The Managing Director of the Nigeria Deposit Insurance Corporation (NDIC), Alhaji Umaru Ibrahim, yesterday called for the involvement of his organisation in the process of licensing new banks in the country.
Ibrahim made the call in Abuja when he appeared before the Senate Committee on Banking, Insurance, and other Financial Institutions. The hearing is part of the processes being undertaken in the ongoing amendment of the Banks and Other Financial Institutions Act (BOFIA) 2004.
According to the News Agency of Nigeria, Ibrahim told the senate committee that the NDIC should be allowed to work in collaboration with the Central Bank of Nigeria (CBN) when a new bank is being licensed. He emphasised that such a collaboration between the NDIC and the CBN would ensure that necessary fits and adequate checks are carried out before banking licenses are issued. It would also help to establish a clearer assessment of the status of financial institutions before licensing them, he stated.
Delineation of roles between the CBN and the NDIC
While commenting on the BOFIA bill, Ibrahim stressed that there is a need to clarify any over-lapping mandate between the CBN and the NDIC in order to avoid ambiguity/misconception. He specifically called for clarification regarding the resolution of failing banks, adding that the NDIC should be recognised as the primary actor in any failing bank’s resolution process. He even offered some clarification by noting that Nigeria’s apex bank only intervenes in the affairs of banks in event of a systemic crisis.
A clear delineation of roles between the NDIC and CBN would strengthen the legal framework of BOFIA 2020, Ibrahim explained.
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“In a bid to establish effective legal instruments to secure the safety and stability of the nation’s financial system, there is a need to closely examine enacting laws with a view to harmonising the positions of the NDIC and CBN in the NDIC Act 2006 and the Banks and Other Financial Institutions Act (BOFIA) 2004.
“The bill seems to suggest the option of the appointment of other entities in the liquidation of failed banks. The bill should be amended to reflect the NDIC as the sole liquidator of failed banks based on the Corporation’s core mandate,’’ Ibrahim was quoted to have said.
Speaking further, Ibrahim made the following suggestions
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- That the NDIC should seek the approval of the CBN in the implementation of supervision, control, management and distress resolution of banks as reflected in the bill.
- That directors of banks should be held liable for the causes of the failure of their banks if found to be negligent in management decisions.
- That imposition of penalties and persecution of various offenses would serve as a deterrent to officers and directors of banks.
Recall that Nairametrics already reported about the Central Bank of Nigeria asking that some adjustments be made to the BOFIA bill. In specific terms, the CBN’s Director in charge of legal services, Kofo Salam-Alada, had pointed out that the new BOFIA bill has ‘inadvertently’ omitted a clause that should normally grant the CBN Governor power to freeze any bank accounts linked to criminals, using a court order. The apex bank asked that this clause be included.
Regulatory stakeholders in the Nigerian financial services sector have been appearing before the Senate Committee on Banking, Insurance, and other Financial Institutions, to partake in the adjustments to BOFIA 2004. Nairametrics understands the BOFIA bill has already passed its second reading at the senate.