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CBN kicks against NDIC’s alleged plot to usurp role



CENTRAL Bank of Nigeria (CBN), Monday, rejected some proposed amendments to  the Nigeria Deposit Insurance Corporation (NDIC) Act, noting that they were targeted at usurping some of its core mandates.

  CBN Governor, Godwin Emefiele, who spoke at a one-day public hearing on NDIC Act 2006, Cap N102 LFN 2012 (repeal and re-enactment) Bill, 2015, prayed the Senate and the general public to reject the amendments as they are capable of causing chaos and anarchy in the financial sector.

 Represented by his deputy, Sulieman Barau, Emefiele added that said some of the proposed amendments seek to confer coordinate functions and powers on  NDIC.

  He argued further that NDIC, being the banking regulator or undertaker, cannot seek to be a judge and prosecutor in its own case. 

   Specifically, Emefiele insisted that the implications of the proposed amendment to the NDIC Act will make the NDIC a parallel coordinator and regulator for banks as CBN, thereby conferring conflicting supervisory functions and powers on the corporation over banks, as well as create overlapping regulatory responsibilities for it.

   He added that the powers that the Corporation sought to assume and exercise include, power to licence banks, power to supervise banks without reference to the CBN, power to determine the licences of banks and power to appoint itself as liquidator.

   Emefiele 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.

   “It is indeed the ingredient for chaos and anarchy and is not practiced in any financial system in the world.

  “There is also the moral hazard of the NDIC as a deposit insurer that charges premium on the basis of the riskiness of an institution which it supervises without recourse to the CBN to rate such institutions as riskier than they actually are in order to enhance the premium charged to bolster the deposit insurance fund.

 “Consequently, it is essential that the NDIC must flow from its primary function, which is the basis for its establishment, that is, Deposit Insurance.

  “Then and only then, will its role in the financial system as it relates to banks and other deposit taking financial institutions be properly defined”.

  The Managing Director, NDIC, Alhaji Umaru Ibrahim, in his presentation, said even though disagreements exist, they were not seeking any role out of their lawful mandate.

   Ibrahim added that NDIC is seeking the amendments to ensure safety and soundness in the banking system.

 He added that the agency was not in competition with the CBN but however cherishes its operational independence and mandate as provided by its Act.

   “Yes, we may have disagreements here and there, we are not reinventing the wheel. I noticed from the presentation of Mr. Barau that apparently, he may not be aware of the fact that a lot of things have been resolved.

  “We are for collaboration, we are for the safety and soundness of the system. We are not in competition with CBN. At the same time, we cherish our own operational independence and we cherish our mandate as provided by our Act.

 “I can assure you that by the time we go through the details, you will find that there are very few areas of misunderstanding or conflict that we need to resolve.

 “There are very few new things that we have introduced and some of them have been read out.”

 “But a lot of the issues still remain valid in our rules and I keep saying that the founding fathers of NDIC, who decided that NDIC should operate as a risk minimizer, in other words, given full powers to be involved in supervision and bank examination and in the liquidation among others, did not do that by mistake.

  “This is 25 years ago and I do not think anybody should take us 25 years back by abrogating the power of NDIC to continue with its mandate and all we are trying to do is to add value and enhance financial systems stability especially the stability of the banking system”, NDIC boss said.

  Senate President, David Mark, while declaring the public hearing open, said the exercise was aimed at obtaining authentic information from various shades of interest and opinion to enhance and guide the Senate in its legislative action.

   Organized by the Senate Committee on Banking, Insurance and other Financial Institutions,  Mark, represented by Senate Leader, Victor Ndoma-Egba, said: “It is hoped that this exercise if successfully completed, will produce results that are acceptable to the generality of our citizenry”.

  Chairman of the  Committee, Senator Bassey Otu, said the repeal and reenactment being sought in the Bill is targeted at revitalizing and enhancing the operational framework of the nation’s financial institutions and in “essence, strengthen their capacities in addressing challenges in line with international best practices”.

 On his part, the Minister of State for Finance, Bashir Yuguda, represented by the Director of Home Finance, Mr. Khali Zaji, noted that even though the NDIC had made giant strides since its establishment, there have been “some operational challenges that have  threatened the ability of the Corporation to discharge its mandate effectively which if left unchecked  will undermine the safety, stability and soundness of the banking system.”

 Other stakeholders who made presentations at the event however stressed observed differences to be settled amicably in order to enhance stability of the banking sector in the country.

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