Exposure Draft -Revised Framework for the Differential Premium Assessment System in NDIC

EXPOSURE DRAFT REVISED FRAMEWORK FOR DIFFERENTIAL PREMIUM ASSESSMENT SYSTEM IN NDIC 2023 NDIC NDIC Nigeria Deposit Insurance Corporation Protecting your bank deposits

Table of Contents 1.0 Introduction 2.0 Objectives of the Framework 3.0 The Framework Principle and the IADI Essential Criteria 4.0 Legal Basis of the Framework 5.0 Scope of Application 6.0 Rationale for the Review of Extant DPAS Framework 7.0 Methodology of the Framework 7.1 Assessment Model for the NDIC DPAS 7.2 DPAS Structure 8.0 9.0 7.3 7.4 7.5 7.6 7.7 7.2.1 DPAS Template 7.2.2 Premium Base Rate and Add-ons Computation for Different Categories of Insured Institutions Regulatory Returns and Reports Filing of Returns by Insured Institutions DPAS Rating Reports Premium Assessment Period Review of Insured Institution's Premium Rate Compliance with Statutory and Regulatory Requirements Monitoring and Enforcing Compliance 10.0 Key Success Factors 11.0 Effective Date 12.0 Review Cycle 13.0 Enquiries 14.0 Annexure 14.1 Definitions of Key Terms 14.2 List of Abbreviations 2

1.0 Introduction The adoption of Differential Premium Assessment System (DPAS) by the Nigeria Deposit Insurance Corporation (NDIC) aims to differentiate premiums payable by insured financial institutions based on their respective risk profile. The adoption of Differential Premium Assessment System (DPAS) by the Nigeria Deposit Insurance Corporation (NDIC) aims to differentiate premiums payable by insured financial institutions based on their respective risk profile. A DPAS is premised on classifying banks into various risk buckets and applying different premium rates depending on the perceived riskiness of each bank. A DPAS is premised on classifying banks into various risk buckets and applying different premium rates depending on the perceived riskiness of each bank. Hence, institution with higher risk profile would have a higher premium rate. Hence, institution with higher risk profile would have a higher premium rate.

Prior to the adoption of DPAS, the Corporation implemented a Flat-rate Premium System from 1989 to 2007 for Deposit Money Banks (DMBs); 2006-2016 for Primary Mortgage Banks (PMBs); and 2006-2020 for Microfinance Banks (MFBs). Prior to the adoption of DPAS, the Corporation implemented a Flat-rate Premium System from 1989 to 2007 for Deposit Money Banks (DMBs); 2006-2016 for Primary Mortgage Banks (PMBs); and 2006-2020 for Microfinance Banks (MFBs). The premium payable to NDIC was assessed at a uniform rate across all insured banks. The premium payable to NDIC was assessed at a uniform rate across all insured banks.

In 2008, the NDIC transited from flat rate premium assessment to DPAS which was applied to Commercial and Merchant banks (DMBs). In 2008, the NDIC transited from flat rate premium assessment to DPAS which was applied to Commercial and Merchant banks (DMBs). Subsequently, it was adopted for Non-Interest Banks (NIBs) in 2012; PMBs in 2017; and MFBs & Payment Service Banks (PSBs) in 2021. Subsequently, it was adopted for Non-Interest Banks (NIBs) in 2012; PMBs in 2017; and MFBs & Payment Service Banks (PSBs) in 2021.

The Initial DPAS Framework of the NDIC was issued in 2007. The Initial DPAS Framework of the NDIC was issued in 2007. This Revised DPAS Framework seeks to document the key elements of the NDIC DPAS which have been reviewed to make it more risk sensitive due to significant changes that have taken place in the Nigeria banking system and conform with the recommendations of the International Association of Deposit Insurers (IADI) and other global best practices. This Revised DPAS Framework seeks to document the key elements of the NDIC DPAS which have been reviewed to make it more risk sensitive due to significant changes that have taken place in the Nigeria banking system and conform with the recommendations of the International Association of Deposit Insurers (IADI) and other global best practices. 2.0 Objectives of the Framework The specific objectives of risk-based pricing of deposit insurance and this DPAS Framework are: The specific objectives of risk-based pricing of deposit insurance and this DPAS Framework are: i. To introduce fairness into the premium assessment process; To introduce fairness into the premium assessment process; ii. To encourage effective risk management practice in insured institutions; To encourage effective risk management practice in insured institutions; iii. To apply a risk differential approach in the deposit insurance premium assessment of banks; To apply a risk differential approach in the deposit insurance premium assessment of banks; 3

