NDIC Engages CBN To Insure Licensed Non-Deposit Institutions 

Yemisi Izuora

The Nigeria Deposit Insurance Corporation, NDIC, is stepping up engagement process with the Central Bank of Nigeria, CBN, to identify and insure non-bank deposit taking institutions licenced by the bank and other Agencies like SEC.

The NDIC, said this will be facilitated using the Fintech solution which has proved to be an effective instrument to Stabilise the financial sector.

Managing Director of the Corporation Umaru Ibrahim, confirmed that currently, there is an ongoing engagement with the relevant regulatory agencies on how to actualise that within the limits of legal provision.

Speaking at the opening ceremony of the 2020 workshop for Business Editors and Finance Correspondence Association of Nigeria, FICAN, in Kaduna, Ibrahim said the NDIC is also embarking on modernization exercise of its internal data collection equally using the Fintech solution.

The Corporation is tapping 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 further noted that managing financial system risks requires collaboration. Financial system instability increases the volatility of asset prices and investor behaviour, leading to deteriorating credit conditions, increased costs to firms and households and potentially the collapse of the payment system.

According to him, There is increasing evidence that Fintech innovations have many advantages for businesses and customers.  The World Economic Forum, 2017, suggests Fintech is “disruptive”, “revolutionary”, and armed with “digital weapons”, that will “tear down” traditional financial institutions. Fintech will enhance market competition and financial inclusion.

However, the increasing sophistication and proliferation of technology in banking operations also ushered in unintended consequences like operational and legal risks, as well as the security of consumer personal data.  The recent experiences of technology giants selling consumer data without consent or authority is cause for concern.

Speaking further, Ibrahim added that managing the risks associated with emerging technology without stifling innovation has become a major theme amongst regulators and policy makers, pointing that, “In Nigeria for instance, the Central Bank recently released a draft framework for regulatory sandbox operations to encourage innovation, especially for Startups. The NDIC equally established an ‘Innovation and Fintech Unit’ to drive its agenda for emerging technology and provide solutions to improve the safety of depositors and the banking system.”

According to McKinsey & Company, Nigeria is now home to over 200 fintech standalone companies, plus a number of fintech solutions offered by banks and mobile network operators as part of their product portfolio. Between 2014 and 2019, Nigeria’s bustling fintech scene raised more than $600 million in funding, attracting 25 percent ($122 million) of the $491.6 million raised by African tech startups in 2019 alone—second only to Kenya, which attracted $149 million.

From the foregoing, it becomes evident that the theme of this conference is informed by emerging developments in the Fintech space and the expected long-term effects of the pandemic on the financial system, which will largely be determined by our actions in promoting innovation while also strengthening bank stability, the managing director said.

He said that the issues confronting the country today are indeed monumental and unprecedented but not insurmountable.

He observed that the critical role of the media is central in shaping public perception and suporting financial stability through the effective reportage of the regulators’ activities, especially NDIC’s roles in protecting depositors and promoting safe and sound banking system.

“This is the motivation behind the specific selection of topics that will be presented throughout the workshop. They will examine the risks and opportunities the COVID-19 pandemic poses to the financial system and deposit insurers, the appropriate regulatory response to Microfinance Banks and Primary Mortgage Banks, Risk Management Strategies in the Banking Industry, Challenges of Consumer Protection and most importantly, the Role of the Media in Promoting Financial Stability in the COVID-19 era. The workshop has been designed to be interactive and engaging to foster a better understanding and developing proactive measures to address the emerging issues.”

Speaking on the theme: “COVID-19 & FinTech Disruption: Opportunities & Challenges for Banking System Stability and Deposit Insurance”. Ibrahim stated that the theme aptly captured the current concerns of all stakeholders within the local and global economic and financial landscape.

“The theme was carefully 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.”

The impact of the COVID-19 pandemic and the resultant disruptions to social and economic activities had negative consequences on all nations across the world.

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.

On the other hand, he said FinTech is simply the common term used to describe the technology (internet, mobile devices, software app, cloud services and many more) that are used in delivering important financial services that were exclusive to traditional financial institutions. Despite promising innovation and economic growth through disruption of traditional finance, Fintech disruptive financial services such as chip-based debit/credit cards, mobile and web-based payments cloud computing also poses a major challenge to the regulatory paradigm.

 

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