The Central Bank of Nigeria, CBN, has protested the proposed amendment being sought by the Nigeria Deposit Insurance Corporation, NDIC, to its enabling Act, describing the move as attempt to usurp its core mandate. Expressing the apex bank’s concern 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 Bank ing, Insurance and other Financial Institutions in Abuja, the CBN Governor, Mr. Godwin Emefiele, specifically urged the National Assembly to refuse the proposal. The governor, who was represented by his deputy, Sulieman Barau, said the amendments to the NDIC Act, if allowed, were capable of causing chaos and anarchy in the financial sector. He said some of the proposals sought to confer coordinate functions and powers on the NDIC, pointing out that the Corporation, being the undertaker cannot seek to be a judge and prosecutor in its own case. Specifically, Emefiele noted that the implications of the proposed amendment would make the NDIC a parallel/ coordinate regulator for banks; confer conflicting supervisory functions and powers over banks and create overlapping regulatory responsibilities. He added that the powers that in the Corporation sought to assume and exercise and their consequences included, the 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 clarified: “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.” He explained that in view of the reasons given, it was essential that NDIC must flow from its primary function, which is the basis for its establishment, that is, Deposit Insurance, adding that it is 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. In his defence of the move by the NDIC to amend its Act, the Managing Director, Alhaji Umaru Ibrahim, said even though CBN may perceive the proposed amendments as incursion into the mandate of the bank, in reality, NDIC was not seeking any role outside its lawful mandate. Ibrahim said that the Corporation was seeking the amendments to ensure safety and soundness in the banking system just as he pointed out that the NDIC was not in competition with the CBN but however cherish its operational independence and mandate as provided by its Act. Ibrahim 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. “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, 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.” Recalling that for about 25 years, the Corporation has been playing its roles effectively in the financial system, the NDIC boss explained that what it was trying to do through the proposed amendments to its enabling Act is to add value and enhance financial systems stability, especially the banking system. Earlier, Senate President, David Mark, had 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. Represented by Senate Leader, Victor Ndoma-Egba, the Senate President expressed the hope that the exercise, if successfully completed, would produce results that are acceptable to the generality of the citizenry. Chairman Senate Committee on Banks, Insurance, and other Financial Institutions, Bassey Otu, said the repeal and re-enactment being sought in the Bill was targeted at revitalising and enhancing the operational framework of the nation’s financial institutions and in essence strengthens their capacities in addressing challenges in line with international best practices. The Minister of State for Finance, Bashir Yuguda, who was 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 stressed the need for observed differences to be settled amicably in order to enhance stability of the banking sector.
The Guardian
