in the headlines
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mzeiya
Elder Lister
Parliament rejects Bill seeking to pay fallen bank depositors Sh1m
THURSDAY AUGUST 12 2021
MPs during a session at Parliament chambers. PHOTO | FILE
Parliament has rejected a proposed law that would have seen depositors in fallen banks paid up to Sh1 million for every account in compensation.
The National Assembly Committee on Finance and National Planning shot down the Bill amid concerns that nearly Sh1 trillion would be needed to cover for the exposure.
The Kenya Deposit Insurance (Amendment) Bill 2020 sought to increase the compensation from the current cap of Sh500,000 to Sh1 million.
The Bill also sought to make the compensation be made for each account instead of per depositor, amid opposition from the Treasury and Kenya Deposit Insurance Corporation (KDIC).
The proposal to double the compensation came months after it was increased to Sh500,000 from Sh100,000 — the first time in three decades.
“If subsection 28 (2) of the principal Act is amended, unscrupulous individuals can collude to open several accounts in a bank and bring down the bank so that they can benefit from the deposit insurance,” the committee said in its report on the Bill.
The KDIC — an independent agency that manages the deposit refund in collapsed banks — had opposed the Bill, saying that if passed it would increase its exposure to Sh950 billion against the current fund of Sh130 billion.
The agency added that changing the law to allow for compensation per account instead of per depositor would be against the internationally accepted bets standards of deposit insurance.
The increment to Sh500,000 made in July last year came at a time low compensation had exposed savers to higher losses in the event of bank closures because the refund was not adjusted to take into account changing economic realities over the three decades.
In 2015 and 2016, Dubai Bank, Chase Bank and Imperial Bank were placed under receivership, fuelling jitters among investors.
Dubai Bank is facing liquidation while Chase Bank and Imperial Bank had their good loans and deposits transferred to State Bank of Mauritius and KCB Group respectively.
The revised cap of Sh500,000 covers about 20 percent of all bank deposits from the previous eight percent.
The KDIC is funded by charging commercial banks a small percentage of their deposits in the form of insurance.
Banks currently pay an annual premium at a flat rate of 0.15 percent of the average total deposit liabilities or Sh300,000 per bank, whichever is higher.
The fee is applied uniformly while the assessments are conducted in July and premium payments are expected by August of each year.
ODM is also a tribal outfit, not just a cult!
Which Party isn't to be honest?
some are more tribal than others, and ODM leads that pack
that might be exaggerated, but there is money in Kenya, and most with the money will stock it in banks at least till after the elections, since COVID is here to stay.
not much one can invest in unless farming.