CBN rebukes bill seeking more powers for NDIC

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The Central Bank of Nigeria, CBN, on Monday rejected some proposed amendments to give the Nigeria Deposit Insurance Corporation, NDIC, more powers.

A bill currently before the Senate seeks to give more powers to the NDIC to allow the body serve as a parallel regulator for banks, alongside the CBN.

The proposed amendments also seek to confer conflicting supervisory functions and powers on NDIC over banks as well as create overlapping regulatory responsibilities for the corporation.

Some of the powers include those that would ensure that applicants for banking licenses simultaneously submit to the CBN and the NDIC such applications for processing.

Such an arrangement, the NDIC said, was to ensure that it determined whether or not deposit insurance status would be granted to the bank, if and when licensed.

Other amendments sought in the proposed law include the power to remove board and management of banks based on the report of its examinations, in addition to powers to carry out the consolidated supervision of banks subsidiaries, associates and affiliates without due regard for the sector regulators of such entities.

At a public hearing on the proposed amendments to the 2006 law establishing the deposit insurance corporation, participants criticised the proposals, which they said were seeking to create overlapping regulatory responsibilities for the corporation with CBN.

Most speakers in their presentations called for caution over the issue, saying it was better for the two regulators to continue to cooperate and work together in the interest of stability in the country’s financial system.

The CBN said some provisions in the document were targeted at appropriating some of its core mandates.

The CBN Governor, Godwin Emefiele, represented by his deputy, Sulieman Barau, said the amendments should be rejected as they are capable of causing chaos in the financial sector.

“The implications of the proposed amendment to the NDIC Act enactment would make the NDIC a parallel or a coordinate regulator for banks as CBN,” he said.

“It is pertinent to mention that all the above powers, which the NDIC seeks to assume and exercise, are ostensibly to ensure that it carries out its function as a risk minimizer and that depositors of distressed banks and other deposit taking financial institutions are paid in good time to avoid delays.

“While the CBN supports the desire to pay depositors of distressed institutions in good time, the proposal to make NDIC ‘the judge and juror’ in cases involving banks is fraught with dangers and is a recipe for financial instability.

In his presentation, NDIC Managing Director, Umaru Ibrahim, denied there was any conflict with the CBN, pointing out that all the corporation was trying to do was to add value and enhance financial systems stability and stability of the banking system.

According to Mr. Umaru, though there may be some disagreements, he said most of them have virtually been resolved, adding that by the time all the issues are reviewed, it would have been established that they were in the interest of the system.

“We are for collaboration,” the NDIC boss said, “We are for the safety and stability of the banking sector. We are not in competition with the CBN. We cherish our independence and mandate,” he noted.

He said the founding fathers of the corporation decided that it would operate independently in carrying out its supervisory and banking examination functions in different jurisdictions, adding that his management would not want to be part of any arrangement that would take NDIC 25 years back.

A former deputy governor, Banking Supervision, CBN, Victor Dozie, who was one of the founding directors of NDIC, said the corporation has done well in fulfilling its mandate in terms of disclosure and liquidation of failed and terminally distressed banks without causing undue disruption of the financial system.

He cited the example of the revocation of the licenses of 26 banks in 2008, which was achieved through active collaboration with CBN without serious disclocation of the financial system stability.

Former CBN deputy governor, Financial Systems Stability, Tunde Lemo, said CBN and NDIC have always cooperated in their roles towards the stability of the financial system.

Mr. Lemo said it was important to be clear who the regulator was, to ensure the effective exercise of the monitoring and regulation of the financial system, pointing out that if NDIC needed powers to do certain things to fulfill its mandate, it should not do so in a manner that undermined the cooperation and support of the regulator.

Chairman of the Committee, Bassey Otu, said if the mandate of the NDIC as risk minimiser to ensure financial systems stability is going to be changed, the legislature would have to take a decision on whether they are going to reduce the deposit insurance system in Nigeria after 25 years.

He assured that the lawmakers would review the different presentations by stakeholders and other experts to enable come up with final document that would strengthen cooperation and collaboration to effectively monitor and supervise operations of the country’s financial system.

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