Digital currency threat to financial stability – Ibrahim, NDIC boss

By Tokunbo David

According to Ibrahim, the proliferation of digital currency like Bitcoin has led to the partial disintermediation of the banking system.

Since the advent of digital currency, traditional banking institutions have not remained the same again. In fact, “the fabric of the global financial stability is constantly being threatened”, says Umar Ibrahim, the Managing Director/Chief Executive Officer of the Nigerian Deposit Insurance Corporation (NDIC).

According to him, the proliferation of digital currency like Bitcoin has led to the partial disintermediation of the banking system. To curb the contagion effect, Umar said the Africa Regional Committee (ARC) of the International Association of Deposit Insurers (IADI) which he was recently elected to oversee as the Chairman, would pursue capacity building under his leadership to tackle cross-border and systemic risk crises, through collaboration.

At two different fora recently, the Annual General Meeting (AGM) of the IADI-ARC , a prelude to the IADI Technical Assistance Workshop being hosted by the Corporation in Lagos, and the familiarisation visit of the Minister of Finance, Hajiya Zainab Ahmed, to the Abuja headquarters of the corporation, Umar disclosed that investigation has already begun on the events that led to the capital erosion of the defunct Skye Bank Plc and the roles played by its officers, vowing that whoever is found guilty would be prosecuted.

The fabric of the global financial stability is constantly being threatened by one form of crises or another. These include policy normalisation in notable economies, which may result to sharp volatility and disruptions in financial markets. Another issue is the partial disintermediation of the banking system, arising from proliferation of digital currency like Bitcoin, as well as the activities of financial technology in general.

Under my leadership, the Africa Regional Committee (ARC) of the International Association of Deposit Insurers (IADI) will pursue capacity building to tackle cross-border and systemic risk crisis through collaboration. This is because Nigerian banks have operations outside the country, the increasing interconnectedness has shown that banking crisis can have contagion effects, hence the need for a system-wide approach and collaborative efforts of safety net participants and regional deposit insurance systems.

Skye Bank collapse

In continuation of the Central Bank of Nigeria (CBN) intervention in the distressed Skye Bank Plc., on the July 4, 2016, which was aimed at protecting depositors of that bank, the NDIC, in the exercise of its statutory powers, under the NDIC Act, 2006, and in consultation with the Central Bank of Nigeria, has organized and incorporated a Bridge Bank known as POLARIS Bank Limited to assume the deposit and other liabilities of the Skye Bank Plc and acquire its assets.

Consequently, POLARIS Bank Limited, has been issued operating license by the CBN , while the operating licence of Skye Bank has been revoked by the Governor of the Central Bank of Nigeria, and the NDIC has commenced the processes for its liquidation.

The capitalization Polaris Bank Limited (The Bridge Bank) is being done by the Assets Management Corporation of Nigeria (AMCON) through the injection of N786 billion to return the bank to soundness and profitability to enable its subsequent sale to credible and financially sound third parties acquirers.

The NDIC carried out the Bridge Bank option to resolve the Skye Bank Plc. in order make certain that its depositors are fully protected as their deposits with Polaris Bank limited remain insured under the NDIC Act and the customers of Skye Bank Plc. can also continue to transact their businesses with POLARIS Bank Limited thereby ensuring the non-disruption of their banking transactions. Furthermore, the adoption of the Bridge Bank model for the resolution of Skye Bank Plc., guarantees that most of the employees of that bank will not lose their jobs and they will continue their employment with POLARIS Bank Limited under fresh contracts of employment.

The NDIC, as Deposit Insurer, acted to ensure the continued safety of depositor’s funds in furtherance of the regulatory authorities resolve to proactively manage potential threats to financial system stability.

The NDIC hereby assures depositors and customers of the defunct Skye Bank that their deposits are safe and hereby encourages them to continue to transact their normal banking business with POLARIS Bank Limited.

The Directors who perpetrated in insider abuse and other illegalities in running the affairs of the defunct Skye Bank are being investigated and I can assure you that when the time comes, the relevant security and law enforcement agencies will do their work and they will be prosecuted by appropriate authorities. The primary concern of the NDIC is to ensure the safety of depositors’ funds and minimise the disruption of banking services. The Corporation used the most appropriate failure resolution option in the case of the defunct Skye Bank as it ensured that over 6,000 jobs were saved while its depositors continued to operate their accounts with the new Polaris Bank Limited which assumed its entire assets and liabilities.

The Corporation corporation will also do all it can to assist in the recovery of all the debts owed the defunct Skye Bank and other banks in liquidation.

Polaris Bank

It is a lie that Polaris Bank was not registered by the Corporate Affairs Commission (CAC). It is a total lie Normally, you register a company first, before pursuing a licence. And when the licence is approved, you register again as a bank. These have been done, so they should check properly with CAC.

Liquidated banks

A total number of 46 Deposit Money Banks (DMBs) are currently in liquidation. Since 1991, the aggregate payment to depositors, creditors and shareholders of the 46 closed banks amounted to N11.75 billion, out of which the total payments to insured depositors of the DMBs amounted to N8.252 billion.

A total of N2.89 billion was paid out to insured depositors of Microfinance Banks (MFBs) covering 81,657 individual accounts, while N69.60 million was also paid to insured depositors of Primary Mortgage Banks (PMBs). The total amount paid by the Corporation under the Fiscal Responsibility Act amounted to N175 billion.

This article provided by NewsEdge.