Kenya Deposit Insurance Corporation raises deposit loss repayment
Depositors will be paid 98 per cent of their money within seven working days in the event their bank is liquidated.
Kenya Deposit Insurance Corporation (KDIC) has also raised the maximum deposit covered from Sh100,000 to Sh500,000 effective July next year, in a move chief executive Mohamud Mohamud said will promote public confidence and encourage savings.
Speaking during a conference to launch the revised deposit coverage limit in Nairobi yesterday, Mohamud said the adjustment will make it the highest in Africa and put Kenya at par with developed nations.
“It will also encourage depositors to bank their money which will be used to develop our country,” he added.
Mohamud also said to safeguard depositors in cases of bank failure, KDIC has established a contributory insurance scheme whereby member institutions pay premiums annually to support the build-up of the fund.
The growth of the fund, he added, will be based on the annual premiums and investment returns earned.
Mohamud also disclosed that KDIC,formerly Deposit Protection Fund Board, will in July next year launch a risk-based premium assessment model, upon which it will leverage its plan.
The model applies different rates of premiums on member institutions, based on their evaluated risk profile.
Previously, KDIC used a flat rate. However, KDIC Chairman James Lopoyetum said the risk-based premium model will introduce fairness and equity in charging premium, “a process that supports the increased coverage limit we are proudly launching today.”
He said in the last three years, the institution has adopted a “Purchase and Assumption” methodology of risk management, as was the case with Chase Bank and Imperial Banks where 75 per cent of assets and liabilities were successfully transferred to SBM Bank (K) Ltd.
Acting National Treasury CS Ukur Yattani said the launch of the risk-based premium assessment model, would further stabilise efforts by the government to create a stable financial sector.
“The era of pillow saving or putting money in hidden places in the house is long gone. We must create an environment that is stable for deposits,” he added.