Total exposure to banks at US$39,5 million: DPC

THE Deposit Protection Corporation (DPC) says as at 31 May 2015, total exposure to banks on the watch list was US$39,4 million while exposure to distressed contributory institutions was US$21,7 million.

At present seven contributory institutions are on the watch list including Tetrad. The country has 17 operational banks and one that is under judicial management. Four of the banks are in distressed financial condition and have a CAMELS ratings of “4” or “5”.

Chief executive John Chikura at a workshop for banks on its operations, said the current level of exposure calls for a robust Deposit Insurance Fund capable of instilling confidence in the banking sector.

The deposit insurance cover is currently pegged at US$500 and Chikura said at this cover, 88.5% or about 1,252,949 out of about 1,417,785 depositors are covered in full.

“A cover level of about US$1,000 would ensure that at least 92% of depositors are covered in full and comply with the public policy objectives coverage benchmark of at least 90 percent of depositors,” he said.

As at December 31 2014, the size of the Deposit Protection Fund was US$7,184,852 after providing for banks that have collapsed. Six of the banks had closed. These are Allied, Trust, AfrAsia, Capital, Interfin and Royal.

The DPC Act provides that pay-outs should commence within three months from date of closure of a contributory institution.

“This is too long, IADI is aiming at 7 days. Following the placement of a member on provisional and/or final liquidation by the High Court, DPC advises the insured depositors in writing via electronic and print media to collect claim forms from its offices or from the website for them to be compensated.”

Chikura said since its inception in 2003, DPC has compensated depositors of nine failed banking institutions which were subjected to liquidation. These include Century Discount House; Rapid Discount House; Sagit Finance House; Genesis Investment Bank, Royal Bank; Trust Bank Corporation; Interfin; Allied Bank; and AfrAsia Bank.

He said payments to Genesis, Royal, Trust, Allied, Interfin and AfrAsia depositors are still on-going.

DPC said it’s targeting the fund to reach 2% of the total deposit base of the banking sector. -FinX