iv. To allow banks in the lower risk categories to pay relatively lower premium rates; To allow banks in the lower risk categories to pay relatively lower premium rates; V. To charge banks in the higher risk categories additional premium for their extra risks; To charge banks in the higher risk categories additional premium for their extra risks; vi. To incentivise regulatory compliance; and To incentivise regulatory compliance; and vii. To mitigate moral hazard. To mitigate moral hazard. 3.0 The Framework Principle and the IADI Essential Criteria The NDIC risk-adjusted deposit insurance pricing is anchored on the premise that the cost of deposit insurance premium and the coverage level should neither over-burden the banking system nor be largely subsidised by public funding (tax payers money). The NDIC risk-adjusted deposit insurance pricing is anchored on the premise that the cost of deposit insurance premium and the coverage level should neither over-burden the banking system nor be largely subsidised by public funding (tax payers money).

IADI Core Principle 9 “Sources and Uses of Funds” provides that a deposit insurer should have readily available funds and all funding mechanisms necessary to ensure prompt reimbursement of depositors' claims and that the responsibility for paying the cost of deposit insurance should be borne by banks. IADI Core Principle 9 “Sources and Uses of Funds” provides that a deposit insurer should have readily available funds and all funding mechanisms necessary to ensure prompt reimbursement of depositors' claims and that the responsibility for paying the cost of deposit insurance should be borne by banks. The essential criteria recommended that if the deposit insurer uses differential premium systems: The essential criteria recommended that if the deposit insurer uses differential premium systems: i. The system for calculating premiums is transparent to all participating institutions; The system for calculating premiums is transparent to all participating institutions; ii. The scoring/premium categories are significantly differentiated; and The scoring/premium categories are significantly differentiated; and iii. The ratings and rankings resulting from the system pertaining to individual banks are kept confidential. The ratings and rankings resulting from the system pertaining to individual banks are kept confidential. 4.0 Legal Basis of the Framework i. Section 16 of the NDIC Act 2006, provides that all deposits of a licenced bank or any other financial institution shall be insured with the Corporation with the exception of the following: Section 16 of the NDIC Act 2006, provides that all deposits of a licenced bank or any other financial institution shall be insured with the Corporation with the exception of the following: a. Insider deposits, that is, deposits of staff including directors of the insured institutions; Insider deposits, that is, deposits of staff including directors of the insured institutions; b. Counter-claims from a person who maintained both deposit and loan account, the former serving as a collateral for the loan; and Counter-claims from a person who maintained both deposit and loan account, the former serving as a collateral for the loan; and 4

c. Such other deposits as may be specified from time to time by the Board. Such other deposits as may be specified from time to time by the Board. ii. Furthermore, Section 17 (2) has given the Corporation the power to vary the rate or basis of assessment of the premium payable to the Corporation by insured institutions or to charge an insured institution or any class of insured institutions premium at a rate or rates which reflects risk posed to the Corporation's deposit insurance funds. Furthermore, Section 17 (2) has given the Corporation the power to vary the rate or basis of assessment of the premium payable to the Corporation by insured institutions or to charge an insured institution or any class of insured institutions premium at a rate or rates which reflects risk posed to the Corporation's deposit insurance funds. Hence, the adoption of the Differential Premium Assessment System in NDIC. Hence, the adoption of the Differential Premium Assessment System in NDIC. iii. Sections 23 (1), (2d) (3) and 25 empower the Corporation - where an insured institution is in default with its payment of annual premium or special contribution as provided in section 17 of the NDIC Act - to terminate the insured status (remove an institution from its register of insured institution) after a warning notice. Sections 23 (1), (2d) (3) and 25 empower the Corporation - where an insured institution is in default with its payment of annual premium or special contribution as provided in section 17 of the NDIC Act - to terminate the insured status (remove an institution from its register of insured institution) after a warning notice.

