NDIC Educational Resources
Q. What is Deposit Insurance?
A. Deposit Insurance is a component of a country’s financial safety net, set up primarily to protect depositors in case their bank or any other insured financial institution fails or is unable to make payments on deposits. The other components of the safety net are the supervisory and regulatory framework and the lender of last resort facility of the Central Bank.
Under Decree 22 of 1988 now replaced with the Nigeria Deposit Insurance Corporation (NDIC) Act No 16 of 2006, the NDIC is responsible for managing the Scheme established under the provisions of the Act.
The Scheme provides a formal system for the Government to address problems which may arise in the financial sector. It also helps in maintaining confidence in the financial sector as well as encouraging savings.
Nigeria is among many countries around the world which have explicit deposit insurance schemes.
Q. Why is Deposit Insurance necessary?
A. Financial institutions differ from most industrial and commercial enterprises in that they depend mainly on deposits mobilized from the public for their working capital and are highly leveraged. If a financial institution is unable to meet its obligation to depositors due to operational problems or business failure, anxious depositors may cause a run on the bank as well as other healthy institutions. The stability of the financial system and social order in general would also be at risk. Moreover, most depositors have small deposit amounts and therefore cannot cost-effectively collect information on the financial institutions they do business with. The government has therefore established a deposit insurance mechanism, under which the NDIC is empowered to provide protection for small depositors and contribute to financial and social order.
Q. What is the role and function of the NDIC?
A. The NDIC’s role is to administer the deposit insurance system (DIS) in Nigeria and protect depositors. The Corporation provides incentives for sound risk management in the Nigerian banking system, and promotes as well as contributes to the stability of the financial system. The NDIC manages two deposit insurance funds, the DIF for universal banks and the Special Insured Institutions Insurance Fund (SIIF) for licensed Microfinance Banks (MFBs) and Primary Mortgage Institutions (PMIs).
Q.Which financial institutions are covered by Deposit Insurance?
A. The deposit-taking institutions covered are:
· Universal banks (or deposit money banks)
· Microfinance banks (MFBs)
· Primary mortgage institutions (PMIs)
Q. How can I be sure that a financial institution has Deposit Insurance coverage?
A. To identify insured financial institutions, look out for an NDIC decal (sticker) displayed in the head offices and branches of all insured institutions or call our Help Line 09 460 1280; and 09 4601032 or visit our website: www.ndic.org.ng.
Q. Which financial institutions are not covered by Deposit Insurance?
A. Financial institutions not covered by Deposit Insurance Scheme include:
· Development Finance Institutions such as Bank of Industry, Federal Mortgage Bank, Nigeria Agricultural, Cooperative and Rural Development Bank and Urban Development Bank
· Discount Houses
· Finance Companies
· Investment Firms
· Unit Trusts/Mutual Funds
· Insurance Companies
· Pension Fund Administrators (PFAs)
Q. What deposits are insured by the NDIC?
A. The majority of funds received by a deposit-taking financial institution in its normal course of business are insured. These are:
Ø Savings Account Deposits
Ø Current Account Deposits
Ø Time or Term Deposits
Ø Foreign Currency Account Deposits
Q. Are foreign currency deposits in Nigerian financial institutions insured?
A. Yes. However, payments of insurance obligations are made in Nigerian currency, the Naira.
Q. What monies are not insured by NDIC?
A.NDIC does not insure monies invested in:
Ø Stocks
Ø Bonds
Ø Mutual Funds
Ø Annuities
Ø Commercial Paper
Ø Debentures
Even if these investments were bought from insured institutions. NDIC does not also insure:
Ø Federal Government Treasury Bills, Bonds and Notes as these instruments are backed by the full faith and credit of the Federal Government of Nigeria.
Finally, NDIC does not insure:
Ø Inter-bank placements; and
Ø Insider deposits (i.e. deposits made by staff, directors and other connected parties)
Ø Deposits held as collateral for loans
Q. What is the basic insurance coverage under the Scheme?
A. The basic insurance coverage limit is N500,000 (principal and interest combined) per depositor, per insured universal bank; and N200,000 (principal and interest combined) per depositor, per insured PMI/MFB.
