The reality is that the power to terminate the insurance status of any licensed bank has been in NDIC’s Act since 1988 and is therefore not a new proposal. However, due to the observation by the CBN with respect to this clause, the Corporation decided to amend that section from “Notification” to “Consultations” whenever such need arises.
Power to appoint self as liquidator
On the power to appoint itself as liquidator, one of the publications alleges that “subsequent to the power to determine the licence of a bank as detailed above, the Corporation also seeks the power to appoint itself as liquidator of the same institution”. It is pertinent to note that both the CBN and NDIC share responsibility for failure resolution. However, with respect to the appointment of the NDIC as liquidator, it was agreed between the CBN and NDIC that the provision be inserted to cater for situations where insured institutions, such as PMBs and MFBs, would have closed shop for long periods and the CBN had not revoked their licences.
Although the provision on appointment of NDIC as provisional liquidator had already been tested with the revocation of the operating licences of some MFBs, its effectiveness was very much in doubt, given the experience with the cases of the defunct Fortune and Triumph banks. It would be recalled that the NDIC was appointed provisional liquidator for both banks since 2006 but, nine years later, the NDIC has not been able to carry out liquidation activities, such as the realization of the closed banks’ assets and subsequent payment of liquidation dividends to the uninsured depositors of the banks involved. That was despite the status of the NDIC as a provisional liquidator of the banks. It is in this regard that the proposed amendment provided for the appointment of the NDIC as liquidator simpli cita in order to ensure effective winding-up of the affairs of failed insured institutions.
Curiously, the anti-amendment camp and their mouthpieces are not mentioning the following depositor-focus amendment proposals, which will amount to crass naivety to oppose:
i.) Expanding incidence for payment of insured deposits to ensure that deposit payouts are promptly made to the depositors of insured institutions where the insured institution has suspended payment or is otherwise unable to meet its obligations to depositors rather than wait until the licence of such institution is revoked by the CBN. The aim is to ensure that depositors do not suffer unduly.
ii.) The Corporation is proposing an amendment to its Act that will empower it to enforce the recommendations contained in its examination reports, thereby strengthening its supervisory capacity. This is to prevent a situation where a bank is examined and the same lapses observed in previous examinations report are repeated due to failure of bank management to implement the earlier recommendations as well as to ensure prompt corrective action is taken on problem banks.
iii.) The NDIC as conservator – The NDIC is empowered through Section 34(a) of the Banks and Other Financial Institutions (BOFIA) Act 1990 (as amended) to assume control of certain category of failing banks. However, the subsisting NDIC Act has no provision stipulating its status under such circumstances. The experience of the NDIC in such matters had shown that its status should be likened to that of a conservator. Accordingly, a problem bank which NDIC has assumed control of should be protected from attachment of its assets and the assets of NDIC against the liability of such distressed bank. The status of conservator should confer on NDIC powers that would enhance its ability to recover debts owed to the distressed bank, protect its assets and effectively manage the bank for the purpose of restructuring and rehabilitation.
iv.) Payment of insured deposits even when action challenging revocation is pending in court – The proposed amendment seeks to empower the NDIC to pay insured deposits to depositors of insured institutions whose operating licence has been revoked even when the litigation of the institution’s operating licence or winding-up is still pending in court. The proposal aims to reduce the extent to which depositors are subjected to untold hardship anytime erstwhile owners of banks whose operating licences have been revoked take the CBN/NDIC to court to forestall liquidation of their banks. Section 40(7) of the NDIC Act, meant to address the above problem, does not prevent the institution of an application in court from payment of insured deposits. Rather, it regulates the venue for hearing such applications. Accordingly, under the current practice, once an application is filed and pending determination, payment of the insured deposits cannot be done.
The proposed amendments would enable the NDIC to pay insured deposits, irrespective of such an application pending in court, as payment of insured deposits would be statutorily obligatory. The equitable doctrine of lis pendis would not operate in the face of statutory provisions compelling NDIC to effect such payment. In the event that the licence of the institution is restored, the NDIC would exercise its right of subrogation.
v.) Reduction of payout period (depositors’ reimbursement) from 90 days to 30 days – The purpose of this amendment is to guarantee prompt settlement of depositors’ insured sum by reducing the waiting period for payment from 90 days to 30 days. That means that the NDIC is seeking to commence the payment of insured deposits within 30 days.
I cannot see any iota of intent from the foregoing amendment that presents NDIC as seeking to be a parallel or coordinate regulator for banks. Rather, these amendments are intended to strengthen the Corporation to play its role as a responsible member of the financial safety-net in Nigeria working with the CBN and other critical stakeholders to ensure the safety, stability and soundness of the financial system.
On a final note, one would like to appeal to the out-going 7th National Assembly to be on the side of history and Nigerian depositors by approving these novel and credible amendments that will keep NDIC ahead of its peers.
Bashir Ibrahim Hassan