5.0 Scope of Application The Revised Framework shall be applied to all insured banks in Nigeria which include Commercial Banks (CBs), Merchant Banks (MBs), Non- Interest Banks (NIBs) and Non-Interest Windows; Microfinance Banks (MFBs); Primary Mortgage Banks (PMBs); Payment Service Banks (PSBs) and such other insured deposit taking institutions in Nigeria. The Revised Framework shall be applied to all insured banks in Nigeria which include Commercial Banks (CBs), Merchant Banks (MBs), Non- Interest Banks (NIBs) and Non-Interest Windows; Microfinance Banks (MFBs); Primary Mortgage Banks (PMBs); Payment Service Banks (PSBs) and such other insured deposit taking institutions in Nigeria.

6.0 Rationale for the Review of Extant DPAS Framework The need to periodically review, up-date and fine-tune DPAS cannot be over emphasised to ensure the sustainability of the system and comply with best practice. The need to periodically review, up-date and fine-tune DPAS cannot be over emphasised to ensure the sustainability of the system and comply with best practice. This review was necessitated by the need to address observed gaps in the extant DPAS framework, challenges of operationalising the framework; align with Risk Based Supervisory Rating/Approaches; and for a more robust calibration of a Risk Adjusted Premium Assessment of the NDIC. This review was necessitated by the need to address observed gaps in the extant DPAS framework, challenges of operationalising the framework; align with Risk Based Supervisory Rating/Approaches; and for a more robust calibration of a Risk Adjusted Premium Assessment of the NDIC. 5

7.0 Methodology of the Framework 7.1 Assessment Model for the NDIC DPAS The IADI recommended four models for pricing deposit insurance which includes the Structural Option Pricing Model, Empirical Expected Loss Model, Bucketing Approach, and Fund Size Calculations. The IADI recommended four models for pricing deposit insurance which includes the Structural Option Pricing Model, Empirical Expected Loss Model, Bucketing Approach, and Fund Size Calculations. In the Revised Framework, the NDIC adopted the Bucketing Approach for its DPAS. In the Revised Framework, the NDIC adopted the Bucketing Approach for its DPAS.

7.2 DPAS Structure 7.2.1 DPAS Template i. Determination of a Base Premium Rate (Ro) for banks in the best (lowest) risk category; and Determination of a Base Premium Rate (Ro) for banks in the best (lowest) risk category; and ii. Determination of add-ons based on the individual bank's risk profile using both quantitative and qualitative factors. Determination of add-ons based on the individual bank's risk profile using both quantitative and qualitative factors. The add-ons are dependent on the Composite Risk Rating (CRR) of the individual insured financial institution. The add-ons are dependent on the Composite Risk Rating (CRR) of the individual insured financial institution.

The NDIC DPAS Template uses two primary stages of deposit insurance pricing (determination of premium rate), namely: The NDIC DPAS Template uses two primary stages of deposit insurance pricing (determination of premium rate), namely:

The premium rate would be computed quarterly and the average for the four quarters would be used to determine the premium payable by multiplying each institution's premium rate by its total assessable deposits reported in the external auditor's certified statement of total deposit liabilities or the returns as at 31st December of the preceding year. The premium rate would be computed quarterly and the average for the four quarters would be used to determine the premium payable by multiplying each institution's premium rate by its total assessable deposits reported in the external auditor's certified statement of total deposit liabilities or the returns as at 31st December of the preceding year.

The Template is based on the CAMELS parameters with the quantitative criteria carrying 75% of the total add-ons score (0.30) or 0.225 of the add- ons and the qualitative criteria accounting for 25% or 0.075. The Template is based on the CAMELS parameters with the quantitative criteria carrying 75% of the total add-ons score (0.30) or 0.225 of the add- ons and the qualitative criteria accounting for 25% or 0.075. The quantitative factors are Capital Adequacy, Asset Quality, Earnings & Profitability, Liquidity & Funds Management and Sensitivity to Market Risk; while the qualitative factor is Management & Corporate Governance. The quantitative factors are Capital Adequacy, Asset Quality, Earnings & Profitability, Liquidity & Funds Management and Sensitivity to Market Risk; while the qualitative factor is Management & Corporate Governance.

