The institutional and legal framework for the operation of the Deposit Insurance Scheme in Nigeria.
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ABSTRACT
Due to the significant functions it plays in safeguarding depositors and contributing to the stability of the financial system, the Deposit Insurance System (DIS) has become an integral part of the majority of global financial systems. Since its formation by Nigeria Deposit Insurance Corporation (NDIC) Decree No. 22 of 1988, the NDIC, which has a deposit protection mission, has remained an active safety-net actor despite facing several formidable obstacles. Over two decades ago, when the Federal Government developed the notion of implementing the Structural Adjustment Programme (SAP), in which the deregulation of the banking sector would serve as the unwavering key pillar, it became necessary to form the company. Numerous obstacles have impeded the effective and efficient execution of the Deposit Insurance Scheme (DIS) in Nigeria by the Nigeria Deposit Insurance Corporation (NDIC). Therefore, the purpose of this study on The institutional and legal framework for the operation of the Deposit Insurance Scheme in Nigeria is to examine these obstacles and provide good suggestions. First, the company faces the difficulty of the execution of a court judgment against its assets for the liabilities of insolvent banks. This is because courts often see the NDIC as the legal heir of bankrupt banks. The sum set as the maximum deposit claim under section 20(1) of the NDIC Act, 2010 for all depositor classes, regardless of the amount of deposit lost by a depositor in the case of the collapse of a deposit-taking financial institution, is unreasonable. Thirdly, the punishment stipulated in section 45 of the NDIC Act of 2010 for noncompliance with its terms and failing to ensure the veracity of any statement filed according to the Act is less severe. As a consequence, it is proposed that the NDIC Act of 2010 be further revised to prohibit courts from executing judgment against the Corporation’s assets as a result of its statutory mission as a liquidator of bankrupt banks. The complete recovery of a depositor’s lost deposit in the case of the collapse of an insured deposit-taking institution would promote savings. In order to promote compliance, section 45 of the NDIC Act of 2010 should be amended to strengthen the severity of the penalty. For this study project, the doctrinal research methodology will be used.
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CHAPTER ONE
GENERAL INTRODUCTION
1.9 Background of the Study
In recognition of the strategic importance of a stable banking system to an economy, various institutional arrangements have evolved over time to foster banking stability; one of these initiatives is the establishment of a deposit protection scheme, which aims to mitigate the economic disruptions that result from banking instability.
The institutional and legal framework for the operation of the Deposit Insurance Scheme in Nigeria.
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