iadi general guidance for the resolution of bank failures：机构为银行倒闭的分辨率一般指导

iadi general guidance for the resolution of bank failures：机构为银行倒闭的分辨率一般指导 PROCEEDINGS OF THE IADI ARC WORKSHOP ON BANK RESOLUTION AND DIFFERENTIAL PREMIUM SYSTEM (ABUJA, MARCH 6 – 8, 2007) PROCEEDINGS OF THE IADI ARC WORKSHOP ON BANK RESOLUTION AND DIFFERENTIAL PREMIUM SYSTEM 1.0 INTRODUCTION The International Association of Deposit Insurers (IADI) was established in May 2002 with a vision to “share deposit insurance (DI) expertise with the world.” In line with this vision, the Association organizes conferences, workshops, seminars, and meetings regularly. The workshop on Bank Resolution and Differential premium system, organized by the Africa Regional Committee (ARC) of the Association, was one of such events. This report provides an account of the workshop. It is organized as follows: Section 2 presents the events of the opening ceremony; Section 3 provides an account of the presentations and discussions during the business sessions; Section 4 presents views expressed about the workshop during the wrap-up session; Section 5 Highlights the lessons learnt during the workshop; and Section 6 concludes the report. Appendix I show at a glance some of the design features of the members of the ARC of IADI. 1.1 Objective Of The Workshop The objective of the workshop was capacity building for middle management staff of member organizations in bank resolution and DI pricing system, particularly, differential premium system. 2 1.2 Participation Participants were drawn from Kenya, Tanzania, Zimbabwe, Nigeria and Commission Bancaire de’I’Afrique Centrale (COBAC) of Cameroon. In all thirty-five (35) delegates participated in the workshop, with the Nigeria Deposit Insurance Corporation (NDIC) having the highest number of delegates. 2.0 OPENING SESSION 2.1 Welcome Address by the MD/CEO of NDIC Mr. G. A. Ogunleye (OFR) In his welcome address, the MD/CEO expressed delight at the composition of the participants. He reiterated the need for effective collaboration amongst safety-net players and stated that the main objective of the workshop was capacity building for middle level staff of member organizations. After giving background information about IADI, the MD/CEO pointed out that IADI had issued two Guidance Papers on “Resolution of Bank Failures” and “Differential Premium system.” Four other Guidance Papers, according to him, were in the process of being finalized. The Guidance papers, he said, seek to promote sound practices by deposit insurance practitioners and other interested safety-net players. He explained that it is in appreciation of the fact that deposit insurance is knowledge-based, that the Africa Regional Committee decided to organize the workshop. He hoped that at the end of the workshop, participants would 3 be better equipped to discharge their functions as deposit insurers in the broad areas of bank resolution and deposit insurance pricing. 2.2 Goodwill Message by CBN Governor (Presented By Dr. Obadia Mailafia, CBN Deputy Governor Policy) In his goodwill message, the Central Bank of Nigeria (CBN) Governor explained that the CBN banking reform derived its framework from the National Economic Empowerment and Development Strategy (NEEDS) document of the Nigerian government. He pointed out that after the first phase of the reform, the number of banks in the country reduced from 89 of variable credibility to 25 with stronger capital base. The consolidation, he noted, had started yielding fruitful results in the form of increase in lending to the private sector; access to increased foreign credit lines by banks; enhancement of corporate governance practices; and the abolition of ethnic and family (closely-held) banks, among others. The Governor called for a thorough discussion regarding which premium assessment system to adopt. He noted that differential premium system seeks to provide incentives to banks for sound risk management and therefore, should contribute to the stability of the banking system. He therefore, urged participants to address all the issues and challenges that could constrain effective implementation of differential premium system in their various countries. In the area of IT, he said that Electronic Financial Analysis and Surveillance System (e-FASS) and other systems had been put in place by the regulatory 4 authorities, to improve the reliability and accuracy of the statutory returns from the banks. This, according to him was essential for the determination of the risk profile of insured institutions. He added that the CBN was investing heavily in capacity building, especially in the area of risk-based supervision. Finally, he asserted that their ambition at CBN was to make Nigeria the financial hub of Africa, which according to him could only be achieved through stable political and macroeconomic environments. 2.3 Keynote Address by Minister of Finance (Presented By Minister of State for Finance, Engineer Elias Mbam) In his keynote address, the Minister commended Africa Regional Committee on the choice of topics for the workshop. He noted that virtually all countries were making efforts to strengthen existing mechanisms for dealing with failing or failed deposit-taking institutions. However, he urged participants to bear in mind that certain aspects of failure resolution mechanisms are country specific. Furthermore, he pointed out that the key issue raised by NDIC’s experience with failure resolution, was the need for the legal system to be supportive of timely and effective resolution of bank failures. With respect to differential premium system, the Minister opined that it is superior to the flat rate approach to the extent that it offers incentive for banks to effectively manage their risks. He however advised on the need to 5 strike a balance between adequate funding of DIS and providing sufficient incentives for sound risk management by banks. Furthermore, he reminded participants that there were certain prerequisites for an effective and efficient differential premium system, which he indicated to include the following: a strong prudential regulation and supervision framework; sound accounting and disclosure regimes; access to accurate, reliable and verifiable information; and a supportive legal framework. In conclusion, he urged all participants to make constructive contributions. 3.0 BUSINESS SESSIONS Eleven papers (11) were presented by facilitators drawn from the NDIC, CDIC (Canada) and SDIF of Turkey. The workshop was concluded with a wrap-up session, which was chaired by the Managing Director of NDIC and ARC Chairman. Highlights of the papers presented as well as the comments, questions and answers are presented as follows: 3.1 IADI General Guidance For The Resolution Of Bank Failures Facilitator: G.A. Ogunleye, NDIC Chairman Of Session: David Walker Summary of Paper In his presentation, Mr. Ogunleye explained that IADI guidance for failure resolution seeks to assist deposit insurers in establishing or enhancing their 6 mechanism for dealing with bank failures. The guidance according to him has the following five sections: (1) General Issues Guidance for general issues covers institutional framework to reduce risk of failure and embrace sound corporate governance. (2) Interrelationship and Cross-Border Issues This covers delineation of roles, duties and responsibilities of Safety-Net Players (SNP); explicit statutory mechanism for dealing with systemic crises; and information sharing and coordination amongst SNPs. (3) Statutory Powers & Mandate This section provides guidance in the following areas: mandate; funding mechanism; authority to accept or reject membership; authority to conduct on-site review or perform due diligence before bank failure; and legal issues. (4) Operational and Administrative Issues This section provides guidance on: policies; standards operational procedure; authority to outsource services; valuation of assets and sales processes; public awareness and communication mechanism; and code of conduct for employees. (5) Resolution of Failing and Failed Banks This