Below is the summary of parameters and the accompanying weights as used in the CBN/NDIC Composite Bank Rating that is expected to feed into the DPAS Template: Below is the summary of parameters and the accompanying weights as used in the CBN/NDIC Composite Bank Rating that is expected to feed into the DPAS Template: 6

Table 1: Composite Risk Rating Computation Parameters Weights Credit Weighted Credit Points (%) points Capital Adequacy 20 CP1 WCP1 = CP1WEIGHTS/100 NNNNNNNNNNNNNNNNNNNNNNNNN Asset Quality 15 CP2 WCP2 = CP2WEIGHTS/100 Earnings & Profitability 20 CP3 WCP3 = CP3WEIGHTS/100 NNNNNNNNNNN Liquidity & Funds 15 CP4 WCP4 = CP4WEIGHTS/100 Management Sensitivity to Market Risk 5 CP5 WCP5 = CP5WEIGHTS/100 Management 25 CP6 WCP6 = CP6WEIGHTS/100 &Corporate Governance Total 100 SWCP = COMPOSITE RATING Weighted Credit Points = component points x weights/100; Composite Rating = sum of weighted credit points =WCP. Weighted Credit Points = component points x weights/100; Composite Rating = sum of weighted credit points =WCP. Ratings (Low, Moderate, Above Average and High Risks) are assigned to banks based on the Total Composite Score, where COMPOSITE SCORE is the Summation of all the Weighted Credit Points for all items in the Bank Rating Computation. Ratings (Low, Moderate, Above Average and High Risks) are assigned to banks based on the Total Composite Score, where COMPOSITE SCORE is the Summation of all the Weighted Credit Points for all items in the Bank Rating Computation.

Table 1.1: Composite Risk Rating Computation – Parameter Components S/N PARAMETER COMPONENT COMPONENT WEIGHT % TOTAL WEIGHT % 1. Capital Adequacy a. b. Tier 1 Capital to Risk Weighted Asset Qualifying Capital to Risk Weighted Assets Ratio 5 5 c. Adjusted Capital Ratio (Tier 1 Capital to Net Credit) 4 d. Tier 1 Capital to Total Assets 2 e. Impaired Credits net of 4 Accumulated Impairment to Tier 1 Capital 20 2. Asset Quality a. Impaired Credits to Total Credits 10 b. Impaired Risk Assets to Total 2 Risk Assets c. Total Impairment to Total 3 Impaired Risk Assets 15 3. Earnings a. Profit Before Tax to Average 5 Total Assets b. Total Expenses to Total Income 10

c. Net Interest income to Total Income 2.5 20 d. Non-interest Income to Total 2.5 Income 4. Liquidity a. Liquidity Ratio 10 b. Net Credit (less on-lending) to 2 Deposits c. Volatile Liability Dependency 3 Ratio 15 5. Management a. Risk Management Control 20 Functions b. Return Submission 2.5 c. Implementation of Examiners' 2.5 Recommendation 6. Sensitivity to a. NOP to Tier 1 Capital 5 25 5 Market Risk Table 2: Composite Risk Rating Categorisation 100 S/No Score Rating Risk Category υπουουουουουου που που που που που που που που που που που που π 1 80≤X≤100 Low Risk A 1100 1100 1100 1100 1100 1100 1100 1100 1100 1100 1100 1100 1100 1100 1100 1100 1100 1100 1100 1100 1100 110 12 2 60<X<80 Moderate B 3 50<X<60 Above Average C 4 0≤X<50 High Risk D 11001101011001011001101011001102NNNNNNNNNNNNNNNNNN Rating A - Low Risk the highest (best) rating. Rating A - Low Risk the highest (best) rating. It is an indication that the institution is very sound in all respects. It is an indication that the institution is very sound in all respects. Rating D- High Risk is the lowest (worst) rating. Rating D- High Risk is the lowest (worst) rating. An institution rated in this category has high immediate probability of failure. An institution rated in this category has high immediate probability of failure.

