Since incorporation in 1988, the Nigeria Deposit Insurance Corporation has carried out liquidation activities on 425 financial institutions in the country.
A breakdown of the 425 liquidated banks during the period showed that 51 of them were Deposit Money Banks, 325 Microfinance Banks and 51 Primary Mortgage Banks.
The Assistant Director, Insurance and Surveillance Department of the NDIC, Mr. John Abiodun, gave the figure at the 2020 Finance Correspondents Association of Nigeria forum in Abuja.
Abiodun said through efficient and diligent liquidation activities, the corporation had successfully paid in full the deposits of customers of 18 DMBs that were both insured and uninsured.
He also said payments had been put on hold to depositors of Fortune International Bank, Triumph Bank and Peak Merchant Bank due to litigations challenging the revocation of their operating licences.
He lamented that the effectiveness of the NDIC’s efforts in failure resolution had been hampered by a number of challenges.
Some of these challenges include delays in revocation of the licences of terminally distressed banks, depositor and creditor apathy and ignorance, delay in filing claims, and recovery of debts owed the failed banks.
He said the NDIC was also concerned about the legal actions of owners of closed banks, protracted litigations, disposal of low-quality physical assets of the closed banks and provision of timely liquidity support.
Abiodun gave some of the causes of bank failure to include insider abuse, abusive ownership and weak board of directors, weak corporate governance, poor risk management process, inadequate capital, weak regulatory and supervisory measures as well as economic and political factors.
He said, “Liquidation of a failed bank through revocation of licence becomes the final bus stop when all efforts made by the shareholders and regulatory authorities do not yield the desired result.
“Once a bank’s licence is revoked, NDIC takes over for liquidation.”
Abiodun explained that before the corporation liquidated a bank, it looked out for deficiencies observed, known as early warning signals that raised red flags.
Some of the early warning signals, according to him, are aggressive growth and excessive competition for deposits, shareholder’s squabbles, frequent changes in management and ownership and change in major business lines.
Others are failure to meet the minimum Capital Adequacy Ratio of 10 per cent, rising non-performing loans to total credit ratio of above five per cent, failure to meet the prevailing minimum liquidity ratio of 30 per cent, high total expense to total income ratio and high incidences of fraud.