section covers: trigger mechanism for early intervention; authority to decide on resolution method; determination of viability or otherwise of 7 failing banks; effective resolution policies; procedures; resolution strategies; and rules for managing liquidation process. He concluded by advising IADI members to conduct self-assessment, using the guidance as a benchmark. Comments, Questions and Answers The comment by the chairman of the session: , Factors such as the need to ensure financial system stability, timeliness, integrity and independence of a deposit insurance agency as well as need to optimize resolution cost are critical to the choice of preferred failure resolution option. , In Canada according to the chairman, a major issue in bank resolution is information sharing, which he noted to be working well in some countries but not so well in others. He further noted that, typically, deposit insurance tended to focus on domestic issues but with globalization, cross border issues and their implications for failure resolution were beginning to attract the attention of DI agencies. Comments and questions by other participants: , Need to further explain ex-ante and ex-post Funding approaches; , Observation on the limited capacity of Nigerian banks to address post consolidation challenges; , Need to ensure compliance by banks in Nigeria with the new code of corporate governance; and 8 , How to limit the effect of policy-induced failure particularly in Nigeria where it was felt that if some banks had been left to pursue their own business strategy they would have survived. Response by the Facilitator , Funding is basic to DIS. The credibility of any DIS is dependent on the adequacy of its funding. One principal source of funding a DIS is through contributions by insured institutions, which accumulates over time to meet insurance obligations. This is referred to as ex-ante funding approach. Contribution is on a regular basis, purely for meeting obligations of bank payouts or providing financial assistance to banks. With respect to Ex-post funding, a bank would have failed before funds are mobilized to finance failure resolution. The ex-post funding arrangement is believed to be less efficient than ex-post funding arrangement. , With respect to Corporate Governance, there is a new code in Nigeria post-consolidation and a lot is being done to ensure full compliance by banks. , The observation with respect to banks’ capacity to address post- consolidation issues was accepted as valid but he noted that such banks were taking steps commensurate with their size and emerging risk profile. , With respect to complaints against some banks as regards service delivery under the Purchase and Assumption (P & A) transactions, the 9 presenter indicated that some cases had been brought to the attention of the NDIC and appropriate actions taken. He cited as an example the arm-twisting approach by some banks to compel customers to open accounts rather than pay them their deposits as demanded. However, he noted that the system was passing through a learning process with respect to P & A mechanism, which is a novelty in Nigeria. 3.2 Bank Failure Resolution: The Experience Of Nigeria – Challenges And Lessons Facilitator: Prof. Peter N. Umoh, NDIC Chairman of Session: Victor Odozi Summary of the Paper The paper covered the following four key areas: conceptual issues in failure resolution; bank failures and failure resolution mechanisms employed in Nigeria; failure resolution challenges; and lessons learned. The presenter explained that two major resolution mechanisms, Pay-out and Purchase & Assumption transactions, had been adopted in Nigeria. According to him, the key challenges included: inability to obtain winding-up orders from the courts timely; depositor ignorance/awareness; inability to recover loans of failed institutions and Purchase and Assumption related challenges. Some of the lessons that could be learnt from the Nigerian experience, according to the presenter, included the following: , Necessity of adequate statutory powers; 10 , Importance of a robust deposit insurance fund (DIF); , Imperatives of capacity building; , Need for supportive/understanding judicial system; , Importance of information sharing amongst safety-net players; , Need for effective public awareness mechanism; , Management quality as a key determinant of bank health; , Insider non-performing loans/advances and insider abuses as major contributors to bank failures in Nigeria; and , Full reimbursement to depositors of eleven (11) liquidated banks was largely financed from disposal of real properties rather than recovery of risk assets. Some of the design features of the scheme in Nigeria are as shown in Appendix I. Comments, Questions and Answers Comment by the chairman of the session: He observed that despite the best efforts of regulatory/supervisory authorities banks would fail. He reiterated that regulators/supervisors were not just to protect individual banks but also to protect and promote safe and sound banking system. He added that having revoked the licenses of many banks and facilitated the turn around of several institutions, Nigeria had a lot of experience to share. He advised on the need to maintain a robust framework that would send a clear and strong signal to institutions that engaged in unsafe and unsound banking practices. 11 He noted that the facilitator made a compelling presentation and that his paper was a very good reference material. According to him, Nigerians stand to benefit from their experience but those from other African countries stand to benefit more. In addition, he raised several issues such as: , Distinction between distress and failure resolution; , The fact that 26 banks were successfully closed in 1998 was a testimony to the executive capacity of NDIC; , The denial by some owners of failed banks with respect to the health status of their banks often cause delays in effecting prompt supervisory intervention; , Lack of political will and implications for prompt resolution of distress; , Depositors’ ignorance and NDIC’s effectiveness in the discharge of its mandate; , The challenge of recovering loans of failed institutions; and , The importance of Purchase and Assumption related issues. Comments and Questions from Other Participants: , Need to clarify the status of African International Bank (AIB) whose acquisition appeared to have been aborted by litigation. , Need to delineate between the role of NDIC as an insurer and its role as a liquidator; , Does the New NDIC Act have retrospective effect with respect to the coverage limit? , Need for the NDIC to brace up to cope with the post-consolidation challenges in view of the size of the emerging banks and the fact that 12 the attitude of bankers has not changed in spite of the increased capital base. , How long should the liquidation of a bank take? , That the statistics of bank failures in Nigeria during paper presentation gave the impression that all 26 banks failed on the same date whereas the correct position was that they failed at different times but were liquidated on the same day. , Some agent banks that were not rendering returns on depositor- reimbursement to NDIC as and when due were among those bidding under the P & A option and that the situation should not be allowed to continue. Response by Facilitator , On the issue of AIB, he stated that the “ball was still in the court of CBN” as it was yet to revoke the bank’s license; , On the issue of whether the new NDIC Act has retrospective effect with regard to the payment of insured deposit, the presenter opined that the Law had no retrospective effect and that the provision of the new NDIC Act in the area of coverage limit would apply to only Depositors of Banks to be closed in future. , With respect to the issue of time limits for liquidation, he stated that the NDIC Act did not specify any period for the Liquidation of an institution whose license had been revoked. Liquidation would continue for as long as it was cost effective. , The facilitator advised the Receivership and Liquidation (R&L) Department of NDIC to come up with ideas on how to tackle the problem of rendering returns by assuming banks under the P & A 13 transactions for Management consideration. He added that R&L should always capture the past performance of agent banks, especially with respect to rendition of returns, when considering them for additional responsibilities/business relationships. 