KDIC mulls increased cover for customer deposits

KDIC mulls increased cover for customer deposits

The Kenya Deposit Insurance Corporation (KDIC) is in talks with commercial to increase the insurance premium on deposits.

This comes as the deposits insurer faces its toughest stint yet with three banks being placed under receivership since 2015.

KDIC acting Managing Director Mohamud Ahmed said there is need for banks to increase the contributions to the deposit protection fund through contributions to be determined on the basis of the risk each carries, including the type and amount of deposits.

“KDIC shall continue to align with International best practice on target fund and deposit insurance in general,” Mr Ahmed said during a meeting with bank representatives.

Currently banks pay a premium contribution of 0.15 percent of total deposits, a rate last adjusted in 1993.

Currently customer deposits are covered up to Sh100,000 leaving many large depositors at the mercy of the deposits insurer for larger payouts.

Recently KDIC has been partnering with local banks to facilitate payments of up to Sh1.5 million for affected depositors.

In the case of Imperial Bank, depositors were initially paid through KCB and DTB before the enlisting of NIC Bank.

The Kenya Deposit Insurance Corporation is also mulling the creation of a target fund that will shore up its reserves, enabling it deal with deposit settlement should a bank go under.

The insurer is also reviewing the maximum amount payable to depositors should their bank collapse to instill confidence in the banking sector.

KDIC is also in the process of setting up a risk based premium assessment that will see banks rated and charged premiums on an individual basis.

Mr Ahmed said there was need for sector players to set up an industry body that will manage the sector’s reputation in the event of a crisis.

“Risk based premium assessment methodology will be rolled out when all frameworks are in place. There is also need to establish an appropriate crisis management group,” he said on the KDIC twitter page.

KDIC is overseeing the liquidation of 16 banks with Dubai Bank being the latest bank to undergo liquidation.