NDIC gets task to prepare for eventuality if institution fails

The Nigeria Deposit Insurance Corporation (NDIC) has been tasked to prepare for eventuality incase some insured institutions fail as a result of the general economic downturn in the country.
The Director, Research, Policy and International Relations Department, Mohammed Umar, gave his task at the just concluded 2016 NDIC workshop for Business Editor and Finance Correspondents Association of Nigeria (FICAN) in Kaduna State.
“The Corporation needs to prepare for any eventuality in case some of the insured institutions fail as a result of the general economic downturn in the country. This is important in order to ensure that the failures are resolved fast enough and in a seamless manner without causing any disruption to the system”, he said.
“It is important to note that economic recession does not imply economic stagnation, this is because recession is just a cycle it comes and goes and will end at a point in time. What is important as is our ability as policy makers and stakeholders to develop an appropriate response mechanism to ensure that it does not last and also reduce the likely impact it will have on the Deposit Insurance System, the financial sector and the economy in general”, he stated.
Umar charged NDIC and other regulatory agencies to be more vigilant in terms of regulation and supervision in order to address any problem that could arise as a result of the consequences of recession on the insured institutions.
“In order to address the likely issues of reduced collection of premium payable by the insured institutions and by extension the growth of its insured funds as a result of economic downturn and the fluctuations in the treasury bill rates, the NDIC needs to begin to explore other investment avenues/ channels in which to invest its funds”, he said.
The Director further stated that the government needed to remain focused on its efforts at diversifying the economy and other policies put in place to ensure quick recovery from the current recession. When that is done, the economic environment according to him will be conducive for the banks to operate safely which reduces that risk of failure and hence negative consequences on the NDIC.
“There should be more intensive and synergetic collaborations between and among the safely- net participants who incidentally are also members of the Financial Services Regulation Coordinating Committee (FSRCC). The activities of the committee through regular meetings as well as subcommittees and working groups should be intensified. Considering the inter- connectedness of the sub-sectors in the system, such collaboration should include cooperation with regards to issues of smooth information sharing, capacity building for all regulators and greater co-ordination of regulatory activities in the financial system”.
This, he said, could lead to efficiency in activities of all the members, greater ability to take prompt decisions as well as better position all the regulators to tackle any challenge that may arise in the various sub-sectors resulting from the down-turn being experienced.
The Director maintained that this would therefore encourage continued stability of the entire system as well as confidence in the system despite recession being experienced.