3.3 Bank Failure Resolution: The Experience Of Zimbabwe Facilitator: John Chikura, CEO, ZDPB, Zimbabwe Chairman of Session: Mrs. F. B. Ibrahim, ED (F & A), NDIC Summary of Paper The mandate of the deposit insurance scheme of Zimbabwe was limited to assessment of premium, management of deposit insurance fund and claim settlement (see appendix I). According to the presenter, The Reserve Bank of Zimbabwe (RBZ) is the only institution that has powers to supervise banks as well as undertake resolution of problem banks. As a result, his presentation on the experience of Zimbabwe on bank failure resolution was from the perspective of the Reserve Bank of Zimbabwe and not the Deposit Protection Board of Zimbabwe. According to the facilitator, the introduction of DIS in Zimbabwe was a response to banking crisis in 2003. During that period, ten banks were under curatorship, two banks were under liquidation and one discount house was closed. Some of the factors responsible for the crisis, according to him, included: , Inadequate risk management system; , Poor corporate governance; 14 , Deviation from core business to speculative activities; , Rapid expansion by banks; , Creative accounting leading to misrepresentation of the financial condition of the institutions; , High level of non-performing insider loans; , Unsustainable earnings; and , Chronic liquidity challenges. He explained that some of the measures taken by the Reserve Bank of Zimbabwe to deal with the problems included: , Corrective orders which involved appointment of advisor; suspension of directors, officers or employees; and amending, suspending or canceling of license; , Curatorship and liquidations; , Troubled bank resolution framework leading to the creation of Troubled Bank Funds; , Issuance of such guidelines as corporate governance guidelines, minimum audit standards in banking institutions, framework on the relationship between bank supervisors and banks’ external auditors and accreditation of credit rating agencies. He noted that several lessons were learnt from the crisis. Such lessons included: , Need for banks to maintain adequate capital commensurate with their risk profile; , Need to adhere to the guidelines on corporate governance; 15 , Need for banks to establish Asset and Liability Management Committee policy frameworks and enhance capacities in their treasury department as a way of addressing liquidity problems; , The importance of disclosure of information to the public; , Need for external auditors to critically evaluate the risks faced by financial institutions, while leveraging on the work done by bank supervisors and internal auditors; , The need for curatorship to be for a limited period of time in order to maintain confidence in the system and minimize financial losses to depositors; , Need for prompt corrective action; and , Need for supervisory processes to stay abreast of developments in the financial sector, to facilitate pre-emptive and corrective measures. The facilitator concluded by pointing out that Reserve Bank of Zimbabwe was enhancing its supervisory processes on a continuous basis in line with the lessons learnt. Comments, Questions and Answers Comments/Questions by chairman of Session: , Who decides on the consolidation of banks in Zimbabwe? , Are there prescribed ratios such as capital adequacy ratios in Zimbabwe? , How independent are auditors and directors in Zimbabwe? 16 Comments and questions by other participants: , Most of the banks were said to have found themselves in trouble after expansion. Who approves the expansion of bank branches in Zimbabwe? , What is the relationship between the Deposit Protection Fund Board (DPFB) of Zimbabwe and the liquidator? Can the DPFB work independent of the liquidator? , Who took care of banks that failed before the establishment of the DPFB? , Are there regulations regarding insider loans? Response by the Facilitator , The Reserve Bank of Zimbabwe in collaboration with the Ministry of Finance takes decision on the consolidation of banks in the country. , Capital ratios exist in the Zimbabwe banking system. However, hyperinflation has been impacting negatively on the capital of the banks. , The Central Bank approves the creation of bank branches in Zimbabwe. , So far the relationship between the Deposit Protection Fund Board (DPFB) and the Liquidators has been cordial. Usually, after appointing the liquidator, the Central Bank brings the DPFB and the Liquidator together to ensure proper understanding of each other’s roles in the failure resolution process. In particular, while the DPFB is charged with paying insured depositors of the failed banks their claims, the Liquidator has the responsibility of realizing the assets of 17 the failed banks and settling the claims of the uninsured depositors, creditors and other bonafide claimants with the proceeds, among others. , It was the responsibility of government to settle the depositors of banks that failed before the establishment of DPFB in Zimbabwe. This therefore means that it was Implicit Deposit Insurance that was used to protect depositors in the country prior to the establishment of DPFB. , There are regulations for dealing with insider loans but as usual, people circumvent the law for their selfish interests. For instance, companies used by insiders were not reflected as insider companies. 3.4 Bank Failure Resolution: The Experience Of Kenya Facilitator: B. K. Mitchel, DPFB Kenya Chairman of Session: Mrs. F. B. Ibrahim, ED (F & A), NDIC Summary of Paper The Deposit Protection Fund Board (DPFB) was established in response to challenges presented by the past banking crisis in the country. The crisis started in 1983, with the failure of several indigenous banks. This exposed the inadequacy of the safety-net and the failure resolution mechanisms, leading to the amendment of the Banking Act in 1985. The Act expanded the safety-net and improved the failure resolution mechanisms. It provided for the establishment of DPFB as a department of the Central Bank and conferred on the Central Bank: the responsibility of 18 risk minimization through prudential regulation, supervision, function as curator and revival of ailing banks. Other details on the design features of the scheme in Kenya are as shown in Appendix 1 The facilitator enumerated some of the challenges faced by DPFB in the course of fulfilling its objectives as follows: , Insurance fund is still very low relative to the total exposure of the funds; , The urgent need to terminate the liquidation process of institutions whose valuable assets had been realized and where continuation of the liquidation exercise was no longer sustainable; , Difficulty in realizing securities held in the rural areas, especially family land and properties; , Low response to deposit claims; , The need for proactive engagement in the resolution of problems affecting weak institutions before they become insolvent; , Loan recovery hampered by slow and costly court process; and , Need to harmonize all the three laws (Central Bank Act, Banking Act and Companies Act) that govern operations of the fund. Comments, Questions and Answers Comments by the Chairman of Session: , What challenges does the DPFB face by not examining banks? , How does the DPFB invest its Deposit Insurance Fund (DIF)? , On statutory management, does the DPFB appoint consultants or audit firms or is it the Central Bank that manages the banks? 