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Bank Supervision in the NDIC is the responsibility of three departments, namely, the Bank Examination Department (BED), the Insurance & Surveillance Department (ISD) and Special Institutions Investigation Department (SIID).  As the names imply, on-site examination is carried out by BED and SIID while the ISD is charged with the responsibility of maintaining off-site surveillance over all insured banks.  These functions however overlap and are complementary.  Both the on-site and off-site examinations seek to protect depositors’ fund and to prevent systemic failure.

Off-site Surveillance

Off-site supervision involves the receipt and analysis of returns from insured banks on a periodic basis to ascertain the banks’ compliance with prudential regulations.  Returns, basically, are requirements of the regulatory/supervisory authorities from the banking institutions which are made on determined periodic basis to assist in ensuring that the banks conform to desired operating rules.  Two categories of regulatory returns can be identified.  These are statutory and non-statutory returns.  Statutory returns are the returns that must be made by financial institutions as provided for in various acts governing the banking business.  Non-statutory returns on the other hand are those returns which the regulatory/supervisory authorities can require from banks in their day to day operations.  These non-statutory returns are usually called for by means of circulars or questionnaires.

Returns required to be prepared and submitted by financial institutions in the system are expected to be made in specified formats in accordance with instructions and in a consistent manner.  The specified returns formats can only be charged or varied by the regulatory/supervisory authorities.  All items are to be completed with no item left blank.  Presently, the periodicity and types of bank returns can be categorized into the following:
- mid-month;
- monthly;
- quarterly; and
-  semi-Annually/Annually

Others are irregular, depending on the financial environment as well as the objective of the regulatory/supervisory authorities.

Upon the receipt of the appropriate returns by the Insurance and Surveillance Department (ISD), they are first checked for completeness, accuracy and consistency before they are analysed with the aim of identifying salient problem areas in the banks’ operations and to proposing appropriate remedies to the banks.  The analysis which takes the form of spreadsheets and ratios are in turn further subjected to level, trend, peer and industry analysis.  The analysis is concluded with a report on the condition and performance of individual banks and the industry.  A recurrent feature of these reports is the rating/ranking of individual banks and recommendation for corrective action in areas where weaknesses are observed.  Information from off-site surveillance serves as the basis for identifying potential financial distress in the individual banks.  On confirmation of distress through on-site examination, supervisory measures are adopted to contain the situation and maintain stability.  Those measures may include granting of loans, take-over of the management of the bank or directing the bank to make specific changes in its management.  The adoption of any of the measures will depend on the severity of the problems identified.