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Business Reporter
THE Deposit Protection Corporation is confident it will pay off 93 percent of depositors whose funds were locked in collapsed financial institutions. The DPC is a statutory body created in 2003 to cushion depositors against bank failure. Depositors of the failed banks – all of which were closed before the June 1, 2016 review of the cover limit to US$1 000 – will receive the old cover limit of US$500 per depositor per bank.
Payments are currently being made to AfrAsia, Allied Bank, Interfin Bank, Genesis Investment Bank, Royal Bank and Trust Bank depositors through mobile phone and bank transfers. DPC chief executive officer Mr John Chikura told The Sunday Mail Business, “For the banks which were closed, we are paying depositors what was in their accounts at the time of closure.”
Apart from providing depositors with a safety net, DPC also helps restore confidence in the financial services sector. Compensation is not only confined to commercial banks and also covers merchant banks, building societies, finance houses, discount houses and deposit-taking micro-finance institutions. “We have a policy objective of ensuring that at least 93 percent of depositors are covered in full and won’t need to wait for the liquidation process.
Only high net-worth clients and few corporates will be paid through the liquidation process and they constitute only seven percent. “These clients will be paid through the liquidation process on a pro rata basis after the disposal of assets through public auctions and debts recovered,” explained Mr Chikura.
The Deposit Protection Fund administered by the DPC was established under Section 13 of the Deposit Protection Corporation Act (Chapter 24:29). Effective June 1, 2016, depositors in failed banks will get payments of up to US$1 000. Those holding balances above the cover limit will be compensated through the liquidation process on a pro rata basis, or proportional to the amounts owed.
The DPC also actively participates in the resolution of failing or failed member institutions and liquidation of closed banks.
Government has amended the Banking Act to establish a framework that ensures fiduciary duties in financial institutions are legally enforceable.
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