Q. Do I have to pay insurance premiums?
A. No. Premiums are paid by insured institutions.
Q. Can I increase my coverage by depositing my monies in several insured institutions?
A. Yes. Deposits by the same depositor in different institutions are insured separately and therefore enjoy coverage of N500,000 per depositor in the case of universal banks or N200,000 per depositor in the case of PMIs/MFBs. However, to gain additional protection, deposits must be held in separate institutions and not different branches of the same institution
Q. Can I increase my coverage by opening several accounts in the same insured institution?
A. No. You cannot increase coverage by putting your monies into several accounts in the same ownership category and in the same insured institution. However, if the owners of the accounts are different, coverage is separate. The most common ownership categories are Individual (Single), Joint, Business and Trust Accounts.
Q. Who administers deposit insurance system in Nigeria?
A. The NDIC, a government – owned institution, established by Decree 22 of 1988 and now replaced with Nigeria Deposit Insurance Act No. 16 of 2006, is the agency empowered to administer the deposit insurance system in Nigeria, thereby protecting depositors. The Corporation provides incentives for sound risk management in the Nigerian banking system, and promotes as well as contributes to the stability of the financial system. The NDIC manages two deposit insurance funds, the DIF for universal banks and the Special Insured Institutions Insurance Fund (SIIF) for licensed Microfinance Banks (MFBs) and Primary Mortgage Institutions (PMIs).
Q. Is Deposit Insurance The Same As A Conventional Insurance?
A. No. Deposit insurance is different from conventional insurance in several respects. Some of the differences include the following:
a. Different Purposes
The purpose of deposit insurance is to protect the rights and interest of depositors, maintain credit order, and promote the sound development of the financial industry. It is designed to serve the public welfare with no profit-earning motive. Conventional insurance companies providing property and life insurance, on the other hand, are commercial types of insurance.
b. Different Beneficiaries
Under the deposit insurance system, insured institutions pay insurance premiums to the NDIC, which uses these funds to protect the depositors of the insured institutions. If an insured institution goes out of business or is unable to pay its deposit liabilities, the NDIC will reimburse the depositors of the failed institutions by law. The insured institution therefore is different from the beneficiaries (the depositors). With property and life assurance policies, the insured party can designate itself or another party as the beneficiary. When an insurance incident occurs, the insured party or beneficiary of a property or life assurance will claim compensation from the insurance company. The insured party can also be the beneficiary.
c. Different Functions
With property and life insurance, claims are paid by the insurer after an insurance incident. Deposit insurance claims are also paid after an insurance incident. However, the deposit insurance system in Nigeria takes active measures to keep such insurance incidents from occurring. When a financial institution experiences trouble, the NDIC uses the Early-Warning System, Off-site monitoring of insured institutions, assistance and other measures, to help the insured institution return to sound operations. It is when the troubled insured institution does not respond favourably to the measures that the insurance incident is deemed to have taken place and claims are thereafter paid.
d. Different Policy Role
Deposit insurance also plays a policy role as part of the financial safety net. In addition to fulfilling deposit insurance responsibilities toward the insured institutions which are unable to perform their deposits payment obligations or are non-viable, the deposit insurance system helps the government to establish mechanisms for withdrawing problem financial institutions from the market in order to effectively prevent the occurrence of systemic risk.
e. Different Conditions for Participation
In deposit insurance, best practice dictates that participation should be compulsory. Participation in conventional insurance contract is generally voluntary.
f. Different Coverage Levels
Under deposit insurance, best practice prescribes that the amount of coverage should be limited, whereas in the case of conventional insurance, coverage may be full.
Q. Who are the Insured Institutions Under The Deposit Insurance Scheme in Nigeria?
A. Insured institutions are all deposit-taking financial institutions licensed by the Central Bank of Nigeria (CBN) such as
Ø Universal Banks (deposit money banks);
Ø Micro-finance Banks – (MFBs); and
Ø Primary Mortgage Institutions (PMIs).
Membership is compulsory as provided under the NDIC Act No 16 of 2006.