7.2.2 Premium Base Rate and Add-ons Computation for Different Categories of Insured Institutions 7.2.2.1 Premium Base Rate and Add-ons Computation for DMBs The DPAS Template for DMBs is made up of the Base Rate (Ro) of 0.35% and maximum Add-ons of 0.30%. The DPAS Template for DMBs is made up of the Base Rate (Ro) of 0.35% and maximum Add-ons of 0.30%. The estimated add-on for a DMB is dependent on the CRR of that individual insured DMB, as shown in Table 3. The estimated add-on for a DMB is dependent on the CRR of that individual insured DMB, as shown in Table 3.

Table 3: Premium Base Rate and Add-ons Computation for DMBs PARAMETER FORMULA BASE RATE (%) =0.35 MAXIMUM ADD-ON (%) =0.30 ESTIMATED ADD-ON PER DMB (%) = 0.30 [1-(CRR/100)] PREMIUM RATE = {0.35 + (0.30[1-(CRR/100)])}/100 NOTE: 1. Note: 1. Base rate is 0.35 irrespective of the DMB's Rating. Base rate is 0.35 irrespective of the DMB's Rating. 2. CRR - Composite Risk Rating of individual DMB derived from the CBN/NDIC Bank Rating Matrix. 2. CRR - Composite Risk Rating of individual DMB derived from the CBN/NDIC Bank Rating Matrix.

7.2.2.2 Premium Base Rate and Add-ons Computation for PSBs The DPAS Template for PSBs is made up of the Base Rate (Ro) of 0.10% and maximum Add-ons of 0.10%. The DPAS Template for PSBs is made up of the Base Rate (Ro) of 0.10% and maximum Add-ons of 0.10%. The estimated add-on for a PSB is dependent on the CRR of that individual insured PSB as shown in Table 4. The estimated add-on for a PSB is dependent on the CRR of that individual insured PSB as shown in Table 4.

Table 4: Premium Base Rate and Add-ons Computation for PSBs PARAMETER FORMULA BASE RATE (%) =0.10 MAXIMUM ADD-ON (%) =0.10 ESTIMATED ADD-ON (%) = 0.10 [1-(CRR/100)] PREMIUM RATE = {0.10 + (0.10[1-(CRR/100)])}/100 NOTE: 1. Note: 1. Base rate is 0.10 irrespective of the PSB's Rating. Base rate is 0.10 irrespective of the PSB's Rating. 2. CRR - Composite Risk Rating of individual PSB derived from the CBN/NDIC Bank Rating Matrix. 2. CRR - Composite Risk Rating of individual PSB derived from the CBN/NDIC Bank Rating Matrix.

7.2.2.3 Premium Base Rate and Add-ons Computation for PMBs The DPAS Template for PMBs is made up of the Base Rate (Ro) of 0.30% and maximum Add-ons of 0.25%. The DPAS Template for PMBs is made up of the Base Rate (Ro) of 0.30% and maximum Add-ons of 0.25%. The estimated add-on for a PMB is dependent on the CRR of that individual insured PMB as shown in Table 5. The estimated add-on for a PMB is dependent on the CRR of that individual insured PMB as shown in Table 5. 8

Table 5: Premium Base Rate and Add-ons Computation for PMBs PARAMETER FORMULA BASE RATE (%) =0.30 MAXIMUM ADD-ON (%) =0.25 ESTIMATED ADD-ON (%) = 0.25 [1-(CRR/100)] PREMIUM RATE = {0.30 + (0.25[1-(CRR/100)])}/100 NOTE: 1. Note: 1. Base rate is 0.30 irrespective of the PMB's Rating; Base rate is 0.30 irrespective of the PMB's Rating; 2. CRR - Composite Risk Rating of individual PMB derived from the CBN/NDIC Bank Rating Matrix. 2. CRR - Composite Risk Rating of individual PMB derived from the CBN/NDIC Bank Rating Matrix.

7.2.2.4 Premium Base Rate and Add-ons Computation for MFBs The DPAS Template for MFBs is made up of the Base Rate (Ro) of 0.20% and maximum Add-ons of 0.25%. The DPAS Template for MFBs is made up of the Base Rate (Ro) of 0.20% and maximum Add-ons of 0.25%. The estimated add-on for an MFB is dependent on the CRR of that individual insured MFB as shown in Table 6. The estimated add-on for an MFB is dependent on the CRR of that individual insured MFB as shown in Table 6.

