Approval has been granted the Nigeria Deposit Insurance Corporation (NDIC) for an upward review of its maximum deposit insurance coverage (MDIC) from N200,000 to N500,000 per depositor for primary mortgage banks (PMBs) and the extension of differential premium assessment system (DPAS) to the PMBs.
Finance Minister, Kemi Adeosun who granted the approval in a letter dated August 4, 2016 emphasized the need for the Corporation to ensure that all the DMBs, PMBs and MFBs strictly adhere to sound risk management practices and entrench compliance to the Central Bank of Nigeria(CBN) approved code of corporate governance standards.
As part of its statutory functions as a deposit insurer, Section 20 (2) of the NDIC Act 2006, empowers the Corporation’s Board to periodically review the maximum deposit insurance coverage for licensed banks and other deposit taking financial institutions in accordance with changes in deposit structure, income levels and in line with global best practices.
The MDIC review is carried out through studies and surveys and is aimed at ascertaining the adequacy or otherwise of the deposit insurance coverage level for insured institutions in Nigeria. The outcome of the most recent survey that was conducted in August, 2015 revealed the compelling need for the upward review of the current MDIC for the PMBs from N200,000 to N500,000 per depositor. The survey also revealed that the MDIC increase would cover 99% of depositors of the PMBs in Nigeria.
The adoption of DPAS in assessing the annual premium payable by PMBs will promote better risk management in the banks in line with international best practises. Presently, over 120 countries across the globe have adopted DPAS as an objective method of insurance premium pricing.
Nigeria Deposit Insurance Corporation is an independent agency of the Federal Government of Nigeria. The objective of the deposit insurance system is to protect depositors and guarantee payment of insured funds in the event of failure of insured institutions. Apart from protecting depositors and contributing to the stability of the financial system through effective supervision of insured institutions, it also provides financial/technical assistance to eligible insured institutions through prompt payment of guaranteed sums and orderly resolution of failed insured financial institutions.