Q. How can the public find out if a financial institution is insured by the NDIC?
A. To identify insured financial institutions, look out for an NDIC decal (sticker) displayed in the head offices and branches of all insured institutions or call our Help Lines 09 460 1280; and 09 4601032 or visit our website: www.ndic.org.ng.
Q. Which financial institutions are not covered by the NDIC?
A. Financial institutions not covered by the NDIC include:
· Development Finance Institutions such as Bank of Industry, Federal Mortgage Bank, Nigeria Agricultural, Cooperative and Rural Development Bank and Urban Development Bank
· Discount Houses
· Finance Companies
· Investment Firms
· Unit Trusts/Mutual Funds
· Insurance Companies
· Pension Fund Administrators (PFAs)
Q. How Does The NDIC Assess Premium and Who Pays For The Insurance Premium?
A. Participating institutions are required to pay annual premiums to the deposit insurance system administered by the NDIC. The premium is assessed based on participating institutions’ total assessable deposit liabilities as at 31st December of the preceding year. The assessable deposit liabilities are total deposits with the exception of some deposits listed in Section 16 of the NDIC Act 2006. The NDIC Act 2006 (Section 16(2)), has given the Corporation the power to adopt any premium assessment system to reflect developments in the industry in particular and the economy in general.
Q. How Does The NDIC Protect The Deposit Insurance Fund?
A. The NDIC protects the Deposit Insurance Fund (DIF) by investing the Fund in safe but liquid financial instruments such as Treasury Bills, Federal Government Bonds and instruments of similar nature.
Q. Does The NDIC Finance Its Operations From The DIF?
A. No, the Corporation finances all its overhead and administrative expenses from its investment income. The main sources of income of the NDIC are the proceeds from investment of the DIF in securities issued by the Federal Government. The DIF is used only for paying insured deposits when an insured institution fails as well as for granting financial assistance to deserving participating institutions.
Q. Does the Supervisory Functions of the NDIC duplicate that of the Central Bank of Nigeria (CBN)?
A. No. There is no duplication of supervisory functions, rather what exists is collaboration. For instance there is a framework whereby the Corporation collaborates effectively with the Central Bank of Nigeria through a joint committee on supervision at which both organizations are represented at very senior level. Secondly, in order to avoid duplication of supervisory functions, the two institutions share banks for examination purposes on an annual basis and when such examinations are concluded, the examination reports are exchanged. The supervisory efforts of the two institutions are sometimes conducted jointly when the need arises. Indeed, the involvement of the NDIC in bank supervision has reduced the examination cycle from about once in two years to once a year.
The Corporation supervises banks basically, to protect depositors. Banking supervision is a core function of the Corporation as it seeks to reduce the potential risk of failure and ensures that unsafe and unsound banking practices do not go unchecked. It also provides the oversight required to preserve the integrity of, and promote public confidence in, the banking system. The Corporation carries out its supervisory responsibilities through on-site examination and off-site surveillance of insured institutions.
Q. How Does The NDIC Protect Bank Depositors Against Loss?
A. The NDIC protects bank depositors against loss through:
a. Deposit Guarantee
This is perhaps the most significant and distinct role of the Corporation. As a deposit insurer, the NDIC Act 2006 guarantees payment of deposits up to the maximum insured sum (N500,000.00 to a depositor in universal banks and N200,000 to a depositor in MFBs and PMIs) in the event of the failure of a participating financial institution. Balances in all deposit accounts held in the same right and capacity by a depositor in all branches of the closed insured institution, net of outstanding debts, are aggregated to determine the maximum insured amount.
b. Bank Supervision
The Corporation supervises banks to protect depositors, ensure monetary stability and effective/efficient payment system as well as to promote competition and innovation in the banking system. Banking supervision seeks to reduce the potential risk of failure and ensures that unsafe and unsound banking practices do not go unchecked. It also provides the oversight functions required to preserve the integrity of and promote public confidence in the banking system.
c. Failure Resolution
The Corporation is empowered to provide financial and technical assistance to failing or distressed banks in the interest of depositors. The financial assistance can take the form of loans, guarantee for loan taken by the bank or acceptance of accommodation bills. On the other hand, the technical assistance may take the following forms: take-over of management and control of the bank; change in management; and/or assisted merger with another viable institution.
