CBN rejects regulatory powers for NDIC in Amendment Act

Oscarline Onwuemenyi 10 March 2015, Sweetcrude, Abuja – The Central Bank of Nigeria has rejected a proposed amendment to the Nigeria Deposit Insurance Commission (NDIC) Act which seeks to confer supervisory functions and powers on the commission over banks, saying it would create overlapping regulatory responsibilities for the NDIC.

The CBN said the amendment would make the NDIC a parallel/coordinate regulator for banks as CBN, thereby usurping its powers,adding that the proposed powers were capable of causing chaos and anarchy in the financial sector.
Governor of CBN, Godwin Emefiele, made this position known at a one-day public hearing on the NDIC Act 2006, Cap N102 LFN 2012 (repeal and re-enactment) Bill, 2015 organised by the Senate Committee on Banking, Insurance and other Financial Institutions, in Abuja.
Emefiele said the amendments being sought to the NDIC Act should be rejected as NDIC, being the undertaker, could not seek to be a judge and prosecutor in its own case.
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 minimiser and that depositors of distressed banks and other deposit taking financial institutions are paid in good time to avoid delays.
He said the amendments being sought to the NDIC Act should be discarded because if passed into law, they would cause confusion and anarchy in the financial sector.
According to him, some of the proposals were designed to confer coordinate functions and powers on the NDIC, which are part of the core functions of the CBN.
“The implications of the proposed Act will make the NDIC a parallel/coordinate regulator for banks as CBN confers conflicting supervisory functions and powers on NDIC over banks; and create overlapping regulatory responsibilities for the NDIC,” he stated.
Emefiele also said the powers that NDIC sought to assume and exercise included: licensing banks, supervising banks without reference to the CBN, determining the licences of banks and power to appoint itself as liquidator.
The CBN Governor, who was represented by his deputy, Suleiman Barau, further noted that, “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.”
He added, “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, he said, 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.”
On his own. Part, NDIC Managing Director, Alhaji Umaru Ibrahim, said the Commission was 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 cherished its operational independence and mandate as provided by its Act.
He said, “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 these have been resolved and will be resolved.”
He added that, “We are for collaboration; we are for the safety and soundness of the system. We are not in competition with the 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. 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 was 25 years ago and I don’t 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.”
Earlier, Senate President David Mark, while declaring the public hearing open, had said the exercise was aimed at obtaining authentic information from various stakeholders to enhance and guide the Senate in its legislative functions.
Mark, represented by Senate Leader, Victor Ndoma- Egba, noted that, “It is hoped that this exercise, if successfully completed, will produce results that are acceptable to the generality of our citizenry.”
Chairman, Senate Committee on Banks, Insurance, and other Financial Institutions, Senator Bassey Otu said the amendments being sought in the bill were targeted at revitalizing and enhancing the operational framework of the nation’s financial institution and in “essence strengthen their capacities in addressing challenges in line with international best practices.”


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