… as CBN, NDIC contend for management of dormant accounts’ fund
In the bid to safeguard the banking and financial sector from another round of crisis, the House of Representatives on Monday unveiled plans to amend the Bank and Other Financial Institutions Act (BOFIA) with the view to provide for stiffer sanction against defaulters.
The lawmakers, who expressed displeasure over the crisis that led to the injection of over N5 trillion into the deposit banks in 2009, further frowned at the non-enforcement of extant financial regulations and the need to provide for punitive measures against apex bank staff, deposit banks’ directors, shareholders and auditors who compromise in the cause of discharging their functions.
Specifically, Jones Onyereri, chairman, House Committee on Banking and Currency, expressed displeasure over the spate of infractions committed by deposit banks, which give loans to directors, shareholders and their relatives above the stipulated threshold in the BOFI Act.
Onyereri expressed the concern during the public hearing on the bill, which seeks to amend the BOFI Act to among other things establish a Deposit Fund at the CBN for standardisation and management of Dormant Accounts in accordance with international best practices and for other related matters.
From the total 94.388 million activated accounts being operated by financial institutions operating in the country, only 64.128 million accounts (68.7%) are activate, leaving 30.26 million (32.42%) unactivated, according to the Nigerian Inter-Bank Settlement System (NIBSS) report.
In its year-to-date (YTD) analysis as at October 2016, NIBSS report showed that a total of 4.13 million accounts have become dormant within the period, thereby raising the dormant account from 26.042 million out of the 85.018 million accounts as at the end of Q4, 2015.
In the bid to avert looming crisis, the lawmaker who read Riot Act to Central Bank of Nigeria (CBN) over alleged laxity in the enforcement of extant financial regulations, requested for details and utilisation of the money accrued Sinking Fund being managed by CBN.
“I’m worried to the extent that if you look at the BOFI Act amendment bill, you will agree with me that most banks create unnecessary infractions. How will you ask a bank to pay N100,000 for an infraction, that is why the bank can afford to give themselves billions of credit facility at the expense of the depositors.
“With respect to the regulator’s, there’s nothing weighty about the consequences of not doing your job as it were because why would you have the banking supervision department and you know that the law provides that no shareholder or bank director will give credit to himself or anybody whosoever related to him or her in excess of N50,000 but you are giving billions of naira.
“CBN, you know that no bank has the authority to give any loan whatsoever without the express approval of the CBN and you allow that to happen. So the time has come to take critical look at the BOFI Act and trust me, in the next two to three months, we will come out with the amendment, enough is enough,” he said.
He noted that imposition of about N20 million on defaulting CBN Governor or Director of Banking Supervisory Department or N50 million on the Auditor who fail to bring to fore such infractions in the cause of discharging his or her responsibility, will serve as deterrent to others and forestall collapse of the financial sector of the Nigerian economy.
Speaking on the intent of the BOFI Act amendment bill on the Dormant Accounts, Kofo Alada, who spoke on behalf of CBN called for provision of ‘certain latitudes’ for CBN to manage the Dormant accounts fund.
Alada disclosed that the accrued funds into the dormant accounts would be used to finance infrastructure and help the apex bank to perform its function as lender of last resort to the deposit banks and other financial institutions in the country.
He observed that there are some depositors who are incarcerated and could not access their accounts hence were declared dormant, adding that the bill did not cover the dormant accounts as a result of liquidation.
According to Alada, the proposed dormant accounts’ bill took in part of the directive issued to deposit banks, adding that the provisions of the bill should not be limited to deposit banks but extended to specialised banks which also take deposit.
In his presentation, Belema Taribo, who spoke on behalf of Nigerian Insurance Deposit Corporation (NDIC), who urged the House to cede the management of the dormant account to the Corporation, assured that the fund will be invested in government securities as provided in the NDIC Act.
He also called for the redraft of the unclaimed funds to include: “process of local and foreign currency, drafts or any instruments not yet presented for payment by beneficiaries or funds received from may person without sufficient details as to the rightful beneficiary, judgement debt for which judgement creditor has not claimed the amount of judgement award.”
He alleged that the insider abuse is negatively affecting the banking industry, adding that there are several dormant accounts belonging to Government’s agencies and parastatals despite the introduction of Treasury Single Account (TSA).
Taribo, who explained that all the accounts under litigation would not be included in the pool of fund to be managed, called for inclusion of dormant accounts of government agencies in the bill.
According to the bill, the account categorised as dormant refers to “account that has no customer or depositor initiated transaction for a period of one year, while inactive account refers to account without transaction within six months.
The private bill, sponsored by Garba Mohammed, further seeks to eliminate the possibility of the deposit banks converting dormant accounts balances into income and to “streghten risk management and internal control process” within the financial sector of the nation’s economy.
To effect this, the bill, seeks to empower Central Bank of Nigeria (CBN) to establish a Deposit Fund through the amendment of the Banks and other Financial Institutions Act (BOFIA) Cap B3 Laws of the Federation of Nigeria 2004.
According to the proponent of the bill, unclaimed funds refers to “proceeds of local and foreign currency drafts not yet presented for payment by the beneficiaries or funds received from a correspondent bank without sufficient details as to the rightful beneficiary or a judgement debt for which judgement creditor has not claimed the amount of judgment award.”
According to the bill, every banks shall ensure that dormant account which continue to reflect in its books as deposit liabilities until the account holder eventually withdrawn his deposit or the money is disposed of on his instruction and is covered by Deposit Insurance Scheme.
When established, every Bank is expected to transfer the credit balances in deposit account with the details of the depositor which have not operated or any amount remaining unclaimed with interest accrued after the expiration of five years to the Fund.
The proposed amendment to section 26 of the BOFIA, also provides that “such fund realised shall be channels toward productive areas of the economy and thereby serve as a revolving fund.”
In case of recovery of such dormant account which has been transfered to the Depositor Fund, owner of such account already declared as dormant, the customer “shall approach the bank branch in which the account was opened and submit application for amount of unclaimed deposit along with details of deposit passbook, valid ID or any other documentary proof.”
However, Section 5 of the proposed amendment seeks to amend section 27 of the BOFIA Principal Act, by excluding “savings accounts which have no feature of both current and savings account; Government owned accounts and individual accounts that are subject of litigation.”
Subsection 2 of the proposed amendment further provides that “every Bank shall Institute control mechanism consistent with the internal banking policies when a savings account becomes inactive to prevent such accounts from being used for fraudulent purposes.”
To ensure adherence, section 6 of the amendment, provides that “any Bank or person who contravenes the provisions of the bill shall be sanctioned in accordance with the provision of section 60 of the BOFIA.
