The Nigerian Deposit Insurance Corporation (NDIC) has been granted approval for an upward review of its Maximum Deposit Insurance Coverage (MDIC) from N200,000 to N500,000 per deposit for Primary Mortgage Banks (PMBs) and the extension of Differential Premium Assessment System (DPAS) to the PMBs.
According to a statement from NDIC, the approval was granted by the Hon Minister of Finance, Mrs Kemi Adeosun in a letter dated August 4, 2016 emphasizing the need for the corporation to ensure that all the Deposit Money Banks (DMBs), Primary Mortgage Banks (PMBs) and Micro Finance Banks (MFBs) strictly adhere to sound risk management practices and entrench compliance to the Central Bank of Nigeria approved code of corporate governance standard.
As part of its statutory functions as a deposit insurer, Section 20 (2) of the NDIC Act 2006, empowers the Corporation Board to periodically review the maximum deposit insurance coverage for licensed banks and other deposit taking financial institutions in accordance with changes in deposit structure, income levels and in line with global best practices.
The MDIC review is carried out through studies and surveys and is aimed at ascertaining the adequacy or otherwise of the deposit insurance coverage level for insured institutions in Nigeria. The outcome of the most recent survey that was conducted in August, 2015 revealed the compelling need for the upward review of the current MDIC for the PMBs from N200,000 to N500,000 per depositor.
The survey also revealed that the MDIC increase would cover 99 percent of depositors of the PMBs in Nigeria. The adoption of DPAS in assessing the annual premium payable by PMBs will promote better risk management in the banks in line with international best practices. Presently, over 120 countries across the globe have adopted DPAS as an objective method of insurance premium pricing.