NDIC Grants N192.6b Rebate to Banks

Fri, Jan 30, 2015
By publisher

Banking Briefs


THE Nigeria Deposit Insurance Corporation, NDIC, has granted a cumulative sum of N192.6 billion in deposit insurance premium rebate to deposit money banks, DMBs, between 2012 and 2014. Also, it has reduced the deposit insurance premium rate to all DMBs in the country as part of efforts to stabilise the financial system and promote public confidence in the banking industry.

Umaru Ibrahim, managing director, NDIC, said the premium reduction policy had been initiated to consolidate on the gains achieved by the corporation’s migration from Flat Rate Premium System, FRPS, to Differential Premium Assessment System, DPAS. The DPAS approach takes into consideration the risk each bank poses to the system and encourages banks to adopt sound risk management practices.

According to him, by 2012, 2013 and 2014, the NDIC had granted a total rebate of N53 billion, N63.6 billion and N75.98 billion, respectively to banks. He said that the NDIC Board had granted additional relief to the DMBs at its last meeting in September 2014, reducing the insurance premium basis rate from the existing 40 to 35 basis points.

The NDIC boss said the new premium rate had already taken effect this month. He stressed that the insurance premium rebates were part of the NDIC major contributions toward improving the intermediation role and other banking related activities of the DMBs. He said the Principle 11 of the Core Principles for effective deposit insurance system requires Deposit Insurance Agencies, DIAs, to set aside adequate funds to ensure depositors’ prompt reimbursement in the event of any bank failure.

He disclosed that the corporation would from 2015 set new coverage levels for the DMBs in view of their relatively large volumes of deposits. The NDIC had initiated the insurance premium rebate since the commencement of DPAS in 2008 but the import began in 2010 sequel to the board’s decision to contribute to the financial stability fund that was spearheaded by the Central Bank of Nigeria, CBN.

The corporation had supported the fund through the reduction of premium base rate from 50 to 40 basis points to reduce the premium burden on the DMBs. It currently administers three types of funds including Deposit Insurance Fund, DIF, for DMBs, Special Insured Institutions Fund, SIIF, for MFBs and PMBs and Non-Interest Deposit Insurance Fund, NIDIF, for non-interest banks. Premium collection from the insured banks contributes substantially to the funds available to the NDIC to discharge its mandate and covering 97 percent of the bank depositors-an indication of adequate coverage and appropriate pricing.

AMCON Gives Mainstreet to Enterprise Bank

THE Asset Management Corporation of Nigeria, AMCON, on Tuesday, January 27, transferred the ownership of Mainstreet Bank Limited and Enterprise Bank Limited to their new owners, Skye Bank Plc and Heritage Bank Limited, respectively.

Mustapha Chike-Obi

At the divestment ceremony held in Lagos, Godwin Emefiele, governor, Central Bank of Nigeria, CBN, warned against a recurrence of the factors which led to the takeover of the three bridged banks. He commended AMCON and the interim management of the Enterprise and Mainstreet banks for assisting the CBN to stabilise the bridged banks and restore them to good financial health.

According to him, if the bridged bank option had not been adopted in 2011, the systemic crisis in the banking system might have been unprecedented and costly in terms of its effects on the banking industry. “I thank those who acquired the banks and I wish them well. That kind of thing that happened in the banking sector is not what you wish for a second time. I believe that we have all learnt from the process and I believe that Nigerian banks have learnt from that process,” he said.

Also, Mustapha Chike-Obi, managing director/chief executive officer, AMCON, said that the corporation followed due process in the sale of the banks. “Both Enterprise and Mainstreet Banks returned to profitability very quickly and that was based on the work the management did. This is a very happy moment for us. We have not finished, we have one more bank to go,” he said.

Also, Kola Belgore, chairman, AMCON, disclosed that the bridged banks had been restored to financial solvency, and that the Mainstreet Bank’s profit at the end of December 2014 stood at N13 billion, while Enterprise Bank recorded a profit of N3 billion.

Speaking at the event, Ifie Sekibo, managing director, Heritage Bank, assured stakeholders of value from the transaction at the end of the year. Timothy Oguntayo, group managing director, Skye Bank, said the bank saw value and synergies in the acquired bank and promised to harness and optimise the value.

AMCON had announced both Skye Bank and Heritage Bank as the preferred bidders for Mainstreet Bank and Enterprise Bank, respectively in the last quarter of 2014. Both banks had since completed the payments for the 100 percent shares of the two acquired banks, and are currently conducting a process for seamless integration.

— Feb. 9, 2015 @ 01:00 GMT