7 Banks Placed Under DPC Watch List

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The Deposit Protection Corporation (DPC) says its fund to pay out depositors of banks that collapse has declined to $7,2 million from $16 million since December last year, and warned that healthy institutions face the risk of contributing additional funding should more banks fail this year.

The DPC was established in 2003 through an Act of Parliament to, among other responsibilities compensate depositors in the event of a bank’s collapse. All deposit-taking financial institutions pay a premium of two percent of total deposits to the DPC.

DPC chief executive, John Chikura told participants at its one-day workshop for banks on Wednesday that as at December 31, 2014, the fund had reduced to $7,2 million after making payouts to depositors of collapsed banks.

“One hopes that no more banks are going to fail because if they do, what do we do?,” he said, adding that there was need to capitalize DPC to enable it to make future payments to depositors.

However, Chikura said the Act provides that if a bank(s) fails when the funds have been exhausted, the corporation can request operational banks to contribute to resolve the problem.

So far he said there were 17 operational banks with one — Tetrad Investment Bank — under judicial management.

He said the collapsed Capital Bank, which was owned by the National Social Security Authority, had not yet progressed to provisional liquidation due to some legal challenges.

In an earlier interview with The Source, he said the bank’s former owners had launched a legal bid to get the ownership of the financial institution.

The bank was part of Patterson Timba’s business empire which collapsed in 2011 in a cloud of poor corporate governance allegations. NSSA, a statutory pension scheme set up in 1989 to which all employees make contributions, took a controlling 84 percent stake in the bank in 2012 after converting its $8, 5 million deposit into equity and rebranded it.

As at May 31 this year, Chikura said seven banks were on the watch list including Tetrad, with four of those in a distressed financial condition.

Six banks were closed in recent years, namely Allied, Trust, AfrAsia, Capital, Interfin and Royal.

Chikura said exposure to contributory institutions was $134 million and $45,4 million to closed banks and those on the watch list.

The deposit insurance cover is currently pegged 88.5 percent with each depositor receiving $500.

“We are below the target of 90 percent, we need to cover at 90 percent to get a $1,000 per depositor. But because of limited funds we are remaining at $500 for the time being,” he said.

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