Depositors money in banks safe

Tujoromajo Kasuto

The Namibia Deposit Guarantee Authority (NDGA) board chairperson Ebson Uanguta says in the annual report that the entity’s market value has increased to N$10 259 574 in 2021 from N$4 902 924 in 2020.

He says the growth in the fund’s value was primarily attributable to N$5,079,150 in member institution premiums paid in July 2021 and a total annual interest income of N$278,496 in 2021. Over the reporting period, the premiums received from member institutions were invested in line with the Investment Policy and Investment Agreement signed between the NDGA and the Bank of Namibia.

Uanguta explained that, ‘’the Namibia Deposit Guarantee Authority provides that assurance to depositors, that even in the event of a crisis such as bank failure, they will be compensated for their deposits in a timely and transparent manner’’.

Emma Haiyambo, Head of the authority says that the NDGA’s assets remained safe and secured for the year ended 31 December 2021 and the market value of the Deposit Guarantee Fund increased by 3.8 percent, year-on-year, to N$10.260 million.

NDGA became fully operational in 2020 and in line with its mandate, it is responsible to maintain and manage a Deposit Guarantee Scheme, whose main objectives are (1) to protect a high percentage of depositors against the loss of their deposits by providing compensation in the event of a member institution’s failure, and (2) to enhance financial stability by way of insuring a portion of the total deposits held by the banking sector.

The existence of a deposit guarantee system ensures that depositors have access to all or part of their funds in the event of a member institution failure. ‘’It is also meant to prevent panic withdrawals by assuring depositors of the safety of their deposits even in the event of such failures, thereby reducing the likelihood and scale of a systemic crisis,’’ Haiyambo noted.

In respect of the coverage limit, the initial threshold is set at N$25,000 per depositor. Uanguta said that this limit is high enough to ensure that 90 percent of depositors receive their deposits back in full.

However, because of a relatively small number of depositors holding large deposits only about five percent of the total value of insurable deposits would be covered in full.

This will leave the larger depositors exposed and vulnerable to risk, thereby rendering thepotential threat of moral hazard very small.

The Bank of Namibia provides facilities, resources, and other services to the NDGA, and that the two entities enter into a service-level agreement. As a result, the Bank of Namibia has seconded three of its staff members to manage and operationalize the NDGA on a part-time basis.

Although it falls under the Bank of Namibia for day-to-day administrative functions, the policy formulation function and oversight of the Authority resort under an independent Board of

Directors appointed by the Bank of Namibia with the approval of the Minister of Finance.

Currently, Bank of Namibia Deputy Governor, Ebson Uanguta is the Chairperson of NDGA Board of Directors while Emma Haiyambo is the Head of the NDGA.

Local banks including FNB, Bank Windhoek, Standard Bank, Nedbank, Letshego, Trustco Bank, BankBic and Banco Atlântico are members.




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