Regulatory Alerts2017-10-04
Issues In Funding of DIS
This paper analyzes the funding of deposit insurance systems, focusing on lessons for Nigeria. The research reviews funding arrangements and fund management practices in other countries, such as the USA, Malaysia, the Philippines, and Japan, highlighting that most explicit deposit insurance systems use an ex-ante funding arrangement, where funds are invested in government debt. The study suggests that Nigeria can benefit from implementing a target funding ratio framework, assessing premiums more frequently, grouping insured institutions into risk buckets, and retaining operating surpluses within the deposit insurance fund. Furthermore, the paper emphasizes the importance of a well-defined investment policy for the deposit insurance fund, aligning with principles of safety, liquidity, and high returns.