Table 6: Premium Base Rate and Add-ons Computation for MFBs PARAMETER FORMULA BASE RATE (%) =0.20 MAXIMUM ADD-ON (%) =0.25 ESTIMATED ADD-ON (%) 0.25 [1-(CRR/100)] PREMIUM RATE = {0.20 + (0.25[1-(CRR/100)])}/100 NOTE: 1. Note: 1. Base rate is 0.20 irrespective of the MFB's Rating. Base rate is 0.20 irrespective of the MFB's Rating. 2. CRR - Composite Risk Rating of individual MFB derived from the CBN/NDIC Bank Rating Matrix. 2. CRR - Composite Risk Rating of individual MFB derived from the CBN/NDIC Bank Rating Matrix.

However, because of the large number of MFBs and the challenges of the sub- sector, not all the MFBs are examined annually, which may impede the effective execution of the DPAS Framework. However, because of the large number of MFBs and the challenges of the sub- sector, not all the MFBs are examined annually, which may impede the effective execution of the DPAS Framework. In such instance, the rating of such MFB in its latest available examination report shall be used to compute the add-ons for that MFB in the premium assessment period. In such instance, the rating of such MFB in its latest available examination report shall be used to compute the add-ons for that MFB in the premium assessment period.

7.3 Regulatory Returns and Reports The following types of returns and reports, amongst others, are expected to be rendered by the insured institution for the determination of differential premium rate, assessment of financial conditions, The following types of returns and reports, amongst others, are expected to be rendered by the insured institution for the determination of differential premium rate, assessment of financial conditions, 9

determination of the Composite Risk Rating of insured institutions, and other purposes: determination of the Composite Risk Rating of insured institutions, and other purposes: i. Monthly and Quarterly Statutory Returns Monthly and Quarterly Statutory Returns ii. Approved Annual Audited Accounts and Reports Approved Annual Audited Accounts and Reports iii. Certified Statement of Deposit Liabilities Certified Statement of Deposit Liabilities iv. Returns on Fraud and Forgeries Returns on Fraud and Forgeries V. Returns on Money Laundering Returns on Money Laundering vi. Risk-Based Examination Reports from CBN/NDIC Risk-Based Examination Reports from CBN/NDIC 7.4 Filing of Returns by Insured Institutions i. Section 27 (1) of NDIC Act 2006 requires every insured institution to submit to the Corporation such returns and information as may be required from time to time within the stipulated period. Section 27 (1) of NDIC Act 2006 requires every insured institution to submit to the Corporation such returns and information as may be required from time to time within the stipulated period. ii. Section 24 (1) of BOFIA 2020 requires every bank to submit not later than five days after the last day of each month or such other specified interval, a Statements showing: (a) The assets and liabilities of the bank, (b) An Analysis of Advances and other assets. Section 24 (2) specifies that every bank shall submit such other information, documents, statistics or returns as the CBN may deem necessary. Section 24 (1) of BOFIA 2020 requires every bank to submit not later than five days after the last day of each month or such other specified interval, a Statements showing: (a) The assets and liabilities of the bank, (b) An Analysis of Advances and other assets. Section 24 (2) specifies that every bank shall submit such other information, documents, statistics or returns as the CBN may deem necessary. This is further clarified in the “iii” below. This is further clarified in the “iii” below. iii. CBN Circular BSD/DIR/GEN/LAB/07/011 dated April 10, 2014 requires all banks to submit Daily, Monthly, Quarterly, and Semi-Annual returns via FinA Application. CBN Circular BSD/DIR/GEN/LAB/07/011 dated April 10, 2014 requires all banks to submit Daily, Monthly, Quarterly, and Semi-Annual returns via FinA Application. The timelines for submission of statutory returns by reporting institutions through FinA are: The timelines for submission of statutory returns by reporting institutions through FinA are: For the determination of applicable premium rate, every insured financial institution is required under this Framework to submit periodic returns in line with the Acts and circular below: For the determination of applicable premium rate, every insured financial institution is required under this Framework to submit periodic returns in line with the Acts and circular below: Table 7: Statutory Returns Submission Deadlines Statutory Returns Filing deadline Daily Returns To be submitted on or before 10.00 a.m. of the following working day. Monthly, Quarterly and Semi-Annual Returns To be submitted on or before the 5th day after the month's end. Where the 5th day happens to be a weekend or public holiday, returns should be submitted the previous day. 10

