1.1. Having discussed in the Part I to this write-up some key and elementary issues for a better understanding of this topic. We would in this Part II dwell on the subject matter of our discussion as can be seen from the tittle of this work.
1.2. In line with the provisions of Section 99 of the Act however, it is pertinent to state that a Failed Insured Institution summarily means any of the following:
i. An insured institution whose licence has been revoked; or
ii. An Insured Institution which is critically undercapitalized as defined in the Act; or
iii. An Insured Institution which has been declared a failed Insured Institution by the Corporation or the Central Bank of Nigeria in accordance with the criteria stipulated in the Prudential Guidelines issued for licensed Insured Institutions.
1.3. From the foregoing definitions, it can be said that a Failed Insured Institution is not only an insured institution whose licence has been revoked, an insured institution is automatically failed if it is critically undercapitalized as defined by the Act.
1.4. Also, we have to still bear in mind that the focus of this work is on Banks, and Banks are Insured Institutions as can be gleaned from or seen in Part I to this work.
1.5. By a combined reading of Section 25(1)(a) of the Act alongside other relevant provisions of the Act, in the event of the revocation of the operating license of a Bank or actual suspension of payment to depositors of a Bank, a depositor shall be entitled to claim and receive a maximum amount of N500,000.00 (Five Hundred Thousand Naira, Only); this claim does not apply to depositors of Microfinance Bank who by Section 25(1) (b) of the Act are just entitled to a maximum claim and receipt of N200,000.00 (Two Hundred Thousand Naira, Only). In any case of actual suspension however, it is further provided that the Corporation shall not unilaterally pay depositors of a Bank or a Microfinance Bank, it must be with the concurrence of the Central Bank of Nigeria.
1.6. Furthermore, under Section 25(2) of the Act, the Corporation has the power to vary upwards the maximum depositors’ claims of N500,000.00 (Five Hundred Thousand Naira) and N200,000.00 (Two Hundred Thousand Naira) as the case may be and as provided by Section 25(1) of the Act, and this variation can only be done in favor of depositors of a Failed Insured Institution. The Corporation can increase the maximum amount for claim as provided by the Act, but this can only be done if such variations are approved by the Board of Directors (the Board) of the Corporation.
1.7. In Section 25(4) of the Act, it is further provided:
“The payment of the insured sum as provided for under this section shall be without prejudice to the liquidation dividends to be paid to the depositor once the assets of the failed insured institution have been realized.“
1.8. From the provisions of Section 25(4) above, it is clear that the insured sum being referred to are the sums of N500,000.00 (Five Hundred Thousand Naira) and N200,000.00 (Two Hundred Thousand Naira) as the case may be; in other words, an insured sum or deposit can be defined to be the sum of N500,000.00 (Five Hundred Thousand Naira) or N200,000.00 (Two Hundred Thousand Naira) as provided under Section 25 of the Act as maximum claims for a depositor.
1.9. Aside the said maximum claims by depositors which are the insured deposits, the provisions of Section 25(4) above make a depositor in a failed insured institution entitled to its liquidation dividends once the assets of the Failed Insured Institution have been realized, but this entitlement is subject to the conditions as provided for in Section 31 of the Act.
1.10. Thus, going by the explanations in Paragraph 1.6 above and to narrow issues down to the title of this work, it would simply be summarized that where a Bank fails, the Board of the Corporation can exercise discretion and increase the maximum claim for a depositor from N500,000.00 or N200,000.00 as the case may be to a certain increased sum in the circumstances.
1.11. The seriousness of the maximum claim in the Act is further solidified and amplified by Section 29(2) of the Act which provides that where a depositor maintains action in court against the Corporation in relation to payment of insured deposits to depositors of an insured institution, the maximum remedy he can get is the insured deposit as defined in paragraph 1.8 above, and nothing more.
1.12. In sum, it is very clear from the foregoing paragraphs as to how much a depositor (customer) of a failed Bank can claim in a given scenario. Except for instances where it is provided for upward variation or entitlement to liquidation dividends, the maximum claim or remedy available to a customer of a failed bank is no more than the insured sum of N500, 000.00 (or N200,000.00 for a microfinance bank). It is therefore immaterial if the amount the customer lodged with the Failed Bank is ordinarily higher than the sum of N500, 000.00 (Five Hundred Thousand Naira) as provided. However, the said provision for upward variation is not as of right on the part of the depositor, it is a discretionary provision which the Corporation may decide to exercise in a given circumstance.
1.13. In the Part III to this work, the time limit available to a customer of a failed bank would be discussed, among others