19 , She observed that lack of political will to close banks had been a problem in Nigeria, noting that some years ago, some regional banks were about to collapse and the CBN/NDIC managed to keep them alive , She also emphasized the need to have guidelines on corporate governance because supervision is easier when clear guidelines are provided. Comments and questions by other participants: , How successful was the amalgamation of the 7 banks into one new bank that was mentioned during paper presentation? , Is it part of the DPFB law that if claims and liquidation dividends are not collected after a year and two years respectively they are forfeited? , What efforts is the DPFB making to get depositors to collect their money? , What measures does the DPFB take to protect the interest of depositors in the event of voluntary liquidation by banks? , Does the DPFB law allow for the recovery of insider loans through take-over of their estates and other interests? , Does the DPFB have laws that facilitate the prosecution of directors involved in insider loans? , It was indicated during paper presentation that banks are handed over to the DPFB by the Central Bank without having to go for court order, is it when the license is revoked or is it before the license is revoked. , Who has the responsibility for determining the health status of banks in the Kenyan banking system? 20 , What are the resolution mechanisms for handling a distressed subsidiary of a holding company? , Are there moves to secure the independence of the DPFB from the Central Bank of Kenya? , What penalties do you have for late payment of premium? , Do people challenge the decision of Central Bank for turning over banks to the DPFB for liquidation, without having to go for court order? Response by the Facilitator: , Deposit Protection Fund does not have the legal right to collect prudential information or returns from banks, not even the opportunity to read examination reports. It is indeed a big problem to the DPFB because by the time a bank is handed over to it, it is completely dead. , DPFB is by law restricted to investing DIF only in government paper (securities). Treasury bill rates in the country are however low and that affects the growth of the funds. , On the duration of claims and dividend, the limit in terms of period within which to file claims (1 & 2 Years) is part of the law establishing the funds. However, if a particular case can be proved adequately that the claimant was absent (particularly outside the country) within the stipulated payment periods, the Fund has the flexibility to use its discretion. , The consolidated bank is doing well as a going concern. , Statutory management is appointed by the Central Bank and could either be staff of the bank, auditors or experienced bankers from outside. 21 , Banks that do not pay premium on time pay interest of 15% daily on the outstanding amount. , On public awareness, DPFB is not having it easy. However, the poor turnout could be attributed to small balances in accounts. , Insider loans are difficult to recover because most of them had poor documentation with no security to back them up. , On the appointment of DPFB as a Liquidator, it is the Central Bank Act, which gives the Central Bank the power to revoke license and appoint a liquidator. Often it is after the license is revoked that it is handed over to DPFB for liquidation. , On the autonomy of DPFB, a bill for this is in the process and once it is through, DPFB would become independent of the Central Bank. , On whether debtors can challenge the action of the Central Bank of Kenya (CBK) for handing over banks to DPFB for liquidation without court order, the answer is no and the reason is that it is in CBK Act, which is superior to any Law that is in conflict with it. 3.5 Bank Failure Resolution: The Experience Of Tanzania Facilitator: From Tanzania Chairman Of Session: Ridvan Cabukel, Turkey Summary of Paper In Tanzania, the power to seize a bank or financial institution and determine an appropriate failure resolution is vested in the Bank of Tanzania (BOT). Within ninety days after taking possession, BOT is empowered by the provisions of the Act to: determine whether to restructure, reorganize or 22 liquidate the bank or financial institution; and establish a plan of resolution based on any combination of restructuring, reorganization or liquidation. The facilitator explained that where the resolution plan calls for liquidation of the bank or financial institution, then the Bank of Tanzania may appoint the Deposit Insurance Board to be liquidator and such appointment has the same effect as if it was done by the court of law. Other details on the design features of the scheme in Tanzania are as shown in Appendix 1. In Tanzania, since the Deposit Insurance Board (DIB) started operations, in 1994, they have had four cases of bank failure. Comments Questions and Answers Comment by the Chairman of Session Developing countries have similar issues. In Turkey, 23 banks failed so far due to global crises and almost one-sixth of Turkey GDP was lost in one year. Comments by other participants: , How does the DIB of Tanzania invest its fund? , Who appoints a curator for a failing bank? Response by the Facilitator 23 , With respect to the DIB’s investment policy, the Deposit Insurance Board is free to decide where to invest its funds but it has always invested in government securities. , The Chairman appoints all employees of Deposit Insurance Board and employees of the Central Bank as well as a curator for a failing bank. 3.6 Overview Of Deposit Insurance Pricing System: Flat Rate Vs. Differential Premium Assessment Approaches Facilitator: John Chikura ZDPB (Zimbabwe) Chairman Of Session: G.A. Ogunleye, NDIC Summary of Paper One of the most technical issues to contend with in the design of a deposit insurance scheme is the establishment of an appropriate pricing structure. The choice, according to the presenter is between the risk based premium system, which is a very sound system in theory but difficult to implement and the flat rate which is easy to implement but has its own demerits. The facilitator explained that the flat-rate premium system is generally easy and cheap to design and implement as there is no need to differentiate banks. In fact, many schemes start with a flat rate premium system and migrate with time. He also noted that it takes time to migrate i.e. it took the US 60 years, 1933-1993. Kenya started in 1985, Nigeria in 1988 but are still on the flat rate system. According to the facilitator, most of the criticisms of flat rate centre on moral hazard. Others include the fact that, risk seeking banks pay the same 24 rate per insured dollar as prudent banks with good risk management and good corporate governance. Prudent banks subsidise the excess risk taking behaviour of fellow contributors. Risk takers are therefore not penalised for their aggressiveness. On the other hand, he pointed out that the theory says that risk based premium structure, has the advantage of overcoming moral hazard by apportioning commensurate cost of risk; instils discipline and counters moral hazard by assessing premiums commensurate with the exposure of the bank concerned; and if banks face the true cost of their own risk, they will be quite professional in their decision-making process as they will be forced to balance appropriately the trade off between risk and return. In this manner the risk based premium system becomes much more equitable as it penalises aggressive banks and rewards conservative ones through low premiums. The facilitator argued that the system tends to be complicated in its design and implementation. How do you identify and appropriately measure the risk characteristics of each bank, he asked? Assume this is achieved, how does one take care of new and emerging sources of bank risks in the risk based premium structure? Does the system not aggravate the situation by charging weak banks higher rates than stronger ones? Furthermore, he explored the risk based premium structure of the United States and submitted that: • Given the strong condition of most banks there, more than 93% of the industry pays nothing for deposit insurance. At the beginning this was 75%. The US therefore, had in place a differential premium 25 assessment system that violates the traditional insurance principle of pooling resources