PREMIUMS paid by member institutions amounting to N$5.079 million and a total annual interest income of N$278,496 has led to a 3.8% year-on-year increase in the market value of the Deposit Guarantee Fund to N$10.260 million.
This was revealed in the Namibia Deposit Guarantee Authority (NDGA)’s second Annual Report for the fiscal year ended 31 December 2021.
The Namibia Deposit Guarantee Act, 2018 (No. 16 of 2018) established the NDGA with the primary goal of administering the Deposit Guarantee Scheme. The Scheme aims to protect depositors from the loss of their deposits by compensating them in the unlikely event of a commercial bank failure. This ultimately benefits consumer protection while also improving financial stability.
The Scheme adopts a guarantee coverage limit of N$25,000, which is currently in effect. At this coverage limit, the Scheme covers more than 90% of current depositors.
“The Scheme therefore ensures that depositors have access to all or a portion of their funds in the event of a bank failure within a specified time period. It also protects against panic withdrawals by assuring depositors of the safety of their deposits even if a bank fails, reducing the likelihood and scale of such a failure culminating into a crisis for the entire financial system. All Namibian banking institutions and branches of foreign banks and building societies are required to be members of the Deposit Guarantee Scheme and pay annual premiums to the Scheme,” Ebson Uanguta, Chairperson: Namibia Deposit Guarantee Authority Board said.
He added that overall, the banking industry remained stable despite the impacts of Covid-19.
“These challenges were evident in the deteriorating quality of assets in the Namibian banking sector as well as in the observed increase in non-performing loans, particularly in 2020. However, the sector proved more resilient to these shocks, remaining sound while operating efficiently and effectively. Total banking sector assets continued to grow, with liquid assets and capital well over the required statutory thresholds,” he explained further stating that during the review period, the NDGA continued to strengthen its institutional architecture, to ensure a smooth operation in what has proven to be another challenging year.
“The Board and Management of the NDGA continued to build on the progress realised during the previous year. The administrative arrangement between the Authority and the Bank of Namibia serves the Institution well and has proven to be the most efficient and cost-effective model for operationalising this new entity. Further, the Institution enjoys good relations with all its stakeholders, including member institutions.”
Since the operationalisation of the Deposit Guarantee Fund, as well as its Investment Policy and Guidelines in 2021, member institutions have all paid their second annual premiums in March 2021, as required by law. Such funds have been invested in accordance with said Investment Policy and Guidelines, delivering value to the Fund.
“Going forward, the NDGA will continue to ensure prudent management of the Deposit Guarantee Fund, in order for the institution to effectively carry out its mandate. Further, the Institution will continue to strengthen relations with key stakeholders and the public at large in order to forge the vital trust of depositors in Namibia’s financial system,” Uanguta said.