Q. How Does The NDIC Establish The Ownership Of A Deposit?
A. The NDIC relies on deposit account records kept by a failed bank as well as on the proofs presented by the depositor.
Q. As a Depositor Must I Apply For The Deposit Insurance Coverage?
A. No, a depositor does not need to. Under the Nigeria deposit insurance system, eligible deposit accounts in insured institutions are automatically insured at no charge to any depositor.
Q. When is Insured Deposit Payable?
A. Deposit insurance is payable only when an insured institution has been closed as a result of action taken by the Central Bank of Nigeria.
Q. What Methods of Payment Does the NDIC Use In Meeting Its Obligations To Depositors of a Failed Institution?
A. The NDIC could pay depositors of a failed insured institution either by transfer to a financial institution with instructions to effect payments to depositors on its behalf, or directly by means of issuing cheques up to the insured limit which will be collected at the NDIC’s designated centres, usually the closed bank’s offices.
Payments could also be made through Purchase and Assumption, whereby a healthy bank assumes part or all of the deposit liabilities of a failed insured bank.
Q. What Does a Deposit Transfer involve?
A. The NDIC transfers an amount equivalent to the total insured deposits of a failed insured institution to another financial institution under an agreement which will enable depositors of the failed insured institution to collect their entitlements from the financial institution.
Q. How are the Insured Sums Collected?
A. Insured sums are collected by depositors on filing their claims through the completion of relevant forms provided by the Corporation. In addition, they have to furnish the Corporation with account documents such as unused cheque books, old cheque stubs, passbooks, fixed deposit certificates, etc. Each depositor would also be required to identify him/herself with a valid identification document such as National ID Card, Driver’s Licence or International Passport. After verification of ownership of the account as well as the account balance, the depositor would be duly paid the insured sum by cheque or deposit transfer through an Agent Bank or Acquiring Bank.
Q. What Should A Depositor Of A Failed Bank Do If He or She Loses Passbook or Savings Documents?
A. The depositor would be required to present a Police report along with a sworn affidavit duly certified by the Court. The depositor would also be required to identify himself/herself with a valid identification document like National ID Card, Driver’s Licence or International Passport.
Q. Can a Depositor Leave His/Her Deposit With The Transferee Institution?
A. Yes, a depositor, if he/she wishes, can open an account with the transferee institution for the full amount or part of his/her deposit.
Q. Does The NDIC Protect The Interests Of Creditors Or Shareholders Of A Bank?
A. The primary mandate of the NDIC is to protect depositors. However, through supervision to ensure safety and soundness of banking institutions, the interest of creditors and shareholders are also protected. In the event of bank failure, creditors and shareholders could be paid liquidation dividends after depositors had been fully reimbursed.
Q. What is Liquidation Dividend?
A. This is a payment made to depositor of a failed insured institution in excess of the insured sum. While the insured sums are paid from the Corporation’s Deposit Insurance Fund (DIF) or Special Insured Institutions Fund (SIIF), liquidation dividends are paid from funds realized from the sale of the assets and recoveries of debts owed to the failed insured institution.
Q. What is the Current Insured Limit And Why Is It Limited To A Fixed Sum?
A. The insured limit is currently a maximum of N500,000 for each depositor in respect of deposits held in each insured universal bank and N200,000 for each depositor in Microfinance Bank and Primary Mortgage Institutions in same right and capacity. The amount to be reimbursed has to be definite. Limited coverage is to minimize moral hazard through excessive risk taking by bank management and depositors. Unlimited coverage could constitute a perverse incentive for excessive risk-taking.
Q. If a Depositor Has an Account in the Main Office of a Participating Institution And Also At a Branch Office, Are These Accounts Separately Insured?
A No. The main office and all branches are considered to be one institution. Therefore, the accounts would be added together and covered up to the maximum insured sum.
Q. If A Depositor Has Deposit Accounts In Different Insured Banks, Will The Deposits Be Added Together For The Purpose Of Determining Insurance Coverage?
