This archive report was first published on 30 August 2019.
Kenya's financial regulators are taking measures to prevent bank failures and ensure that depositors' cash is not stuck for long in insolvent banks. As part of these measures, banks will soon be required to write their own wills, explaining how their assets will be disposed of in case of failure.
According to Kenya Deposit Insurance Corporation (KDIC) CEO Mohamud Ahmed Mohamud, this is part of the measures being taken by financial regulators, including the Central Bank of Kenya (CBK) and KDIC, to ensure that insolvent banks do not stay for long with depositors' cash.
Mr. Mohamud made the announcement while stating that depositors of Imperial Bank, which is under receivership, will get access to 7.5 per cent of their outstanding deposits, estimated at Sh53 billion. However, depositors might have to wait for at least four years before receiving their money in full.
As part of stemming bank failures in the country, KDIC will soon ask banks to do a resolution plan, explaining what they will do in case of failure to streamline the process of paying depositors. This is also known as a living will, and KDIC wants to ask banks to give them wills.
Starting July next year, KDIC will roll out a risk-based premium under which banks with higher risks will be expected to pay higher premiums against deposits. This is aimed at instilling market discipline and avoiding problems in the sector.
Mr. Mohamud also announced that KDIC will create a strong surveillance unit, which will be automated to create a real-time information sharing platform with the banks and CBK. This will enable them to detect signs of any problem in a bank early and take action before it's too late.
Mr. Mohamud emphasized that bank closures will be a thing of the past as they move forward, and that they have already put in mechanisms in place to ensure that problem banking is resolved beforehand.
August 30, 2019
