Nigeria: NDIC says deposit insurance scheme does not cover bank directors, staff

The Nigeria Deposit Insurance Corporation (NDIC), says its Deposit Insurance Scheme (DIS) does not cover insider deposits which are made up of deposits of banks’ directors and staff.

This is to create incentives for the affected group of people to manage their financial institutions in a safe and sound manner as well as ensure good corporate governance practices.

This disclosure is contained in a series of tweet posts by NDIC on its official Twitter account, where it noted that in the event of bank failure, insider deposits would only be paid after all insured deposits had been fully paid.

The Corporation, however, noted that deposits of shareholders are covered since they are not involved in the day-to-day running of their institutions.

What the NDIC is saying in its statement

The NDIC said that entitlements of staff are settled along with creditors of the bank after all insured and uninsured deposits have been fully paid.

The statement from the corporation partly reads, “The NDIC’s Deposit Insurance Scheme (DIS) does not cover insider deposits which are made up of Banks’ directors and staff deposits. Thus, in the event of bank failure, insider deposits are only paid after all insured deposits have been fully paid.

“On the other hand, knowing that their deposits are not protected reduces excessive risk-taking by them.

“Staff entitlements are settled along with creditors of the bank after all insured and uninsured deposits have been fully paid.

“Meanwhile, individual shareholder deposits in the bank are separate from their shareholdings.

“Thus, in the event of a bank failure, those individual deposits are paid as insured deposits while shareholdings are settled after all insured and uninsured deposits, creditors and staff entitlements have been paid in full.’’

What you should know

• The NDIC was established on 15 June 1988 to strengthen the safety net for the newly liberalized banking sector, following the recommendation of former Central Bank of Nigeria Governor, Ola Vincent. The NDIC provides a safety net for depositors in the newly liberalized banking sector.
• The corporation is charged with protecting the banking system from instability occasioned by runs and loss of depositors’ confidence. It operates under the Nigeria Deposit Insurance Corporation Act (1990).
• The Corporation said that DIS was developed to protect uninformed small depositors from the risk of loss of their deposits.