iv. Where an insured institution failed to file returns as and when required and the previous examination reports of that institution are not available, the NDIC shall assign the maximum premium rate applicable to that institution type in determining the premium payable by it. Where an insured institution failed to file returns as and when required and the previous examination reports of that institution are not available, the NDIC shall assign the maximum premium rate applicable to that institution type in determining the premium payable by it. 7.5 DPAS Rating Reports i. Each insured financial institution, upon a written demand, would be provided with its risk rating and other relevant supporting documents employed in the determination of its risk rating. Each insured financial institution, upon a written demand, would be provided with its risk rating and other relevant supporting documents employed in the determination of its risk rating. Such rating report would assist the insured institution to re-evaluate its current level of risk, strengthen risk controls and deploy appropriate treatments to improve its risk score. Such rating report would assist the insured institution to re-evaluate its current level of risk, strengthen risk controls and deploy appropriate treatments to improve its risk score. ii. Each insured financial institution, its director, officer, employee or agent shall maintain confidentiality of its institution's risk score, risk rating, premium rates, the amount of premium payable or paid and are precluded from disclosing any of the confidential information to other insured institutions, unauthorised external parties and the general public. Each insured financial institution, its director, officer, employee or agent shall maintain confidentiality of its institution's risk score, risk rating, premium rates, the amount of premium payable or paid and are precluded from disclosing any of the confidential information to other insured institutions, unauthorised external parties and the general public. The confidential information shall not be published in any advertisement, annual report and prospectus so as not to cause disruption in the financial system or give an undue competitive advantage to any insured institution. The confidential information shall not be published in any advertisement, annual report and prospectus so as not to cause disruption in the financial system or give an undue competitive advantage to any insured institution.

7.6 Premium Assessment Period 7.6.1 In line with Section 17 (1) of NDIC Act 2006, an eligible insured financial institution shall be assessed for premium on its eligible total deposit liabilities standing at its books as at December 31 of the preceding year in the following manner: In line with Section 17 (1) of NDIC Act 2006, an eligible insured financial institution shall be assessed for premium on its eligible total deposit liabilities standing at its books as at December 31 of the preceding year in the following manner: i. The deposit liabilities shall be as certified by the approved auditor of the insured financial institution; The deposit liabilities shall be as certified by the approved auditor of the insured financial institution; ii. The Certified deposit liabilities shall be forwarded to the Corporation on or before January 31 of every year; and The Certified deposit liabilities shall be forwarded to the Corporation on or before January 31 of every year; and iii. The annual premium shall be payable not later than two months from the date of the demand notice. The annual premium shall be payable not later than two months from the date of the demand notice. 7.6.2 Section 17 (7) of NDIC Act 2006, any premium payable by an insured institution and which remains unpaid for more than three months Section 17 (7) of NDIC Act 2006, any premium payable by an insured institution and which remains unpaid for more than three months 11

after a demand notice had been served on such institution, shall attract interest at a rate equivalent to the prevailing Monetary Policy Rate of the Central Bank of Nigeria. after a demand notice had been served on such institution, shall attract interest at a rate equivalent to the prevailing Monetary Policy Rate of the Central Bank of Nigeria. 7.7 Review of Insured Institution's Premium Rate i. The assessed insured financial institution may seek in writing for clarification or review of its premium rate within 10 days on receipt of the demand notice if it is not satisfied with its risk rating. The NDIC shall review the rating to either confirm or revise it. The assessed insured financial institution may seek in writing for clarification or review of its premium rate within 10 days on receipt of the demand notice if it is not satisfied with its risk rating. The NDIC shall review the rating to either confirm or revise it. ii. If not satisfied with the review, the assessed insured financial institution