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Liquidity: NDIC reviews framework for banks to tackle challenges

Although it affirmed that the country’s banking industry remains healthy despite the effects of the Coronavi-rus (COVID -19) crisis, the Nigeria Deposit Insurance Corporation (NDCI) has reviewed its framework that allows lenders facing liquidity problems to access financial assistance from the Corporation.

The Director, Insurance and Surveillance Department at the NDIC, Mr. Galadima Gana, stated this yesterday at the ongoing “NDIC 2020 Finance Correspondents Association of Nigeria (FICAN) Workshop” taking place in Kaduna.

He said that the framework was reviewed in order to make it more convenient for lenders to access financial support in the short to medium term, from the Corporation. According to Gana, the reviewed framework will be formally unveiled once it is approved by the corporation. He emphasized that the framework was designed to help banks that are only facing liquidity challenges and not those grappling with insolvency problems.

The NDIC Director noted that while the banking industry, like most sectors of the economy, has been impacted by the COVID-19 pandemic, its financial soundness indicators remain healthy. In his keynote address at the event, the Managing Director and Chief Executive, NDIC, Alhaji Umaru Ibrahim, said that the theme of this year’s FICAN workshop, “COVID-19 and FinTech Disruption: Opportunities and Challenges for Banking System Stability and Deposit Insurance,” was deliberately chosen to critically analyse the risks, implications and opportunities posed by the pandemic and Fintech on the Nigerian banking sector and the global financial system as a whole.

He noted that despite promising innovation and economic growth through disruption of traditional finance, Fintech disruptive financial services such as chipbased debit/credit cards, mobile and web-based payments cloud computing also posed a major challenge to regulators.

He said that the increasing sophistication and proliferation of technology in banking operations have also ushered in unintended consequences like operational and legal risks, as well as the security of consumer personal data. According to the NDIC boss: “There are two main concerns for the Corporation on Fintech: these are how to identify and insure non-bank deposit taking institutions licenced by CBN and other agencies e.g. SEC. Currently, there is an ongoing engagement with the relevant regulatory agencies on how to actualise that within the limits of legal provision.

“The second is how to tap into the potentials of Fintechs to effectively execute its business processes easily, speedily and reliably. Consequently, we look forward to modernising our data collection and analysis through the use of Fintech solutions/tools (Regtech and SupTech) to handle the following business processes better than currently being done: Risk Based Supervision (RBS), Monitoring Compliance, Premium Administration, Early Warning Signals, Stress Testing, Analysis of insured institutions’ performance etc.”

He stated that the impact of the COVID-19 pandemic and the resultant disruptions to social and economic activities had negative consequences on all countries across the world, adding that: “The threat of recession, increased national debt, increase in non-performing loans and potential financial crisis has put pressure on regulators to reassess their supervisory activities to strengthen their capabilities to address these challenges and forestall financial crisis.”

Ibrahim noted that while the issues currently confronting regulators are unprecedented, they are not insurmountable. He disclosed that the topics that would be presented throughout the workshop were carefully selected due to the critical role the media plays in shaping public perception and supporting financial stability through the effective reportage of regulators’ activities, especially NDIC’s roles in protecting depositors and promoting safe and sound banking system.

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