The Nigeria Deposit Insurance Corporation (NDIC) has disclosed that a review of the target funding ratio (TFR) for deposit money banks (DMB) is underway.
When completed, premiums paid by banks to protect depositors’ funds will be reviewed and banks will have to pay premiums based on size.
Managing Director/Chief Executive Officer of NDIC, Bello Hassan, disclosed this at the 18th workshop for business editors and Finance Correspondents Association of Nigeria (FICAN) in Ibadan.
TFR is the ratio of funds that determines the optimal fund level that enables a deposit insurer to effectively meet its obligation to depositors.
He reiterated that NDIC is focused on the protection of depositors, especially small depositors’ funds because asides being more vulnerable, they also make-up over 90 per cent of funds in deposit money banks across the country.
Hassan said the corporation had also commenced the review of its approach for the determination of premium by banks to make it more risk-based, such that, the probability of the risk crystallising becomes a major factor in the pricing methodology of the premium going forward.
“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.
“The rationale for the review is to be able to scientifically say okay, this is what is supposed to be the deposit insurance fund that is supposed to be held at any point in time to meet risk that will
crystallise,” he said.
In his presentation on building resilience for deposit insurance, Deputy Director of Bank Examination Department, NDIC, Michael Oladele, said one of the ways to ensure resilience is to have a deposit
insurance scheme.
“We are to ensure the deposit of small depositors. More than 90 percent of depositors fall under small depositors, hence they must be protected. They are also the most vulnerable. Our mode of deposit insurance is risk minimising. Hence, we are focusing on them,” he added.
