NDIC fully settles depositors, creditors of 18 closed DMBs

Nigeria Deposit Insurance Corporation (NDIC) has fully settled depositors and other creditors of 18 insured and uninsured Deposit Money Banks (DMBs) that were liquidated.

Assistant Director, Insurance and Surveillance Department of the NDIC, Mr John Abiodun, who gave the figures in a paper Speedy Bank Failure Resolution: Strategies, Challenges and Prospects he delivered at the weekend at the Annual General Meeting and Quarterly Forum of Finance Correspondents Association of Nigeria (FICAN) in Abuja also said since its incorporation in 1988, NDIC has liquidated 425 financial institutions.

Of the 425, 51 are deposit money banks, 325 microfinance banks and 51 primary mortgage banks.

Abiodun said through efficient and diligent liquidation activities, the corporation has successfully paid in full the deposits of customers of 18 DMBs that were both insured and uninsured.

Payments were put on hold to depositors of Fortune International Bank, Triumph Bank and Peak Merchant Bank due to litigations challenging the revocation of their operating licence.

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He lamented that the effectiveness of the NDIC’s efforts in failure resolution had been hampered by a number of challenges.

According to him, insider abuse, abusive ownership and weak board of directors, weak corporate governance, poor risk management process, inadequate capital, weak regulatory and supervisory measures and economic and political factors are some of the causes of bank failure.

Abiodun also cited boardroom squabbles, the window dressing of financial statements, distress borrowing, operation of a bank within a bank and obvious financial difficulties as early signs of a bank having problems.

Some of these challenges include delays in revocation of the licenses of terminally distressed banks, depositor and creditor apathy and ignorance, delay in filing claims, and recovery of debts owed the failed banks.

He said the NDIC is also concerned about the legal actions of owners of closed banks; protracted litigations; disposal of low-quality physical assets of the closed banks and provision of timely liquidity support.

Abiodun gave some of the causes of bank failure to include insider abuse, abusive ownership and weak board of directors, weak corporate governance, poor risk management process, inadequate capital, weak regulatory and supervisory measures as well as economic and political factors.

“Liquidation of a failed bank through revocation of the license becomes the final bus stop when all efforts made by the shareholders and regulatory authorities do not yield the desired result.”