NDIC Defends Coverage Limits For Bank Customers

• Says N500000, N200,000 for DMBs, MFBs in liquidation still up for review

BY CHINYERE OBIORA, GOMBE – Managing Director and Chief Executive of Nigeria Deposit Insurance Corporation (NDIC), Bello Hassan says the maximum coverage limit of N500,000 and N200,000 stipulated for payment to customers of Deposit Money Banks (DMBs) and Microfinance Banks (MFBs) in liquidation are adequate and in line with the recommendation of the International Association of Deposit insurers (IADI).

However, Hassan said the coverage limits are not designed to be static but subject to periodic reviews to ensure they are consistent with the public policy objectives of the Deposit Insurance System (DIS).

Hassan, who was reacting to criticisms that the coverage limits are not only small but required urgent upward review to engender stronger public confidence in the banking system, said the IADI Core Principle No. 8 on coverage limits specifically requires that the thresholds should be limited, but credible with the capacity to fully cover substantial majority of bank depositors while the rest remain exposed to ensure market discipline.

Speaking at the NDIC’s annual workshop for Business Editors and Finance Correspondents in Gombe state, he explained that it is important to have deposit insurance coverage being consistent with the Deposit Insurance System (DIS) public policy objective.

According to him, in the last 32 years, the Corporation has successfully reviewed upward the coverage limits from N50,000 at inception in 1989 to N200,000 in 2006 and N500,000 in 2010.

In the same vein, the NDIC boss said in 2016, 2017, 2018 and 2019, the total number of accounts in the Deposit Money Banks stood at 83.0 million; 99.1million; 112.0 million and 128.4 million respectively, adding that out of these numbers, the N500,000 coverage limit fully covered 99.4 per cent; 97.6 per cent; 97.5 per cent and 97.6 per cent of customers’ accounts respectively.

He said the available statistics reveals that less than three per cent of accounts/depositors are not fully covered by the prevailing coverage limits, adding that the implication is that in the event of any bank failure, above 97 per cent of depositors would be fully covered by the Corporation.

Further addressing the issue, Hassan said these statistics indicate that the Corporation’s deposit insurance coverage limits are not only adequate but robust enough to engender confidence in the nation’s banking system.

On the media interaction, the NDIC boss said; “The choice of the theme of this year’s workshop: “Enduring Extreme Disruptions: Resilience & Reinvention for Banking System Stability & Deposit Insurance” was timely.

“As economies across the globe continue to grapple with the devastating impact of the COVID-19 Pandemic, it has become expedient and highly desirable, for supervisors to come up with appropriate strategies that are required to build resilience into our financial system as we seek to provide the much-needed support to the Federal Government’s economic recovery agenda”, he said

Stressing the need for Nigerian media to do more in sensitizing stakeholders and correcting the misconception around the NDIC coverage limits, Hassan said; “In all of this, the media, the civil society groups, along with the insured financial institutions that are represented at this workshop will remain the most strategic and critical stakeholders that we cherish the most.

“Through the better understanding of our programmes and policies, it is hoped that you will not only be better informed in the coverage of our activities, but also be well-equipped to contribute to our advocacy and mobilization for a better financial system.”

Urging the media not to relent in supporting the Corporation to fully deliver on its core mandates, the NDIC Chief Executive said; “On our part, we promise to keep our doors open to your suggestions and observations, while partnering with you on capacity building and other areas of mutual benefits.”