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Bank examination forms an integral part of banks’ regulatory framework. The scope and importance of the examination in recent times has been amplified by the increase in the deterioration of the risk assets of many insured banks. This is further underscored by the provision of BOFID, 1991 and NDIC Act No. 22 of 1998 as amended.

The NDIC through its Field Examination Department statutorily conducts two types of examinations of licensed banks, namely ROUTINE and SPECIAL.

(1) Routine Examination

This is conducted at regular time intervals (ideally once every year for each bank) in line with the schedule agreed with the Banking Supervision Department of the Central Bank of Nigeria at the beginning of each year.

(2) Special Examination

As stipulated in Section 18 of the NDIC Act, a Special Examination is conducted if the Board of the Corporation is of the opinion that an insured bank:

(a) may be carrying on business in a manner detrimental to the interest of its depositors and creditors;

(b) may have insufficient assets to cover its liabilities to the public;

(c) may be contravening the provisions of the NDIC Act or any other statute in existence.

OTHER ACTIVITIES INCLUDE:

(1) Joint Examination with the Central Bank of Nigeria

It is an examination conducted jointly by CBN and NDIC.

(2) Target Examination

As the name implies, a target examination is aimed at determining the status of specific aspects of the bank’s affairs, e.g. credits.

(3) Special Investigation

A special investigation is conducted to probe into the details of operational or administrative activities such as frauds and forgeries, Board/Management crises, insider abuses etc, which may jeopardise the interest of depositors and/or creditors.

(4) Verification Exercise

Examiners may be required to confirm or verify certain information concerning an insured bank which are relevant to regulatory/supervisory decision-making, e.g. confirmation of payment of recapitalisation, recovery of classified credit, etc.

(5) Monitoring Exercise

A monitoring exercise is performed sequel to the other activities highlighted above. The objective is to follow-up on exceptions raised by Examiners in previous examination/investigation reports so as to ensure the satisfactory implementation of recommendations and actual disposal of all outstanding issues.

BANK EXAMINATION

Bank examination is the process by which on-site assessment of a bank is carried out. The main objectives of bank examination include:

• To ensure that a bank is carrying on its activities in a safe and sound manner.

• To ensure compliance with banking laws, regulations and directives of the regulatory authorities.

• To enable the supervisory authorities to appraise the quality of bank management and directors.

• To identify those areas where corrective action is required to strengthen the bank, improve its performance, and enable it to comply with applicable laws and regulations.

• To confirm that bank returns to regulatory authorities are genuine and a true reflection of the bank’s records.

Bank examination is one of the primary tools utilised by the Corporation to effect and maintain the safety and soundness of the banking system. The first priority of the Corporation’s bank examination is to provide effective surveillance and supervision of the bank examined. The examination report provides an analysis of a bank’s condition to other interest groups like CBN, the bank’s board of directors, top management of the bank, and shareholders (owners of the banks).

Furthermore, the examination report is designed to complement the utility of other supervisory tools available to the Corporation.