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CBN, NDIC disagree over banks’ supervision

By on July 10, 2014

The Central Bank of Nigeria, Nigerian Deposit Insurance Corporation and other stakeholders on Monday failed to agree on who should have full control over the supervision of banks in the country and guarantee the safety of depositors’ funds.

The House of Representatives is repealing and re-enacting the NDIC Act, 2006 to provide for the protection of depositors’ funds in banks.

However, at a public hearing on the bill to repeal and re-enact the Act organised by the House Committee on Banking/Currency, the CBN argued that the NDIC could not assume full supervision of the banks without reaching an agreement with it.

The CBN’s Director of Banking Supervision, Mrs. Tokunbo Martins, who gave the bank’s position, said, “The NDIC must have an agreement with the CBN before it can supervise the banks.”

Martins stated that the CBN had yet to come to terms with the real reasons the NDIC was backing the repeal of its Act, adding that the central bank would later submit a comprehensive response to the committee.

“There can never be two captains in the same ship as the NDIC cannot be on self-employment as a liquidator of banks, deposit insurer and bank supervisor without an agreement with the CBN,” she said.

But the NDIC and other stakeholders opposed the CBN, saying that the corporation could supervise as well liquidate banks if the present Act was repealed and re-enacted.

For example, a former Managing Director, NDIC, Mr. Ganiyu Ogunleye, held the view that rather than pursue a narrow route, the central bank should take a broader appreciation of the proposed law.

“This is inappropriate as we are all agencies of government working towards a common goal,” he said.

The Managing Director, NDIC, Mr. Umaru Ibrahim, told the committee that the proposed amendment of the Act would make the corporation to post better results in the future.

He stated, “Mr. Chairman, please permit me to state for the purposes of emphasis that the NDIC was established by Decree No. 22 of 1988, now the NDIC Act, 2006 to operate the Deposit Insurance Scheme in Nigeria.

“A deposit insurance scheme is a financial guarantee established to protect depositors in the event of a bank failure and also to offer a measure of safety for the banking system. The deposit insurance scheme forms part of the financial safety net necessary to reduce the risk of severe financial crises.

“Without an appropriate financial safety net, problems regarding solvency or liquidity of a financial institution have the potential of turning into a full blown financial crisis. With an appropriate financial safety net in place, depositors’ confidence is enhanced and the likelihood of financial crises is reduced to the barest minimum.”

The Fiscal Responsibility Commission and civil society organisations were among other agencies and groups that supported the bill.

On his part, the Speaker of the House, Mr. Aminu Tambuwal, was optimistic that “the amendment will shore up investors’ confidence and enhance the personal fortunes of Nigerians.”

 

 

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