A. No. The maximum insurance limit is applicable to deposit in each of the participating banks. In the case of a bank having one or more branches, the main office and all branch offices are considered as one bank. In summary, if a person has many accounts in one bank, all the deposits are taken together as one account even if the deposits are in various branches of the same bank. On the contrary, however, if a depositor has accounts in more than one bank, they are insured independently up to the maximum insured sum per bank.
Q. Is The Insurance Protection Increased By Placing Funds In Two or More Types of deposit Accounts in the Same Participating Institution?
A. No, Deposit insurance is not increased merely by dividing funds held in the same right and capacity among the different types of deposits available. For example, demand, time and savings accounts held by the same depositor in the same right and capacity are added together and insured up to the maximum insured sum.
Q. If A Husband And Wife Or Any Two Or More Other Persons, Have, In Addition To The Individually-Owned Accounts Of Each, A Valid Joint Account In The Same Insured Bank, Is Each Account Separately Insured?
A. Yes. If each of the co-owners has personally signed a valid mandate card and has a right of withdrawal on the same basis as the other co-owners, the joint account and each of the individually-owned accounts are separately insured up to the insured maximum sum.
Q. If A Person Has An Interest In More Than One Joint Account, What Is The Extent Of His Or Her Insurance Coverage?
A. As long as the combination of the joint accounts is not the same, the account will be insured separately up to the maximum insured limit. Where the joint accounts are owned by the same combination of individuals then the accounts will be added and the total insured up to the maximum insured sum.
Q. Are Accounts Held By A Person As Executor, Administrator, Guardian, Custodian, Or In Some Other Similar Fiduciary Capacity Insured Separately From His Or Her Individual Account?
A. Yes. If the records of the bank indicate that the person is depositing the funds in a fiduciary capacity such funds are insured separately from the fiduciary’s individually-owned account. Funds in an account held by an Executor or Administrator are insured as funds of the deceased’s estate. Funds in accounts held by guardians, conservators or custodians (whether court-appointed or not) are insured as funds owned by the ward and are added to any individual accounts of the ward in determining the maximum coverage. Account in which the funds are intended to pass on the death of the owner to a named beneficiary, are considered testamentary accounts and are insured as a form of individual account. If the beneficiary is a spouse, child or grand-child of the owner, the funds are insured for each owner up to a total of the maximum insured sum separately from any other individual accounts of the owner. In the case of a Revocable Trust Account, the person who holds the power of revocation is considered the owner of the funds in the account.
Q. When An Account Is Held By A Person Designated As Agent For The True Owner Of The Funds, How Is The Account Insured?
A. The account is insured as an account of the principal or true owner. The funds in the account are added to any other accounts owned by the owner and the total is insured to the maximum sum.
Q. Is An Account Held By Either A Company Or Partnership, Insured Separately From The Individual Accounts Of Shareholders Or Partners?
A. Yes. If the Company or Partnership is engaged in an independent activity, its account is separately insured to the maximum insured sum. The term Independent activity means any activity other than one directed solely at increasing insurance coverage.
Q. If A Depositor Has More Than The Maximum Insured Amount As Deposit In A Closed Bank, Is He Entitled To Any Further Claim For The Amount Of His Deposit In Excess Of The Maximum Insurance Paid By The NDIC?
A. Yes. In a situation where the amount of depositors’ fund in a closed bank exceeds the maximum insured amount, the owners of such accounts will share, on a pro-rata basis, in any proceeds from the liquidation of the bank’s assets with other general creditors, including the Corporation.
Q. Will The NDIC Offset a Deposit Balance held By a Customer Against The Balance Due On the Loan?
A. The NDIC will offset the balance on a deposit account, including any uninsured portion, against a loan if the loan and deposit are held by the same person or persons.
Q. Does the Borrower’s Obligations to the Institution Continue After the Institution is Closed?
A. Yes. When acting as Liquidator of a closed institution, the Corporation is acting on behalf of all creditors of that institution and its obligation is to collect all loans promptly and efficiently along with other assets of the institution.
