Deposit Insurance body moves to cushion members amid liquidity woes in banks

In the wake of liquidity challenges hitting Kenyan banks, the Kenya Deposit Insurance Corporation (formerly Deposit Protection Fund Board) has stepped up to provide a safety-net for savings, banking and payments systems in the Republic of Kenya. At a media workshop yesterday, KDIC revealed that the role of protecting depositors against losses has not been a walk in the park in the last twenty years of the Corporation’s existence.

While giving a status report on the position of banks currently under receivership, Kenya Deposit Insurance Corporation Acting Chief Executive Officer Mohamud A. Mohamud said to date, only 10 per cent of Dubai Bank’s depositors have been paid their dues, unlike Chase bank, which got a lifeline from Kenya Commercial Bank (KCB). The CEO also said confidence had been restored in Chase Bank with more than 1,300 new accounts set up since it was reopened.

The Kenya Deposit Insurance Corporation commenced operations in 2014, taking over the reins of the former Deposit Protection Fund Board, which was a department of the Central Bank of Kenya. It offers insurance to depositors in financial institutions to help restore confidence and stability in the banking sector as well as acting as a ‘risk minimizer’.

The now fully-fledged state corporation is currently liquidating 16 institutions, including Postbank Credit Limited, Trade Bank Limited, Kenya Finance Bank Limited, Reliance Bank Limited, Trust bank Limited among others, with Dubai Bank, Chase Bank and Imperial Bank all under receivership. In his presentation, KDIC Ag CEO Mohamud .A. Mohamud disclosed that 99 per cent of the loans issued by Dubai Bank have been categorized as non-performing.

His analysis on the status of Chase Bank was less gloomy however, noting that transactions worth Sh5.4 billion had been made through the system since it was reopened, with 1,343 new accounts opened, an indication that depositor confidence in the institution had been restored.

With regards to Imperial Bank, 87 per cent of depositors had accessed their accounts, withdrawing up to Sh1 million. However, the process had been slowed by a suspension of payments by the courts. Central Bank of Kenya Governor Dr. Patrick Njoroge has however intimated that Imperial Bank could soon be back on its feet.

These protracted legal battles — both during receivership and liquidation, as well as slow uptake of reimbursed deposits and poor corporate governance in some institutions — were cited as the major challenges the KDIC is facing in implementation of its mandate.

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