together through the law of large numbers that all contribute to a common fund. • The system as it stands today, essentially amounts to charging less during the time of prosperity, and a lot more in times of adversity. Obviously this potentially magnifies swings in the banking cycle. • A look at their Annual Reserve shows that only 4% of revenue comes from premiums, the rest is from Investment Income. Their differential premium system does not adequately reflect the risk that individual banks pose to the deposit insurance system. • Under the system, it is possible for an institution to grow its deposit base significantly and still pay no extra premium. Banks rated 1 under Uniform Bank Performance Report (UBRP) can grow their insured deposit base significantly without having to pay any premiums. • Given the increasing size of the largest banks there and the blending of financial services within holding companies and technological developments, rapid increases in aggregate deposit levels are increasingly possible. This raises the prospects that actions by one or a few banks could trigger premiums for the entire industry. • A significant number of banks got chartered in between and hold tens of billions of dollars and had never paid any premium to the insurance fund. Actually most banks and thrifts established since the re- capitalization of the insurance funds has never paid for deposit insurance. • In terms of new and emerging risks, there is a threat of investment companies converting some of their customer’s funds into FDIC insured deposits. Also there is a possibility of a large shift of 26 household assets into insured deposits accounts in the event of financial market volatility. In conclusion: , The facilitator alluded to the fact that it is possible to have a well- rated institution suddenly developing problems and go belly up? If this is possible then there are prospects of failure by institutions, which have not made any premium payment but would need to be rescued from the fund; • He wondered why in spite of the advantages of the differential premium system over the flat rate, deposit insurers take long generally to migrate? In fact, he believes that this raises questions as to whether the differential system holds tangible benefits over the flat rate. Comments, Questions and Answers Comment by the Chairman of Session He indicated the key elements of flat rate system and reasons why more countries continued to operate it. He solicited for comments or reactions on perceived subsidy and pointed out that information integrity remained a challenge everywhere. BCCI for instance took regulators for a ride for many years, he said. Thereafter he asked for comments and/questions from participants. Comments by other participants: , With respect to the issue of target fund as a way of getting banks to buy in, a participant could not appreciate how a dynamic process 27 would be approached by setting a target, noting the difficulty in assessing the actual exposure of a DIS. He opined that it was more acceptable that when you attain a certain level of funding, concessions could be considered for the contributing institutions. The participant also felt that differential premium was more acceptable than risk based premium. , With respect to the analysis of FDIC that was used to suggest that risk- based approach was not attractive, a participant pointed out that the FDIC Act had been amended in 2006 and every institution would be required to pay some amount of premium but differentiated by risk. , With respect to risk-based versus differential premium, are there any factors other than risks for differentiating premium? Response by the Facilitator , He agreed that target fund is a moving target and could be volatile especially in an unstable environment. However, given that the target fund is usually expressed as a ratio, it has been made dynamic. , He indicated risk-based premium, as a sub-set of differential premium and that there are other factors like size for differentiating institutions for the purpose of charging premiums. 3.7 Overview Of Differential Premium System: The IADI Guidance Paper 28 Facilitator: David Walker, CDIC (Canada) Chairman Of Session: Prof. P. N. Umoh Summary of Paper Deposit insurers must choose between adopting a flat rate premium or a system that seeks to differentiate premiums based on individual bank risk profile. According to him, Flat rate premium systems are easy to understand and administer but they do not take into account the level of risk a bank poses to the insurer and are viewed as being unfair. The objectives of a differential premium regime is to provide incentives for banks to avoid excessive risk taking and introduce more fairness into premium determination. In addition, the Differential Premium Systems: should be consistent with the objectives of the DIS; may not be appropriate for all DIS at all times; and by itself cannot mitigate all excessive risk taking in a DIS. Some of the approaches to differentiate risk include quantitative factor; qualitative factor; and combined quantitative and qualitative factors. It must be noted that no one approach is perfect, whichever approach is chosen should be effective at differentiating banks into appropriate risks categories, utilize a wide variety of relevant information as possible and be well accepted by banking industry and safety net participants. Comments, Questions and Answers Comment by the Chairman of Session 29 He observed that the paper had covered most of the issues that needed to be covered. He also noted that contrary to views held by many, differential premium could be based on many other factors, in addition to risk. Comments and questions by other participants: , Did the CAMELS parameters as captured in the quantitative differential premium systems have qualitative basis? , Would it not amount to double counting to consider both Capital and Capital Adequacy as factors in considering the risk profile of a bank? , Disclosing the risk ratings of banks could be detrimental to the stability of the banking system. While the basis and criteria for rating and categorization of banks could be made public, scores should not. , What is the rationale behind the collection and use of information once a year when returns are more frequent and available all year round? Response by the Facilitator , Mr. Walker confirmed that the CAMELS parameters had qualitative basis. He agreed that using capital as well as capital adequacy amounted to double counting. , He also agreed that disclosure was a very problematic issue and a challenge to regulators. He stated that in some jurisdictions, enabling laws had to be amended to allow for disclosures. , With respect to the use of annual information of banks, he stated that the current system was suitable to the CDIC. 30 3.8 Differential Premium Assessment System: CDIC (Canada) Experience Facilitator: David Walker CDIC (Canada) Chairman Of Session: Prof. P. N. Umoh, NDIC (Nigeria) Summary of Paper Differential premium was not something the CDIC decided to develop on its own. It was directed to implement it. In line with the directive, CDIC went through literature, reviewed the US system and in 1997 came up with a viable model. The underlying guiding principles included: System effectiveness; Ease of development; Acceptability by industry; System transparency; and the need to reflect primary risk factors such as capital quality/diversity of assets, financial strength and profitability, market exposure and quality of management. Below is an overview of CDIC’s Differential Premiums System: Criteria / Factors. CRITERIA OR FACTORS MAXIMUM SCORE CAPITAL QUANTITATIVE: CAPITAL ADEQUACY 20 , ASSETS TO CAPITAL MULTIPLE , TIER 1 RISK-BASED CAPITAL RATIO , TOTAL RISK-BASED CAPITAL RATIO OTHER QUANTITATIVE: 5 , RETURN ON RISK-WEIGHTED ASSETS 5 , MEAN ADJUSTED NET INCOME VOLATILITY 31 5 , STRESS TESTED NET INCOME 5 , EFFICIENCY RATIO 5 , NET IMPAIRED ASSETS(INCLUDING NET UNREALIZED LOSSES ON SECURITIES) TO TOTAL CAPITAL 5 , THREE-YEAR MOVING AVERAGE ASSET GROWTH RATIO 5 , REAL ESTATE ASSET CONCENTRATION RATIO 5 , AGGREGATE COMMERCIAL LOAN CONCENTRATION RATIO SUB-TOTAL: QUANTITATIVE SCORE 60 QUALITATIVE: 35 , EXAMINER’S RATING 5 , OTHER INFORMATION SUB-TOTAL: QUALITATIVE SCORE 40 TOTAL SCORE 100 The premium categories are as follows: PREMIUM CATEGORY PREMIUM RATES SCORE (BASIS POINTS) ? 