The Nigerian Deposit Insurance Corporation (NDIC) has commenced steps to introduce a risk-based deposit insurance premium for Deposit Money Banks (DMBs) and other insured financial institutions.
This was disclosed by the Managing Director and Chief Executive Officer of the NDIC, Bello Hassan, at a workshop organized for Business Editors and Finance Correspondents Association of Nigeria (FICAN) in Ibadan, themed, “Enduring Extreme Disruption: Resilience and Reinvention for Banking System Stability and Deposit Insurance,”
The approach of the annual deposit insurance premium based on the accessed risks of each bank would eliminate the universal premium and save money for banks with low risk.
What NDIC is saying
Hassan stated that the risk-based approach was strongly reviewed by the commission.
He said, “We have commenced the review of our approach to the determination of premium by banks to make it more risk-based, such that, the probability of the risk crystallizing, becomes a major factor in the pricing methodology of our premium going forward.
“And so we are looking at various scenarios under the reverse framework but essentially we want to make it risk-based looking at the various factors that could impact on the viability of the bank to be able to say that maybe this is the number of banks that might likely collapse.”
The framework was being considered to make it easier to support insured institutions that have seen some difficulty.
Hassan said, “We have identified the need to reconsider our framework, to provide realistic terms and conditions that will enable qualifying insured financial institution promptly access technical and or financial support, in line with S.(2)(1)(b) of the NDIC Act.
The NDIC boss said the Corporation’s key focus, therefore is to scale up the deposit insurance framework; provide timely support to insured institutions as and when required; ensure faster and orderly resolutions of liquidated insured institutions; as well as continue to assist the central bank in promoting the stability of the banking system.