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THE Deposit Protection Corporation (DPC) could face serious challenges in carrying out its mandate as it only had $7,2 million in its coffers as at December 2014.
This was after making payments to depositors of banks that were liquidated in December last year. The DPC’s primary function is to compensate depositors in full or in part for losses incurred in the event of insolvency of a contributory institution. It was created by an Act of Parliament in response to a growing need to moderate instability in the banking sector, as well as to protect the public against the worst consequences of bank failure.
The Fund is vested in and administered by the DPC. DPC chief executive John Chikura told bankers at a workshop that seven contributory institutions were on the watch list including Tetrad, which has been placed under further judicial management.
He said four of them were facing financial challenges. He added that six banks (Allied, Trust, AfrAsia, Capital, Interfin and Royal) were recently closed.
“As at May 31, 2015, DPC’s total exposure to banks on the watch list was $39,4m and exposure to distressed contributory institutions was $21,7m,” he said.
“The current exposure levels calls for a robust Deposit Insurance Fund capable of instilling confidence in the banking sector.”
He said a cover level of about $1, 000 would ensure that at least 92 percent of depositors are covered in full and comply with the public policy objectives full coverage benchmark of at least 90 percent of depositors.
Currently, the deposit insurance cover is pegged at $500 per depositor, which means 88,5 percent or about 1, 252, 949 out of about 1,417,785 million depositors are covered in full.
Chikura said since 2003, DPC has compensated nine failed institutions and is in the process of making payments to Genesis, Royal, Trust, Allied, Interfin and AfrAsia depositors. — BH24
Online Reporter