutions, slow growth, increasing inflation and tighter global financial conditions which may all exacerbate pre-existing vulnerabilities.
“Growing financial inter-connectedness has shown that banking crisis can have contagion effects. A system-wide approach to crisis management, involving collaborative efforts of the financial safety-net participants and regional deposit insurance systems is therefore highly imperative.
“It is noteworthy that both the 2007 – 09 global financial crisis and the COVID-19 pandemic exposed the increasing relevance of deposit insurance in stabilising turbulent banking systems and as buffer for financial system stability.
“Furthermore, the crises led to the review of some of the design features of explicit deposit insurance system in many countries to accommodate emerging developments in the domestic and global financial system.
“This Workshop therefore creates a veritable platform for knowledge and experience-sharing in fulfilling the vision and mission of IADI.
“I am optimistic that at the end of this Workshop, strategies for system-wide crisis preparedness and resolution options in promoting financial stability in the region would emerge.
Speaking further, Hassan who acknowledged the close collaboration with other safetynet participants in the financial sector, especially the Central Band of Nigeria (CBN), said the Corporation provides deposit insurance protection to depositors of 33 Deposit Money Banks (DMBs) comprising 24 commercial banks, 6 Merchant Banks and 3 Non-Interest Banks (NIBs) and 882 Microfinance Banks (MFBs); 34 Primary Mortgage Banks (PMBs); 3 Payment Service Banks (PSBs), and 29 Mobile Money Schemes.
He noted the adoption of different resolution mechanism by the NDIC in resolving the failure of distressed deposit-taking financial institutions in the country.
“The liquidation activities of the NDIC involved 467 insured banks in liquidation, comprising 49 DMBs, 367 MFBs, and 51 PMBs, at end-December 2021.
“The successes recorded by the NDIC in the execution of its mandate, would not have been possible without the strong support and collaborative efforts of other financial safety-net players in Nigeria like the CBN, the Federal Ministry of Finance, Budget and National Planning and other members of the FSRCC,” he said.
‘The NDIC as one of the resolution authorities in Nigeria, has adopted different resolution mechanisms in resolving the failure of distressed deposit-taking financial institutions in the country. The liquidation activities of the NDIC involved 467 insured banks, comprising 49 DMBs, 367 MFBs, and 51 PMBs at the end-December 2021.
On her part, Mrs. Zainab Ahmed, Minister of Finance, Budget and National Planning, commended NDIC and CBN for keeping the nation’s economy resilient despite extremely challenging economic environment.
Ahmed, said in spite of the challenges that plagued the economy, no depositors’ fund was lost due to the effectiveness of financial sector regulatory agencies.
“The Nigerian economy, like others, felt the brunt of the global economic distortion, having to go into recession twice in the space of five years. However, given the resilience of the nation’s financial system, we came out within months.
‘We also make bold to say that despite these economic challenges, no depositors’ fund was lost given the effectiveness of our agencies, most especially the CBN and the NDIC.
“It is well known that DIS, thus provide financial guarantee to protect depositors in the event of bank failure and therefore forms a critical component of the financial safety-net arrangement. This guarantee offered by the DIS plays a major role in strengthening depositor confidence in the financial system during crisis.
“Deposit insurers play an effective role during crisis by way of performing the roles and responsibilities as stipulated in their mandates. The NDIC, which was established in 1989, with a mandate of a risk minimizer, has since inception and most especially during critical times been able to allay the fears of depositors through; its wide array of public enlightenment/education programmes, collaboration with the CBN in the efficient supervision of insured institutions to promote sound risk management which reduces likelihood of failure and effective resolution of failing banks. All these have helped to improve public confidence, protect depositors and promote the stability of the Nigerian financial system.
It is worthy of note that, the success recorded by NDIC can be attributed to the effective collaboration with other safety-net participants in Nigeria, particularly the CBN, the Federal Ministry of Finance and other members of the Financial Services Regulation Coordinating Committee (FSRCC),” Ahme said.
Also speaking the NDIC Board Chairman, Mrs Ronke Sokefun, said the workshop was organised so as to serve as a forum to dissect pertinent issues, share experiences, compare notes and elevate our understanding of the role of deposit insurers in: early detection and timely intervention; contingency planning and crisis management; crisis simulation to strengthen operational resilience; and contingency planning framework for a safer, and more resilient financial system, that is supportive of sustainable economic growth in each jurisdiction.
“The presence of global experts from both fiscal, monetary, supervisory and regulatory agencies, and Deposit Insurers in gathering like this, is a manifestation of our commitment towards having robust and sustainable system that can detects problem early enough and manage crisis adequately in the banking system to foster financial system stability.” She said.
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