Economy

7 Functions of Nigeria Deposit Insurance Corporation

Here in this post, we will bring you 7 functions of the Nigerian deposit insurance corporation. We hope you find this post informative an invaluable.

The Nigeria Deposit Insurance Corporation was established with some peculiar functions as an insurer. Most significantly and perhaps, the distinct duties of the Nigeria Deposit Insurance Corporation are that it helps in guaranteeing deposits payment, at least the maximum limit, according to the status, should there be any failure of a financial institution who is insured.

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Being an insurer, the Nigeria Deposits Insurance Corporation has a responsibility of seeing to it that, it supervise the activities of banks in the country.

This is very important given the fact that, it will help protect depositors, as well as, foster monetary stability. The Nigeria Deposits Insurance Corporation also go as far as, promoting competition, including innovation in the banking sector in Nigeria.

Supervision of banks is quite important, and it is an essential responsibility of the Nigeria Deposit Insurance Corporation because such activity will seek to ensure that, there is a reduction in the potential risk of organization failure. It also helps in ensuring that, the unsafe and unsound banking practices in Nigeria is stopped.

Besides the above duties, the Nigeria Deposits Insurance Corporation also saddled with the responsibility of carrying out other functions with a view to achieving its goals.

Read Also: 5 Functions of Nigeria Fire Service

What Are These Functions Of The Corporation?

As I said earlier, the Nigeria Deposits Insurance Corporation was established with a set of functions, most importantly, in the area of protecting the interest of the depositors. Without much ado, I will like to look at these functions in this article.

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1. Insures Deposit Liabilities Of Licensed Banks

As an Insurance Corporation, the Nigeria Deposits Insurance Corporation has a function of making sure that, every deposits liability of every bank in Nigeria is licensed.

This particular function of the Nigeria Deposits Insurance Corporation does not stop at licensed banks, it served also other financial organizations particularly, those ones that are insured, provided they operate in Nigeria, in accordance with section 16, and section 20 of the Act that established the Corporation.

Why? The reason is glaring. It is because it is aimed at engendering confidence in the operations of banks in Nigeria.

2. Gives Assistance To Insured Institutions

Insured institutions are given assistance by the Nigeria Deposits Insurance Corporation. Giving of this assistance is very necessary since it will help in protecting the interest of the depositors.

The has called to mind, why the Nigeria Deposits Insurance Corporation are involving into giving assistance to the insured institution, all in the interest of depositor, should there be any case, where there is imminent of financial difficulties or the actual financial problems of banks, most especially,, where there is suspension of payment thread.

In most cases too, giving of such assistance to the insured institutions by the Nigeria Deposits Insurance Corporation can help in making these insured institutions avoid damage to public confidence in the banking sector.

3. Guarantees Of Payments To Depositors In The Financial Or Banking Sector

This is another function of the Nigeria Deposits Insurance Corporation, and it is in the area of guaranteeing the payments of depositors in the banking sector.

Why is the guaranteeing of payments to depositors necessary? This is necessary because in most cases, there could be an imminent suspension of payments by insured institutions, sometimes, up to the maximum, as provided by the Act.

In other cases, there could be the actual suspension of these payments made by the insured institutions up to the maximum, but such, however, must be in accordance with the provisions of section 20 of the Act.

Going by the above cases, it is expected of the Nigeria Deposits Insurance Corporation to guarantee the payments of depositors, in cases of the above-mentioned occurrences, which could spell doom to the banking sector.

4. Assists Monetary Authorities To Formulates And Implements Policies

The Nigeria Deposits Insurance Corporation actually assists in the formulation of policies and the implementation of these policies.

So there are monetary authorities, whose responsibility among other responsibilities is to formulate policies, and as well, implement the policies.

Since the Nigeria Deposits Insurance Corporation activities revolved around money, and they directly deal with insured financial institutions, it is, therefore, incumbent on the Nigeria Deposits Insurance Corporation to assist these monetary authorities in the area of policies formulation and policies implementation.

The reason is that, since the Nigeria Deposits Insurance Corporation is involved, it will help in ensuring sound banking practices and also encourage fair competition among these institutions that are insured in Nigeria.

Read Also: 8 Functions of Nigeria National Library

5. Adopts Bank Liquidation Option For Banks That Fail To Respond To Measures Of Failure Resolution

This, however, formed one of the functions of the Nigeria Deposits Insurance Corporation. There are some banks that failed to respond to the measures of failure resolution.

Hence, it is the function of the Nigeria Deposits Insurance Corporation to adopt bank liquidation option in such case, where banks failed to respond to the failure resolution measures.

When we talk about the liquidation process, it has to do with efficient and orderly closure of such failed institutions.

In carrying out liquidation process, the Nigeria Deposits Insurance Corporation need to take into consideration, minimum disruption to the banking system, and cost-effective of assets realization, as well as, the settlement of depositors’ claims, including creditors, and most especially, the stakeholders.

6. Endures Resolution Of Failed Institutions

I have mentioned here that there are some failed institutions that do not respond to resolution measures in the banking sector.

It, therefore, remained one of the functions of the Nigeria Deposits Insurance Corporation to make sure that it ensures that every failed institution and every failing institution is resolved.

And if these failed and failing institutions are to be resolved, then the Nigeria Deposits Insurance Corporation should ensure that timely and efficient resolution is achieved. In other words, the failed and failing institutions should be resolved in an efficient and timely manner.

7. Pursues Other Measures Necessary To Achieve The Functions Of The Corporation

There are situations, where perhaps, the Nigeria Deposits Insurance Corporation has exhausted its powers, and what they have set out to accomplish, they could not accomplish with the available options.

It is, therefore, incumbent on the part of the Nigeria Deposits Insurance Corporation to devise other means to tackle such issues.

That is why, in opting to solve such problem, the Nigeria Deposits Insurance Corporation can decide to pursue other available measures necessary in order to make sure that it achieves its goals, provided, the measures adopted is not or are not repugnant to the aims and objectives of the Nigeria Deposits Insurance Corporation.

Conclusion

The Nigeria Deposits Insurance Corporation helps in ensuring that, the unsafe and unsound banking practices in Nigeria is stopped.

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