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Bridge bank option prevents systemic crisis in banking operations- NDIC

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Bridge bank option prevents systemic crisis in banking operations- NDIC

Adopting the Deposit Insurance Corporation (NDIC) bridge bank option has averted a systemic crisis and insured N1.021 trillion of deposits that ensured depositors access their fictitious funds and services.

Mr. Bello Hassan, Managing Director of the NDIC, unveiled this on Saturday at the Editors Forum 2021 with the theme “Enduring Extreme Disruptions: Resilience and Reinvention for the Stability of the Banking System and Deposit Insurance” in Lagos .

He said various fault-resolution initiatives such as Open Bank Assistance (OBA), Purchase & Assumption (P&A) and Mergers & Acquisition (M&A) had been adopted to solve problems at various banks since 1989, culminating in the novel Bridge Bank option.

A bridge bank is an institution created by a regulator or central bank to operate a failing bank until a buyer can be found.

The bridge bank is generally established as a supported deposit insurance organization or official regulator and can be instituted to avoid systemic risk and provide an orderly transition that avoids negative effects.

Some of the tasks of a bridge bank are to assume the deposit and fulfill the commitments of the failing bank, so that the service to the retail clients is not interrupted, and to service the existing loans guaranteed to avoid their interruption or premature termination.

These tasks are carried out on a temporary basis (usually for a maximum of two to three years) to allow time to find a buyer for the bank as a going concern.

Hassan explained that the option has so far secured N1.021 trillion of deposits that ensured that depositors had continuous access to their fictitious funds and services.

“The implementation of the Bridge Bank option also saved more than 12,667 jobs, while more than 877 branch networks and services of the affected banks were maintained.

“The Corporation’s achievement in paying guaranteed sums and settlement dividends speaks volumes about its commitment to fulfilling its unique mandate.

“NDIC had paid a cumulative sum of ₦ 8,268 billion to 443,946 insured depositors and ₦ 100,080 billion to uninsured depositors of bank deposits in liquidation as of September 30, 2021.

“It also paid N3,413 billion to 90,945 microfiche bank insured depositors and £ 1,218 million to uninsured depositors.

“Along the same lines, the accumulated insured amount paid to 1,553 depositors of closed primary mortgage banks as of September 30, 2021 amounted to N110.15 million, while ₦ 7.965 million were paid as uninsured deposits.

More importantly, the payment of N1 274 billion to 991 creditors and £ 4.886 billion to 965 shareholders of banks in liquidation as of September 30, 2021 underscored the Corporation’s success story in bank liquidation.

“What this implies is that the Corporation had made sufficient assets to pay all the insured and uninsured depositors of the banks who come forward for payment. Currently, 19 of the 49 DMBs in liquidation fall into this category, ”he said.

Hassan called on publishers to continue to partner with the NDIC in spreading its mandate to Nigerians in order to improve service delivery.

“Through a better understanding of our programs and policies, it is believed that you will not only provide informed scrutiny and analysis of our activities, but will also assist our other stakeholders in obtaining the correct information on NDIC’s role as a member of the fictitious security. net, and DIS’s contributions to the stability of the nation’s fictitious system. “

Two papers were presented; “Resilience and reinvention strategies for the deposit insurance system in the face of extreme disruption in the banking system” Babatolu, Director of Banking Examination, NDIC and “The role of the Deposit Insurance System (DIS) in the Resolution of Failures Gana, Director, Insurance and Surveillance, NDIC.

The documents focused on various measures taken to clean up the fictitious sector to face current challenges, steps implemented to mitigate failures and ensure that depositors are adequately served while conducting business with fictitious institutions in the country.

Source: NAN

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