Q. What Does Purchase And Assumption (P & A) Mean?
A. Purchase and assumption (P & A) is a merger-type transaction which involves purchasing the assets of a failed bank and assuming its liabilities by another insured bank(s).
Q. What Does Open Bank Assistance (OBA) Mean?
A. Open Bank Assistance (OBA) is a situation where a failed insured institution is allowed to continue to operate in the same name as a going concern. It may involve change in ownership and management of the bank; injection of fresh funds in the form of equity and/or loan capital; and re-organisation and overhauling of the bank including rationalization of staff and branches.
Q. What Is A Bridge Bank?
This is a situation whereby a failed bank is turned over to a new bank specifically set up to assume the assets and liabilities of the failed bank. The bridge bank would permit continuity of banking services to all customers and fully protect all the depositors and creditors of the failed bank.
Q. How can the public contact NDIC about questions and suggestions regarding deposit insurance?
NDIC has set up the following contact channels to provide customer service to the public:
a. For obtaining quick answers to your questions, call our help-line service: 09 460 1280; and 09 4601032.
b. Personnel working in the financial services industry can send comments to NDIC by mail to: The Managing Director/Chief Executive Officer, Nigeria Deposit Insurance Corporation, Plot 447/448 Constitution Avenue, Central Business District, P.M.B. 284, Abuja.
c. Information on NDIC and the deposit insurance system can be accessed from our website at: www.ndic-ng.com. You can also submit comments or questions through the web site.
Q HOW DOES THE NDIC PROTECT DEPOSITORS OF MFBs AND PMIs AGAINST LOSS
A. Each insured Microfinance Bank and Primary Mortgage Institution must meet high standard of safety and soundness in its banking practices. Adherence to these standards is determined through regular routine and special examinations by the Regulatory Authorities: the CBN and the NDIC. If despite these precautions, an insured MFB/PMI gets into financial difficulties and must be closed for purpose of liquidation, the NDIC will be on hand with cash to relieve a depositor up to the maximum of N200,000.00.
Q. DOES THE NDIC PROTECT THE INTERESTS OF CREDITORS OR SHAREHOLDERS OF A FAILED MFB OR PMI?
A. No. The primary mandate of the NDIC is to protect depositors. However, the creditors and shareholders could be protected through the supervision activities of the Corporation i.e ensuring high safety, and soundness standards which ensures that the institutions continue to exist as going concerns thereby protecting all stakeholders.
Q. WHAT IS THE PREMIUM RATE TO BE CHARGED ON DEPOSIT LIABILITIES OF MFBs AND PMIs?
A. MFBs and PMIs are to pay 8/16 of 1% (i.e. 50 basis points or 0.05%) of their certified deposit liabilities for the preceding year as premium for deposit insurance.
Q. WHAT IS BASIC INSURANCE PROTECTION AFFORDED A DEPOSITOR OF A MFB OR PMI?
A. The basic insured limit for a depositor is N200,000.00. A depositor is thus insured up to N200,000.00 in the aggregate with respect to deposits he or she holds in the same right and capacity in each MFB and PMI including branches if any. (The terms “Right and Capacity’’ refer to the nature of ownership of deposits, such as individual, joint or trust deposits).
Q. WHY IS THE DEPOSIT INSURANCE COVERAGE LIMITED TO A FIXED SUM OF N200,000?
A. The scheme was designed to protect small depositors since they are more in number and less informed about the safety and soundness of depository institutions. The insured sum had recently been reviewed upwards from N100,000 to N200,000 for MFBs and PMIs in response to developments in the financial services industry in particular and the economy in general.
Q. WHAT WAS THE BASIS OF ARRIVING AT THE GUARANTEED SUM OF N200,000?
A. The maximum Deposit Insurance Coverage was arrived at through a survey and research carried out on deposit structure in insured institutions. It was established that over 90% of depositors had balances of N200,000 and below in their accounts with each Microfinance bank/Primary Mortgage Institution.
Q. WHAT TYPES OF DEPOSITS ARE INSURED?
A. All types of deposits held in insured MFBs and PMIs are covered by NDIC insurance including:
· Savings account.
· Time / Fixed Deposits.
