The KDIC last year also raised the maximum compensation to depositors in case of bank failure to Sh500,000 from Sh100,000, covering 99 percent of the deposit accounts.
Mr Mohamud said the enhanced coverage saw KDIC’s exposure in the event of total collapse of the entire banking industry is at Sh1 trillion, up from Sh570 billion.
High-risk banks will start paying up to 33.3 percent more to insure customer deposits in changes aimed at strengthening the financial position of lenders to avoid collapse.
Kenya Deposit Insurance Corporation (KDIC) yesterday announced the start of a risk-based premium model which will see the insurance cover for deposits vary depending on each lender’s risk profile.
The corporation said banks and microfinance banks will now be paying between 0.15 percent and 0.2 percent of their annual average deposits as premiums.
This is a departure from the 0.15 percent flat rate or Sh300,000 — whichever is higher — that the lenders have been submitting to the KDIC.
“This model will assist banks and microfinance banks to identify, weigh and correct any risks within their operations. Less risky banks will pay 0.15 percent,” said Mohamud Mohamud, KDIC chief executive.
“It will bring equity and market discipline to enhance our financial sector stability and attract more investments.”
Most of the banks, Mr Mohamud said, would pay below 0.2 percent on improved discipline in the sector following the collapse of Dubai Bank, Chase Bank and Imperial Bank four years ago.
The new pricing of premiums means that high-risk lenders — in terms of their capital adequacy, asset quality, management structures, earnings and liquidity positions— will pay up to 33.3 percent more to the fund.
The KDIC last year also raised the maximum compensation to depositors in case of bank failure to Sh500,000 from Sh100,000, covering 99 percent of the deposit accounts.
Mr Mohamud said the enhanced coverage saw KDIC’s exposure in the event of total collapse of the entire banking industry is at Sh1 trillion, up from Sh570 billion.
The risk-based premium model has been in the works for the last three years and its implementation puts Kenya at par with markets such as Nigeria and Uganda who are using almost a similar model.
The model was to set in last year July but was delayed for one year to give banks impacted by Covid-19 some relief.
PAYE Tax Calculator
Note: The results are not exact but very close to the actual.
