Primary Mortgage Institutions (PMIs) and Community Banks (CBs) might be mandated to have special reserve account from which deposit insurance premium and other charges would be deducted by the Central Bank of Nigeria (CBN and the Nigeria Deposit Insurance Corporation (NDIC).
Indication to this was given by the Director, Special Insured Institution Department (SIID), NDIC Mr J.I Ahimie while addressing the 4th PMIs chief executive retreat organised recently by the Mortgage Banking Association of Nigeria (MBAN).
Speaking on “ extension of deposit insurance to primary mortgage institutions by NDIC ”, he stated that “ a number of suggestions had been made on the modalities for collecting premium from PMIs and CBs . It was suggested that CBS and PMIs maintain a two per cent of their total deposit liabilities with the CBN as at 31st December every year as mandatory deposit from which NDIC’s premium and any monetary penalty can be paid. Another suggestion similar to the one made above was that each special institution should maintain five per cent mandatory reserve account with their correspondent banks from which the NDIC premium and monetary penalties can be paid”.
According to him,” the purpose of mandatory reserves is to ensure that premium from the institutions are collected without problem”. While the option which requires special institutions to maintain a percentage of their deposit liabilities as reserves with the CBN is the most viable source of getting the NDIC premium and other monetary penalties paid, getting the CBN to agree to maintain such a reserve account may be difficult because of its large work load. The other option which requires the special institutions to maintain a percentage of their deposit liabilities in a reserve account with their correspondent banks is also viable provided that the management of the special insured institutions, the correspondent banks and CBN/NDIC have an MOU (memorandum of understanding) to agree on the modality for the payment of premium and other penalty charges through the correspondent banks which maintain account with the CBN. If the proposal works out, the corporation may explore the option.”
The Deposit insurance scheme operated by the NDIC was extended to PMIs and Cbs last year in a bid to enhance public confidence in the two industries. This prompted the corporation to create the Special Insured Institution Department (SIID) to handle deposit insurance coverage of these institutions. NDIC Act simulates that each insured institution shall pay 15/16 of one per cent of their deposit liabilities as at December 31st as deposit insurance premium. Vanguard Investigation however reveal that the corporation is yet to determine what PMIs and CBs would pay as deposit insurance premium.
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