80 1 1.4 ? 65 AND <80 2 2.8 ? 50 AND <65 3 5.6 <50 4 11.1 The industry agreed to the model after several reviews and in 1999, it was implemented. CDIC prohibits members from disclosing premium rating information they receive. However, there is opportunity for review and appeal for member bank scores. 32 Five years after it was introduced, a comprehensive review was conducted to confirm goals achieved and assess the effectiveness of the model. A number of changes have been effected since the review. The Key lessons learned are that: No system is perfect; there is a need to strive for fairness and transparency and minimize regulatory burden; plan for the transition; address disclosure; and need for on-going review. Comments, Questions and Answers Comment by Chairman of Session There were lessons to learn, according to her, from the CDIC experience. With respect to the issue of disclosure, she further underscored the importance of evolving an effective information disclosure regime noting how institutions were prohibited from disclosing scores. Another lesson from the CDIC experience, according to her was opportunity for appeal by member institutions against their ratings and possibility of a review by the CDIC. Comments and questions by other participants: , Does the CDIC have experience of banks that have challenged their scores in court? Or is there any legislation prohibiting scores from being subjected to court actions? , How has the CDIC been able to implement disclosure requirements? In Nigeria, banks could take advantage of disclosure to de-market their competitors using such scores? 33 , With respect to consolidated reporting how do you rate subsidiary member institutions whose parent company is not a member institution? , With respect to quantitative scores, how do you score institutions with inadequate data? , How does the CDIC address the issue of data integrity? , If a bank consistently falls in a particular category what do you do to encourage the bank to migrate to a better category? , How applicable is the CDIC model to developing economies? , Will the required information for the implementation of differential premium system not constitute an additional regulatory burden for member institutions? , How do we make banks accept these ratings, since it affects their profit and loss? , Do depositors show any interest at all in their bank’s ratings? , In 1999 you had banks in four premium categories, In 2006, you had banks in only three categories, over time you may have banks in only one category, which takes you to flat rate. What is your view on that possibility? , CDIC does not supervise banks and there are no bank failures how do you engage your staff? Do they have work to do? , The CDIC does a lot of public awareness in spite of the level that it has attained. How can the public awareness efforts be justified? Response by the Facilitator , There are no challenges in court and no failures since implementation. 34 , Prohibition of disclosure is in the CDIC Act to prevent banks from using good scores to get business. , With respect to consolidated reporting, parent and subsidiary get the same rating , If you do not have sufficient data, we do tentative scoring until data is available , The CDIC system is not designed to make institutions change behaviour based on scores. Differential premium assessment is part of the system. Low scores attracts a lot of supervisory attention , With respect to information quality, we have relatively advanced accounting system and trust our members , How applicable is this model to developing economies?, I would advise that this model should not be taken as it is and applied without considering the peculiarities of a given jurisdiction. However, the model’s underlying factors could be found useful. , We have a shared database for all SNPs and all SNPs have access. It is covered in the Act and it reduces regulatory burden (i.e. Questionnaires from different supervisors) , CDIC receives letters from Professors in Universities requesting that such information (bank ratings) be published but no such requests have been made by depositors , On the issue of the possibility of converging to only one category and hence having a flat rate, facilitator did not think that would happen because business cycles would continue to affect banks differently. , With respect to public awareness, when you do not have failures people forget about deposit insurance and might feel too protected. 35 The CDIC wants people to know exactly what is protected. It is a small price to pay. 3.9 Differential Premium Assessment System: The Experience Of SDIF, Turkey Facilitator: Ridvan Cabukel, SDIF (TURKEY) Chairman of Session: Mrs. F. B. Ibrahim, ED (F & A), NDIC Summary of the Paper The paper covered the Turkish banking system; risk; Differential premium system in Turkey; Improving the differential premium system and results. There are four safety net players in Turkey and SDIF, one of them, is the deposit insurance institution. It acquired new authority and responsibility with respect to Risk Based Premium System under the Banking Law 5411 of 2005. There are five different methods for differential premium assessment in Turkey. The methods are Market based models; bankruptcy models; ratings of external credit rating agencies; and supervisory approach. The problems faced by the SDIF in the administration of differential premium are: , Majority of banks pay at the same rate; , Thresholds used for rates are legal limits which may cause sanctions on banks according to the Banking Act; and , Deposit insurers are unwilling to lose their income. Comments, Questions and Answers Comment by the Chairman of the Session 36 The DIF models as presented in the paper though robust were mostly quantitative and not qualitative. With a base premium rate of 15 basis points and a maximum penal ratio of 13 basis points, maximum premium payable would be 28 basis points. She noted with interest the fact that 91% of the depositors were insured. Comments and Questions by other participants: , The SDIF uses 14 different risk categories for the purpose of implementing the differential premium system with the premium rates ranging between 15 and 28 basis points. Are the categories not too many? Since there is only one basis point between two categories, what is the incentive for banks to migrate from one risk category to another? , Why were qualitative measure not used in the model? , How much reliance does the SDIF place on the international rating agencies? Does the SDIF have access to the banking supervision ratings? If so, does it make use of the ratings for the purpose of the DPS? , What problems does the SDIF face in insuring Gold and Foreign Currency? , Majority of banks (91%) pay the same rate as premium in a regime of differential premium system. Should this not constitute a source of concern? , What is the impact of the war in Iraq and the quest to join the European Union on Turkish economy? , How is gold deposit insured? What is the value of gold insured? 37 , It was observed that five factors used in arriving at the risk categories could effectively be collapsed into three. Response by the Facilitator , Administratively having 13 categories of risk is not a problem for the SDIF. , Qualitative measures were not used because, from the point of view of Turkey, they were not always reliable and acceptable even to the bankers , The reports of the International rating agencies are used only for financial services purposes by the supervisors because the market in Turkey is not interested in the ratings of international agencies. With respect to information reliability, BSRA is charged with the responsibility of supervising banks and the SDIF rely on it for information. There is a central database, which is accessible to the SDIF and other stakeholders. , 60% of the deposits in Turkey are in foreign currency. The amount in foreign currency is converted to local currency for the purpose of computing premium. Gold is also insured but to date there are no Gold deposits in Turkey. , There is no problem with many banks paying the same amount as long as it was acceptable to all stakeholders. The war in Iraq is affecting Turkey especially in the area of foreign funds flow and currency fluctuation. With elections in Turkey coming up in September 2007 a lot of political maneuvers are going on with their effects on the economy. Turkey had been trying to join the EU for the past 40 years. 