DPF urges expanded role in small bank resolutions

KAMPALA - Regional deposit protection insurers have been urged to lobby for a more active role in resolving crises at small and medium-sized financial institutions to be able to strengthen resolution frameworks.

Speaking at a regional workshop in Kampala at Serena Kigo Hotel on April 14, Dr. Julia Clare Olima Oyet, CEO at the Deposit Protection Fund of Uganda (DPF) noted that there are gaps in current resolution toolkits in bank resolutions and urged delegates to prioritise establishing National Resolution Funds by December 2026.

“It was previously noted that existing resolution toolkits for banks were limited and that some Partner States were constrained to a few resolution options. It was further observed that resolution planning was relatively underdeveloped across many Partner States while in some jurisdictions it was noted that Authorities resorted to public funding too early,” she said.

Oyet’s remarks drew reference from deliberations of the 16th Crisis Management Working Group meeting of the Monetary Affairs Committee held in Nairobi, Kenya, from November 20-24, 2023, that made several suggestions to improve deposit insurance protection in the region. 

“The deposit insurance world is discussing the need for an expanded role, especially with regards to the resolution of small banks,” she said, as some countries still rely heavily on public funds during crises.

The workshop, organised by the Macroeconomic and Financial Management Institute (MEFMI) aims to equip East African countries with strategies to manage bank failures without compromising depositor payouts.

Key focus areas during the discussions included safeguards for using deposit insurance funds in non-payout resolutions, developing resolution tools tailored to smaller institutions, and designing frameworks to coordinate deposit insurers with resolution funds.

In 2016, the Financial Institutions Act (FIA) 2004 was amended, establishing the DPF as a separate legal entity from the Bank of Uganda (BOU).

Regulated bank deposits are currently protected up to sh10m per depositor per supervised contributing institution.