The Nigeria Deposit Insurance Corporation (NDIC) has reviewed upward, maximum deposit insurance coverage for depositors of all licensed banks..
This is important to financial institutions and depositors in event of bank failure.
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Deposit insurance is the government’s guarantee that an account holder’s money at an insured bank is safe up to a certain amount.
The Managing Director of NDIC, Mr Bello Hassan, told newsmen in Abuja on Thursday that the deposit insurance coverage level for Deposit Money Banks (DMBs) were reviewed from N500,000 to five million naira.
He said the insurance coverage for Micro-Finance Banks (MFBs) had been increased from N200,000 to two million naira which would provide 99.27 per cent coverage of total depositors.
He said that Primary Mortgage Banks (PMBs) were increased from N500,000 to two million naira with full coverage of 99.34 per cent compared with the current 97.98 per cent.
For subscribers of Mobile Money Operators (MMOs), he said that the deposit insurance coverage had increased from N500,000 to five million per subscriber, per MMO.
Bello said the Payment Service Banks (PSBs) insurance coverage had also increased from N500,000 to two million naira.
He said that adoption of the revised maximum deposit insurance coverage would be supported by the corporation’s funding, represented by balances in the various Deposit Insurance Funds (DIFs) and expected annual premium collection.
Other supports would be enhanced supervision to reduce the likelihood of bank failures, effective bank resolution frameworks and other funding arrangements provided by the NDIC Act.
Bello said that factors considered in the upward review of the coverage level were deposit distribution, impact of inflation, per capita Gross Domestic Product (GDP), exchange rate and other statistical models.
”NDIC’s mandate of Deposit Guarantee is a critical component of depositors’ protection, as it guarantees payment of deposits up to a maximum set limit in the event of bank failure.
”The deposit guarantee, covers depositors of all deposit taking financial institutions licensed by the Central Bank of Nigeria, which include DMBs, MFBs, PMBs, Non-Interest Banks (NIBS), Payment Service Banks (PSBs) and subscribers of MMOs.
”We need to stress that the high level of uninsured deposits posed a risk of bank runs.
”In line with our commitment to enhancing depositors’ protection, public confidence, financial inclusion, and stability of the financial system, I am pleased to announce that the NDIC’s Interim Management Committee (IMC), approved an increase in the maximum deposit insurance coverage levels for all licensed deposit taking financial institutions.
”The revised deposit insurance coverage has balanced the NDIC’s goals of deposit protection and financial system stability with incentives for depositors to practice market discipline and prevent banks from unnecessary risk-taking and moral hazard.
”Consideration was given to ensure that the coverage was limited but adequate enough to protect a large number of depositors,” he said.
The managing director reaffirmed the corporation’s commitment to protecting depositors and contributing to stability of the financial system.