38 , The issue of insuring Gold deposit was brought by the Minister of Finance to encourage the citizens to deposit their Gold in banks after the banking crisis and also as a way of boosting public confidence in the banking system. However, this was not successful as no Gold had been kept in any bank in Turkey. 3.10 Issues And Challenges Of Developing And Implementing Differential Premium Assessment System In Developing Countries Facilitator: David Walker, CDIC (Canada) Chairman of Session: John Chikura, CEO, ZDPB Summary of the Paper The paper highlighted trends in the development of deposit insurance in developing countries as follows: the rapid growth; membership that is largely compulsory; coverage mostly limited to small depositors; and largely administered by government in most of the countries practicing the scheme, although a few are operated by private organizations. The facilitator observed that deposit insurance schemes are now embracing good governance practices as formal interrelationships are being intensified, particularly between the safety-net players. Greater number of the schemes worldwide uses pre-funded system of funding, while more countries are introducing the differential risk-adjusted premium system. 39 Differential Premium System (DPS) has a lot of advantages especially for developing countries, but the success of its adoption depends on: financial system stability, sound accounting system, sound legal and supervisory regimes, expertise and experience on the part of the DIS to design and run the differential system, “Buy-in” from the industry, depositors and other safety-net participants and resources to undertake the development of the system. Notwithstanding the advantages of the differential system, many countries prefer the flat-rate system because of its ease of administration. The facilitator advised that any country wishing to introduce DPS should take the following factors into consideration: , Review literature on DPS and what other countries have done as starting point; , Assess the mix of quantitative and qualitative or a combination of the criteria; , Determine trade-offs between complexity and acceptability by banks, ease of implementation and on-going administration; , Create menu of options; , Keep it simple to tap its advantage; and , Provide accurate and timely information based on sound accounting system, cordial relationship between supervisory authorities and building a good consultative process. 40 On the implementation and administration of DPS, the facilitator advised that there have to be a period of transition, which could be either short or long. There should also be special measure to aid the transition such as bonus points and adjustments, etc. In addition, the human resource to administer the system should be well trained on the framework, while good IT should also be in place to facilitate the collection and evaluation of information. Finally, the facilitator pointed out that in the short-run DPS cost may exceed benefits for many insurers in the developing countries, while in the longer-run and under the right conditions, benefits of well-designed DPS can exceed costs. Comments, Questions and Answers , Is the observed increasing trend in the establishment of DIS in Africa a result of being proactive or is it a reaction to crisis? , Why is it that not all the eight countries that established DIS in Africa are members of the Africa Regional Committee of IADI? Response by the Facilitator The reason for the trend in the establishment of DIS in Africa could be said to be both proactive and reactive. For most of them, they were established during crisis or shortly after crisis. This is similar to the Asian case where the Asian financial crisis compelled a number of countries within the region to establish DIS. However, some countries learnt from the experience of others. 41 Response by Chairman, Africa Regional Committee of IADI On why some schemes in Africa are not members of ARC of IADI, the Chair of the ARC responded that while he was aware that Uganda had a DIS, the scheme had remained inactive, particularly after addressing their bank failures through blanket guarantee by the government. Those in North Africa had joined the Middle East and North Africa (MENA) Regional Committee, probably because of language barrier and cultural affinity. In addition, the ARC Chair indicated that the Central Africa was planning to set up a scheme to serve six countries and to be administered by Commision Bancaire del’ Afrique Centrale (COBAC), while the French speaking West African countries were also thinking of introducing the scheme in their countries. At the committee level, according to him, countries in Africa would be encouraged to set up the scheme in normal times, without having to wait until financial crises engulf them. He cited the example of Singapore, which did not wait for a banking crisis before establishing a DIS as noteworthy. 4.0 WRAP-UP SESSION Coordinator of the Session: G.A. Ogunleye, NDIC Comments by Participants and Facilitators Participant (Kenyan) 42 The workshop offered a lot to learn. The Kenya Deposit Protection Fund has not been involved a lot in workshops because it is under the Central Bank of Kenya. Most issues are decided at the Central Bank level and not at the deposit insurance level. You cannot prosper without comparing with others we also need to interact with DIS from outside Africa where we have more developed systems. Coming to Nigeria has educated us. Participant (another Kenyan) We have learnt several lessons from this workshop. They include: , The advantages of operational autonomy for a deposit insurance institution; , lessons about failure resolution; , lessons with respect to things we have been doing wrong and those we have been doing right; , the fact that prevention is better than cure; , the fact that our legal framework does not cater for some of the things we are doing now; and , the need to enhance public awareness about DIS; Participant (Tanzania) It is a great opportunity to be in Nigeria. We have learnt quite a lot, the case of Turkey shows we have a long way to go. We need to review the time it takes to liquidate banks, it should not be open ended. Lots of people do not 43 know about deposit insurance, hence the need for more efforts on public awareness. Participant (Central Bank of Nigeria) This is one of the best courses I have ever attended. I have never been privileged to have the insight I currently have about NDIC and deposit insurance issues. Participant (Zimbabwe) We need more time to understand the complexities about differential premium system before we adopt it. Participant (Another Zimbabwean) We operate as a pay box but we are in the process of moving to a second phase, which includes differential premiums. In line with this, the networking is very useful and I wish to express sincere thanks to NDIC for what they have provided with respect to learning. Participant (Nigerian) The workshop has facilitated immense experience sharing, it is a very valuable course. I would like to thank NDIC Management for organizing the workshop. We have learnt a lot from the experiences of other countries. With respect to the issue of buy-ins, there is a need to design our system to facilitate buy-ins. Participant (Nigerian) 44 The workshop was enlightening. The number of participants should be enlarged to accommodate more