NDIC to increase N200,000m insurance cover for PMBs

Nigeria Deposit Insurance Corporation, NDIC, has said it wants to review the insurance cover of the Primary Mortgage Banks, PMBs to enable it commensurate with the huge portfolio and risks it carry.
Managing Director/Chief Executive of NDIC, Alhaji Umaru Ibrahim stated this yesterday at the 2014 sensitisation workshop organised for operators of PMBs by the corporation in Abuja.
According to him, “Going forward, we hope to review the insurance coverage that we do provide, you are aware that right now it is N200, 000 in case of any failure”.
“We are thinking why not segregate slightly from what is obtained in the Micro Finance Banks, MFBs, given the huge portfolio and risks you carry. And also in return, given the quantum of premium that you give.’’
Similarly, he said the corporation is also reviewing the basis of premium of the PMBs in the country, adding that, instead of using the flat rate which was the initial practice, the corporation would introduce risk-based premium assessing system.
This, he said, was obtainable with the Money Deposit Banks, pointing out that, “That way, we will be able to promote safer and best practices and in the process, the best manned and managed institutions will have less premium burden on them”.
On the workshop, he said that discussion would be focused on the state of affairs of the mortgage institutions and risk management and its importance. He said that weak corporate governance and poor risk management frameworks could result in risky behaviours by the PMBs, adding that it could help to create huge toxic assets and ultimately put insured deposits at risk.
Ibrahim said that the supervisory authorities were concerned about build up of toxic assets with Micro Finance Banks which stood at about 45.7 per cent as at December 2013 against the prescribed maximum of five per cent.
“Our attention is now being focused on both the MFBs and PMBs sub sectors so as to address the emerging challenges. Our efforts can only be successful if the operators can embrace good corporate governance and sound risk management practices. We cannot afford the repeat of 2008/2009 crisis,’’ he said.
Earlier, the Head, Special Insured Institutions Department, Mr. J.J. Etopidiok, had said that private investors float PMBs ostensibly to mobilize funds and disburse same as loans to capable and willing borrowers to provide accommodation.
Ibrahim also specifically urged the PMBs to be interested in enhanced risk management standards, “because some mortgage portfolios are on a predominantly variable rate and therefore it is highly sensitive to interest rate fluctuations”. “For instance, an increase in interest rate could make mortgage repayment difficult and result in default which may give rise to toxic assets”, he said.