New Authority to Protect Savers Deposits - BOU

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In short
Kiyingi says the move is aimed at offering protection to deposits both in commercial banks and in micro finance institutions. He says merging the two funds will create efficiency by consolidating the governance, administrative and operational aspects, making it easier to manage the fund and invest on a larger scale.

Savers with commercial banks in Uganda will now have their deposits protected under a new authority, according to bank of Uganda.

The amended Financial Institutions Act 2004 provides for the creation of Deposits Protection Fund, which will operate autonomously from Bank of Uganda. Under the old Act, the Bank of Uganda protected deposits up to a tune of three million Shillings in the event of a bank going bust.

Last month, Parliament made this and other amendments to the Act, including allowance of Islamic Banking and bank assurance.

Kelvin Kiyingi Kizito, the acting Director of Communications at Bank of Uganda told Uganda Radio Network that the creation of the Deposits Protection Fund is aimed at making the financial system well protected.

According to Kiyingi, under the amended Act, the Deposit Protection Fund and the Deposit Protection Fund for Micro finance Institutions will be consolidated, forming a more complete and independent block.

Kiyingi says the move is aimed at offering protection to deposits both in commercial banks and in micro finance institutions. He says merging the two funds will create efficiency by consolidating the governance, administrative and operational aspects, making it easier to manage the fund and invest on a larger scale.

Kiyingi says every depositor, regardless of the type of institution, is protected up to three million Shillings.

When a bank collapses, it does so with its customers' savings. The law only provides for protection of the deposits up to a tune of three million Shillings, meaning should a customer have much more, his or her protection is guaranteed only up to the three million Shillings.

He explains that the consolidated Fund will have a different board from the previous two funds, and there will be no repetition of boards.

Kiyingi says although the new Fund will have independence from the central bank, for it to take off the Micro finance Deposit-taking Institutions (MDI) Act also needs to be amended so that the two funds are merged.

Speaking in an earlier interview with URN, Cecilia Muhwezi, the Head of Compliance at Standard Chartered bank, said the Deposits Protection Fund will enable commercial banks to reinforce deposits protection "outside common risk parameters".

 

About the author

David Rupiny
In his own words, David Rupiny says, "I am literally a self-trained journalist with over 12 years of experience. Add the formative, student days then I can trace my journalism roots to 1988 when as a fresher in Ordinary Level I used to report for The Giraffe News at St Aloysius College Nyapea in northern Uganda.


In addition to URN for which I have worked for five years now, I have had stints at Radio Paidha, Radio Pacis, Nile FM and KFM. I have also contributed stories for The Crusader, The New Vision and The Monitor. I have also been a contributor for international news organisations like the BBC and Institute for War and Peace Reporting. I am also a local stringer for Radio Netherlands Worldwide.


I am also a media entrepreneur. I founded The West Niler newspaper and now runs Rainbow Media Corporation (Rainbow Radio 88.2 FM in Nebbi). My areas of interest are conflict and peacebuilding, business, climate change, health and children and young people, among others."

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