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2020-07-01

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Kenya Deposit Insurance (Amendment) Act, 2013

The Kenya Deposit Insurance (Amendment) Act, 2013 introduces critical regulatory mechanisms for the management of problem institutions, including defined protocols for 'exclusion and transfer' processes and adherence to the 'lesser cost rule' to mitigate financial risk. The legislation grants the Kenya Deposit Insurance Corporation enhanced powers to resolve bank failures, including the ability to prioritize its own subrogated claims and utilize the Fund for resolution processes while establishing strict governance over its leadership. Furthermore, the Act mandates operational timelines for deposit payments to affected depositors and empowers the Central Bank to provide technical assistance during instances of systemic risk.

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THE KENYA DEPOSIT INSURANCE (AMENDMENT) ACT, 2013

  1. This Act may be cited as the Kenya Deposit Insurance (Amendment) Act, 2013.

  2. Section 2 of the Kenya Deposit Insurance Act, 2012 is amended by inserting new definitions for "exclusion and transfer process," "lesser cost rule," "problem institution," and "systemic risk."

  3. Section 6 is amended to ensure Corporation powers are exercised only to avert systemic risk and adds collaboration with other deposit insurers.

  4. Section 7 is amended to mandate that the chairperson is not from member institutions and adds the Attorney General to the board, while revising qualification criteria for board members.

  5. Section 16 is amended to clarify funding, allowing Parliament to appropriate funds and the Corporation to transfer money from the Fund when insufficient to meet requirements.

  6. Section 20 is amended to replace references to the 'Corporation' with 'Fund' regarding contributions.

  7. A new section 20A is inserted, allowing the Board to fix the size of the Fund.

  8. Section 21 is amended to allow advances to any other person, subject to a 25% cap of the Fund, and adjusts borrowing powers.

  9. Section 22 is amended regarding the nature of securities and currencies for investments.

  10. Section 27 is amended to consider institutional risk profiles in contribution determinations and to handle insufficient funding by drawing on future contributions.

  11. Section 33 is amended to require payments to depositors within thirty days after appointment as liquidator and allows for interim partial payments.

  12. Section 35 is amended to grant the Corporation priority for subrogated claims.

  13. Section 50 is amended to outline resolution mechanisms, including the use of the 'lesser cost rule' and specific ranking of liabilities during transfer processes.

  14. Section 53 is amended to clarify the receivership term and the recommendation process for liquidation.

  15. Section 57 is amended to explicitly include uninsured deposits in priority claims.

  16. Section 63 is amended for minor wording adjustments regarding approvals.

Topics
capital
governance
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