NDIC To Increase Banks Premium On Risk-based Model

….Pledges Support To Insured Institutions Facing Financial Challenges

The Nigerian Deposit Insurance Corporation has commenced the review of premium by banks based on their susceptibility to the risk of becoming solvent.

The Managing Director/Chief Executive, NDIC, Bello Hassan stated this Wednesday in Ibadan, during the 19th FICAN Workshop with the theme “Enduring Extreme Disruptions: Resilience & Reinvention for Banking System Stability & Deposit Insurance”.

The NDIC boss said the corporation is developing an initiative, which seeks to make sure that the insurance cover is always sufficient.

Hassan said, “we have commenced the review of our approach to the determination of premium by banks to make it more risk-based, such that, the probability of the risk crystallizing, becomes a major factor in the pricing methodology of our premium going forward.

“You know as deposit insurance, we say we have guaranteed a maximum sum so what is the risk that institution will collapse? And if it collapse, how much funding do we need to put in place to be able to make that liability that will be able to crystalize?”.

He said the corporation is currently adopting risk-based approach model of deposit insurance, under the reversed framework to determine the upscaling of the premium at any point in time.

“we are looking at various scenarios under the reverse framework but essentially we want to make it risk-based, looking at the various factors that could impact on the viability of the bank to be able to say that maybe this are the number of banks that might likely collapse and if they collapse, do we have sufficient funding to be able to make that payout?

The NDIC Managing Director/CE further disclosed that the agency is considering rolling out support to insured institutions facing financial distress.

“there have been recent calls on the Corporation to enhance the provision of support, to insured institutions that are facing financial difficulties.

“To this end, we have identified the need to reconsider our framework, to provide realistic terms and conditions that will enable qualifying insured financial institution promptly access technical and or financial support, in line with S.(2)(1)(b) of the NDIC Act, whilst also protecting the Corporation from possible downside risks”, Hassan said.

He further reiterated the determination of the current management of the NDIC, to work harmoniously with all stakeholders, to enhance the capacity of the Corporation in the discharge of its statutory obligations towards the fulfilment of the public policy objectives for which it was established.

Mr. Bello Hassan said the media, the civil society groups, along with the insured financial institutions that are represented at the workshop, will remain the most strategic and critical stakeholders of the corporation.

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