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"id": 3661,
"url": "https://info.mzalendo.com/api/v0.1/hansard/entries/3661/?format=api",
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"type": "speech",
"speaker_name": "Mr. Kenyatta",
"speaker_title": "The Deputy Prime Minister and Minister for Finance",
"speaker": {
"id": 168,
"legal_name": "Uhuru Muigai Kenyatta",
"slug": "uhuru-kenyatta"
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"content": "In 1999, the Board commenced operations and the Central Bank made available such facilities and services for the proper and efficient exercise of the functions of the Board as provided for by the Banking Act. Therefore, administrative services for the Board have continued to be provided by the CBK. The mandate of the Deposit Protection Fund Board (DPFB) is summarized under the following core objectives:- (a) To provide a viable deposit insurance scheme for customers or member institutions. (b) To liquidate and wind up operations of any insolvent institution in which the DPFB is appointed liquidator. (c) To prudently hold, manage and apply funds and levy contributions for the Fund for member institutions. Madam Temporary Deputy Speaker, the Deposit Protection Fund (DPF) is managed by a Board with the Governor of the Central Bank as the Chairman. As I have mentioned, the CBK currently provides personnel who manage the operations of the DPFB. The DPFB, therefore, operates administratively as a department of the CBK. This arrangement compromises the independence of the Board in carrying out its activities and operations, thereby exhibiting operational and legislative weaknesses. As such, the present arrangement is not aligned to international standards for a deposit insurance scheme. The current mandate of the DPFB is limited in scope and, hence, does not give the Board the latitude to intervene effectively and promptly in problem bound resolution process as is currently undertaken in other jurisdictions whose deposit insurance schemes are aligned to international best practice. It is against this background that the CBK appointed a taskforce in March, 2006, to examine the legislation currently in place, governing the DPFB operations to assist in the preparation of a draft Bill that will ensure an effective legal framework, provide for autonomy, enhance corporate governance and expand the mandate of the DPFB. The main objectives of the Kenya Deposit Insurance Bill, 2011, are as follows:- The Bill intends to align the deposit insurance policy and operations to international best practices in order to attain efficiency and effectiveness in discharging its mandate. As mentioned earlier, the DPFB is currently established as a statutory body under the Banking Act, Cap.488 and operates as a department of the CBK. This is pursuant to the current legal framework which mandates the CBK to make available to the Board such facilities and services or such officers as are necessary for the functioning of the Board. The Bill establishes the Kenya Deposit Insurance Corporation as an independent body and grants it mandate, powers and obligations that will enable it to operate effectively within the current and emerging challenges in the financial sector. The Corporation will be a body corporate with perpetual succession, common seal, with the power to sue and be sued and enter into contracts. The corporation shall set its own operational budgets and procedures that shall finance any reimbursements. With regard to enhancing corporate governance, this Bill provides for the independent Board of the corporation that comprises the Permanent Secretary, Treasury, the Governor of the CBK and not more than five members with specific qualifications. The Bill provides for a non-executive Chairman and the Chief Executive Officer shall be an ex-officio member of the Board. The Board of Directors is mandated to ensure that the corporation is managed and run to achieve its objectives and to ensure effective and efficient internal controls and risk management policies. The DPFB is currently not involved in problem resolution of member institutions. The DPFB is engaged when an institution is completely insolvent and the CBK appoints the DPFB as a liquidator. The DPFB pays the protected deposits, liquidates and winds up the collapsed institutions. The DPFB’s role is, therefore, limited to a pay box system. The Bill, therefore, proposes to enhance the Board’s role from that of a pay box to a safety net player that will be involved in problem bank resolutions, in close consultations with the CBK and the Ministry of Finance. The Bill contains provisions for prompt corrective action to resolve any problems in an institution which places interest of its deposit or the banking sector at risk. Prompt corrective action shall, however, be taken in consultation with the CBK. The corporation will, therefore, take a more active role in financial stability. The Bill empowers the Board to make rules, regulations, guidelines as may be necessary, to expedite in relation to the administration, management, control, business, assets and affairs of the corporation and for carrying out and achieving the objectives and purposes of the Bill as enacted. The rules, regulations and guidelines will ensure the corporation keeps abreast with the dynamics of the financial sector to enhance financial stability and to create public confidence in the banking sector. The rules, regulations and guidelines will, therefore, ensure that the corporation effectively plays its role as a safety net player to maintain a stable and efficient deposit insurance system to support the financial system. Allow me to give the following highlights on parts of the Bills. Part I provides for the preliminary matters focusing on the short title, commencement and interpretation of the terms used in the Bill. Part II provides for the establishment, powers and functions of the Kenya Deposit Insurance Corporation. Part III contains financial provisions in respect of the corporation. Part IV establishes the Deposit Insurance Fund, vests the Fund with the corporation. The Fund shall consist, among others, of monies contributed by institutions licensed under the Banking Act, the deposit taking micro-finance institutions licensed under the Micro Finance Act of 2006 and interest or penalties levied in respect of such contributions and income that may accrue to the Fund from its investments. Part V provides for an examination of institutions. Clause 40 empowers, for example, the Corporation to request the CBK to undertake an inspection of a member institution and to avail the information so often to the Corporation while Clause 41 provides for a special examination of a member institution by the Corporation in exigent circumstances. Part VI provides for the receivership, liquidation and winding up of member institutions while Part VII provides for offences under the Act. Part VIII contains miscellaneous provisions relating to acquisition, preservation and disposal of assets, co- operation with other law enforcement agencies, exemption from tax, exemption from levy, an attachment, issuance of regulations, repeal of relevant sections under the Banking Act which touch on the DPFB and the transitional arrangements. The transitional arrangements relate to amongst other things the vesting of assets and liabilities of the DPFB in the Corporation and vesting of the assets of the institutions in liquidation in the Corporation as well as the secondment of current staff working under the DPFB to the Corporation. The Schedule contains revisions as to the conduct of business and affairs of the Board of the Corporation. With these few remarks, I beg to move and request hon. Kimunya to second the Bill."
}