· Current accounts.
· Other financial products introduced purposely to mobilize deposits.
· Inter-bank takings including Money at call from other banks
Q. WHAT TYPES OF DEPOSITS OF A MFB OR PMI ARE NOT INSURED?
A. The under listed deposits are not insured.
· Collateralized deposits. (Deposits that are used to secure credit facilities).
· Insider deposits. (Deposits of Board Members, Management and Staff of the Institution)
· Funds lost by the insured institution due to robbery, theft and embezzlement.
· Donor funds i.e funds obtained by MFBs/PMIs for unlending to their customers.
· Collections i.e taxes, deposits for shares and monies collected from the public on behalf of government agencies or other organizations for services or products provided where the PMIs and MFBs serve as collection agents and the funds are remitted at agreed intervals to the CBN or a designated commercial bank.
Q. Why are Directors and Staff deposits not covered by the DIS while deposits of shareholders are covered?
A. Directors and staff deposits are not covered in order to create incentive for them to manage their institutions in a safe and sound manner and also to ensure good corporate governance practices. On the other hand, deposits of shareholders are covered since they are not involved in day to day running of their institutions.
Q. IS THE INSURANCE PROTECTION INCREASED BY PLACING ONE’S FUNDS IN TWO OR MORE TYPES OF DEPOSIT ACCOUNTS IN THE SAME MFB OR PMI?
A. No. Deposit Insurance is not increased merely by dividing funds owned in the same right and capacity among the types of deposits in the same MFB or PMI. For example, current and savings accounts owned by the same depositor in the same right and capacity in the same MFB or PMI are added together and insured up to N200,000.00.
Q. IF A DEPOSITOR HAS DEPOSIT ACCOUNTS IN SEVERAL DIFFERENT INSURED MFBs AND PMIs, WILL THE DEPOSIT BE ADDED TOGETHER FOR THE PURPOSE OF DETERMINING INSURANCE COVERAGE?
A. No. The maximum insurance cover of N200,000.00 is applicable to deposits in each licensed MFB or PMI. In the case of a MFB or PMI having one or more branches, the main office and all branch offices are considered as one institution. In summary, if a person has many accounts in one MFB or PMI, all the deposits are taken together as one account even if the deposits are in various branches of the same institution. On the contrary, however, if a depositor has accounts in more than MFB or PMI, they are insured separately up to a maximum of N200,000.00 per institution.
Q. WHAT IS THE PRIORITY OF PAYMENT OF LIABILITIES OF FAILED MFBS/PMIS?
A. Section 50 of the Banks and Other Financial Institutions Act provides that where a bank is unable to meet its obligations or suspends payment, the assets of the bank shall be available to meet all deposit liabilities of the bank and such deposit liabilities shall have priority over all other liabilities of the bank..
However, after depositors are fully paid, the ranking of other creditors is as provided in the Companies and Allied Matters Act (CAMA), namely:;
- Preferred Creditors,
-Secured Creditors,
-General Creditors.
Q. WHAT SORT OF ASSISTANCE CAN THE CORPORATION RENDER TO INSURED INSTITUTIONS?
A. The Corporation can render financial and or technical assistance depending on the peculiar situation of the insured institution. Financial assistance could be in form of interest-bearing loans that must be paid back on stated terms. Technical assistance could take the form of advisory services, restructuring, staff training, or take-over of management.
Q. IS THERE ANY ARRANGEMENT IN PLACE BY THE CORPORATION TO WAIVE OR REDUCE PREMIUM PAYABLE OVER TIME FOR INSURED INSTITUTIONS?
A. Section 12(2) of the NDIC Act 16 of 2006 provides that subject to stated conditions, part of the Corporation’s surplus can be applied to reduce premium payable by insured institutions. Furthermore, the Corporation would consider adopting differential premium assessment such that premium payable by MFBs and PMIs would be based on their risk profile.
Q. IS THERE ANY TAX ADVANTAGE IN PREMIUM PAYMENT
A. Yes. Premium paid under the Deposit Insurance Scheme is an allowable expense for tax purpose. Hence, payment of premium reduces the tax burden.