[Image]Depositors in fallen banks will now pocket up to Sh500,000 for every account in compensation after President Kenyatta yesterday signed the Kenya Deposit Insurance (Amendment) Bill 2020 into law.The increase in compensation from an earlier Sh100,000 is a boost to depositors because the low reparation had exposed savers to higher losses in the event of bank closures. After all, the refund was not adjusted to take into account changing economic realities over the three decades.The revised cap of Sh500,000 covers about 20 percent of all bank deposits from the previous eight percent.RELATEDUhuru declines to sign Kenya Deposit Insurance BillBusiness 1 hour agoPRIME Depositors hopeful as Bill on collapsed banks advancesBusiness 1 hour agoThe Kenya Deposit Insurance Corporation (KDIC) is funded by charging commercial banks a small percentage of their deposits in the form of insurance.In 2015 and 2016, Dubai Bank, Chase Bank, and Imperial Bank were placed in receivership, fuelling jitters among investors.Dubai Bank is facing liquidation, while Chase and Imperial had their good loans and deposits transferred to State Bank of Mauritius and KCB Group respectively.The Bill by North Imenti MP Abdul Rahim Dawood had initially sought to increase the compensation to Sh1 million.The Bill also sought to make the compensation made for each account instead of per depositor, amid opposition from the Treasury and the KDIC.The proposed compensation limit was, however, reviewed downward to Sh500,000 on input by the National Treasury and the KDIC opposed the Bill, saying that if passed as proposed, it would increase its exposure to Sh950 billion against the current fund of Sh130 billion.The President, in a memorandum to the National Assembly in February, rejected the proposal to cap six months as the waiting period for payment of compensation to a customer in respect of a protected deposit.He urged MPs to delete the proposal to amend section 28 of the KIDC Act that introduced the new provision prescribing the caps.The Act requires that where the KDIC is obliged to commence payment in respect of any insured deposits, the corporation shall within 30 days after the appointed liquidator makes payment based on the records of the institution and the opinion of the corporation as regards entitlements of the amount claimed.The Head of State also rejected the caps, saying it conflicts with the International Association of Deposit Insurance’s core principles for an effective deposit insurance system.He said paragraph 15 of the International Association of Deposit Insurance provides that the deposit insurance system should reimburse a depositor’s insured funds promptly, to contribute to financial stability.The paragraph also dictates that there should be a clear and unequivocal trigger for insured depositor reimbursement. BY DAILY NATION
posted by Breaking Kenya news at 13:41 on 5 Apr 2022
"Depositors in collapsed bank get higher compensation in new law"
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