people. We have mega banks but one or two are already in trouble. What are we doing about them? Participant (Tanzanian) Before this workshop, we thought it was okay to use the report from bank supervision for the purpose of categorizing banks for differentiated premium rates, from what we have learnt we can see that it is not appropriate. We will explore the implementation of differential premium assessment system. We should organize more workshops like this to enhance our knowledge about DIS issues. Participant (Nigerian) It has been beneficial, a workshop with a difference. With respect to training and capacity building, NDIC has been very active. There is need to form a committee and give them a challenge to be the think tank to lead us in developing our Differential Premium System. Participant (Nigerian) I join in expressing deep gratitude for the workshop. One key lesson learnt is that NDIC should develop Standard Operational Procedures (SOPs) for failure resolutions it is empowered to employ. For instance, when the Purchase and Assumption came up, we did not know a year before that P&A would be applied and no adequate preparation was made towards its implementation. Participant (Kenyan) 45 Issue of capacity building is a problem because we operate in an environment where you can be transferred anytime David Walker (CDIC, Canada) A great learning experience, it is my first time in Africa. It is a great experience because several countries are represented. Special thanks to NDIC for the workshop. Your hospitality is first class. Ridvan Cabukel (SDIF,Turkey) My first time in Africa and I have learnt about the problems you have. Turkey had similar problems in the past and we have improved our system considerably. Thank you for inviting me Mrs Ibrahim, ED (F&A) NDIC (Nigerian) It has been a worthwhile experience. It is nice meeting so many participants from outside Nigeria. Knowledge sharing has been useful and can be tailored to finding solutions to problems. We should explore future opportunities for training. Prof. Umoh, ED (OPs) NDIC (Nigerian) I appreciate everyone. Contributions have been wonderful. In fact, this is a way to learn. One key issue facing some DIS in Africa is lack of operational autonomy. We should feel free to make suggestions on what can be done to address the challenge. In response to a comment on investment of DIF, Prof. Umoh indicated that DIF was the outcome of periodic premium contributions by banks and 46 the banks who contributed would have interest in the safety of the fund. It might not be wise to go to the capital market because, according to him, the guiding principles of safety and liquidity could not be guaranteed from capital market investments. He also informed participants that a committee on the differential premium had been set up in NDIC and most of the members are participants at this workshop. He promised participants from other African countries that whatever model of differential premium system designed for implementation by the NDIC would be made available to them as a material for the development of their respective models. Mr. G. A. Ogunleye, MD/CEO, NDIC (Nigerian) The issue of autonomy bothers on public policy objectives of individual countries. We will see how we can influence that. I know the case of Kenya very well. Staff can be transferred at will. Developing countries have similar problems, therefore, workshop of this nature is very useful. In workshops without regional focus, the issues and challenges that manifest would be different. We will try as much as possible to create opportunities for sharing experiences at our regional level. Sister countries should also try to host such events. We, at the NDIC, are prepared to offer slots to staff of other DIS in courses run by our Training Centre. We will give you a feedback by giving you a summary report of the proceedings at this workshop. 5.0 LESSONS FROM THE WORKSHOP 47 Some of the key lessons that could be drawn from the workshop include the following, among others: , One of the most technical issues to contend with in the design of a deposit insurance scheme is the establishment of an appropriate deposit insurance pricing structure; , Differential premium may not be appropriate for all DIS at all times and by itself, it cannot mitigate excessive risk-taking behaviour of banks; , Designers of differential premium systems need to determine the appropriate balance between the desire to promote accountability, market discipline and sound management and the need to ensure confidentiality; , Differential premium systems need to be regularly re-assessed on their effectiveness and efficiency in meeting their objectives and if necessary be up-dated/revised to meet changing conditions; , High quality information and strength of accounting standards and audit reports are crucial for effective implementation of the differential premium system; , The success of the adoption of Differential Premium System (DPS) in developing countries depends on: financial system stability, sound accounting system, sound legal and supervisory regimes, expertise and experience on the part of the DIS to design and run the differential system, “Buy-in” from the industry, depositors and other safety-net participants and money to undertake the development of the system; 48 , In the short-run DPS cost may exceed benefits for many insurers in the developing countries, while in the long-run and under the right conditions, benefits of well-designed DPS can exceed costs; , There are many models of differential premium systems with no one universally accepted model. Though the underlying principles might be the same, every jurisdiction is expected to develop its own model that will suit its environment and level of development; , The need for the legal system to be supportive of timely and effective resolution of bank failures; , Adequate statutory powers are very necessary for the DIS to carry out failure resolutions effectively; , Deposit insurance systems operate in a dynamic world hence the need for training and re-training, which makes capacity building imperative; , Importance of information sharing amongst safety-net players. , Need for effective public awareness mechanism; , Need for deposit insurance schemes to have operational independence; , Bank Liquidation should be efficient, cost-effective and time-bound; , A minimum of pay-box with extended mandate preferable for a DIS. However, DIS should seek to be risk minimizers; , Differential Premium System requires elaborate planning and should take into account local peculiarities; , Participants have enhanced their knowledge of DIS operations and experience shared considered invaluable; and , Effective asset disposal strategies are critical to prompt reimbursement of uninsured deposits. 49 6.0 CONCLUSION The foregoing indicates that the workshop was very rewarding and beneficial. Thirty-five (35) participants from diverse DIS backgrounds, shared deposit insurance experiences for three days. Participants expressed the desire that ARC Workshop should be an annual event. The Chairman of Africa Regional Committee of IADI, Mr. G. A. Ogunleye, accepted the request on behalf of ARC and looks forward to more of such events in the future. Overall, the workshop was assessed a huge success. March 2007 50 APPENDIX I SOME DESIGN FEATURES OF DIS IN AFRICA S/N Country Mandate & Operational Access to Resolution Premium Annual Premium Type Of Deposit Deposit Exemption Powers Independence Information Powers Assessment Rate (%) Covered Base 1. Kenya Narrow Operates Through Significant Deposit 0.15 All None Mandate within Central Liability Central Bank Bank 2. Nigeria Broad Independent Direct Significant Deposit 0.94 Most i) insider deposits Mandate Agency Liability ii) counter-claims iii) interbank deposits 3 Tanzania Narrow Operates Through Minimal Deposit 0.10 Most i) interbank deposits Mandate within Central Liability ii)Foreign Currency Central Bank Bank Deposits 4 Zimbabwe Narrow Controlled Through None NA* NA* NA* NA* Mandate by Reserve Central Bank Bank * NA – Not Available