NDIC moves to close 96 troubled financial institutions

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Nigeria’s National Deposit Insurance Corporation (NDIC) has secured court orders to wind down 96 microfinance and mortgage banks whose licenses were revoked by the Central Bank of Nigeria (CBN) in May 2023.

The Managing Director, NDIC, Bello Hassan, revealed this at a sensitisation seminar for Judges of the Federal High Court in Lagos on Thursday organised by the NDIC, to enlighten the judiciary on the intricacies of the banking industry.

Hassan said, “As at date, the Corporation had obtained Winding up Orders for 96 out of 183 Micro Finance and Primary Mortgage Banks whose licenses were revoked by the CBN in May 2023, in less than one Year of revocation.”

He added that the NDIC was committed to fulfilling its mandate of protecting depositors through bank supervision, failure resolution, and liquidation to boost confidence in the financial system.

Speaking on the role that the judiciary plays in the fulfillment of the mandate, Hassan said, “We recognise the judiciary as one of our critical stakeholders. With this, when cases are brought before them, they can receive accelerated hearing and proclamation of Justice.”

This development signifies a significant step towards resolving the insolvency issues plaguing these institutions and protecting depositors.

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Background:

The CBN’s revocation of the licenses stemmed from a period of financial instability within the microfinance and mortgage banking sectors. Factors contributing to this instability could include poor corporate governance, inadequate capital buffers, and a challenging economic environment.

NDIC’s Role:

The NDIC plays a critical role in safeguarding depositors’ funds in the Nigerian banking system. Its responsibilities include deposit insurance, bank supervision, and failure resolution. In this instance, the corporation is leveraging its legal mandate to initiate an orderly wind-down process for the affected institutions.

Impact on Depositors:

The extent of the impact on depositors remains to be seen. The NDIC has a deposit insurance scheme that covers a specific amount per depositor. However, the adequacy of this coverage and the speed of disbursement will be crucial factors in mitigating potential financial hardship.

Uncertainties and Concerns:

The NDIC’s statement does not elaborate on the timeline for completing the wind-down process for these banks. Additionally, concerns may linger regarding potential job losses within the affected institutions and the broader economic implications.

Looking Ahead:

This development highlights the importance of robust regulatory frameworks and effective risk management practices within the Nigerian financial sector. The NDIC’s actions aim to foster confidence and stability within the banking system. Further updates from the NDIC regarding the disbursement of insured deposits and the timeline for completing the wind-down process will be crucial in the coming weeks and months.