Litigations Frustrate Settling Depositors of Failed Banks – NDIC

Fri, Nov 13, 2015
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BREAKING NEWS, Business

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The Nigerian Deposit Insurance Corporation says litigation in courts frustrates its effort to pay depositors of failed banks their money

By Anayo Ezugwu  |  Nov 23, 2015 @ 01:00 GMT  |

LEGAL tussle between owners of failed banks and Financial regulatory authorities in Nigeria frustrated efforts by the Nigeria Deposit Insurance Corporation, NDIC, to completely wind up failed banks in accordance with the law. Umaru Ibrahim, managing director, NDIC, said this also affected settling of depositors and other creditors within a reasonable time.

Ibrahim, made the disclosure on Monday, November 9, at the 2015 NDIC annual sensitisation seminar for judicial officers for FCT and States High Court Judges with the theme: ‘Challenges of Deposit Insurance Law and Practice in Nigeria.‎’ According to him, without an appropriate financial safety net, rumours of problems regarding solvency or liquidity of a financial institution have the potential of turning into full-blown crisis.

Ibrahim noted that depositors’ confidence tends to be greater and the likelihood of financial crisis reduced to barest minimum if an appropriate financial safety net is put in place. He said, “The menace of liquidation-related litigations made it difficult for the corporation to completely wind up failed banks in accordance with the law and settle depositors and other creditors within a reasonable time. This is further compounded by the complex and often slow pace of litigations in our esteem courts.”

According to him, legal practitioners, court and the public at large lack proper understanding of the legal status of the NDIC as a liquidator different from its role as deposit Insurer.‎ Ibrahim, however, expressed optimism that the presence of the participants at the seminar and pledged that the corporation could count on them as committed partners in the pursuit of the NDIC vision of becoming one of the leading ‎insurers in the world.

Declaring the seminar open, Justice Mahmud‎ Muhammed, Chief Justice of Nigeria, CJN, said a proper understanding of the concept and operations of bridge banks, as well as liquidation of assets of failed banks would enable a better and informed appreciation of the legal issues arising there from, or connecting thereto.

Muhammed, who was represented by Justice Mutatkar kumasi, stated that the seminar was intended to keep the participants informed of the critical role played by the NDIC in the discharge of its statutory mandate ‎and the expected role of the judiciary in this regard. “In the discharge of its mandate, especially as pertains ‎to the resolution of banking distresses, in particular, liquidation of failed banks, some of the arcane legal issues bothering on the competing right of creditors, shareholders and depositors of such failed institutions come before your courts,” he said.

The CJN emphasised that the court decisions on these issues would set the precedent on bank Insolvency ‎Laws and practice in Nigeria, while also commending NDIC leadership for recognising and appreciating the importance of this apparent reality and collaborating with the National Judicial Institute, NJI, to actualise this laudable objective.

He added that in view of the decisive roles in the operation of the law and practice of deposit insurance and the overriding imperatives of financial system stability in Nigeria, the importance of the seminar could not be over-emphasised.

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