Deposit protection fund grows by Shs112 billion

Monday February 17 2020

Protects. The Deposit Protection Fund protects

Protects. The Deposit Protection Fund protects customers’ deposits in the event that a bank collapses. FILE PHOTO  

By MARTIN LUTHER OKETCH

The Deposit Protection Fund has grown by Shs112b in the 2018/19 financial year, according to results released at the weekend.

The growth was higher compared to Shs83b, which the Fund posted for the 2017/18 financial year.
The Deposit Protection Fund protects deposits by a certain percentage of the money they hold in the event that a bank collapses.

Ms Julia Clare Olima Oyet, the Deposit Protection Fund chief executive officer, said during release of the results that the Fund had posted significant achievements in terms of financial performance and operationalised its five-year strategic plan.

“The asset base increased by Shs112b over the period under review. The major growth was reflected in investments in Treasury Bills and Bonds, which increased by Shs131b or 23 per cent from Shs558b to Shs689b in June 2018 and June 2019, respectively,” she said.

The major contributors to the asset growth, Ms Oyet said, were interest earned on treasury instruments and contributions from financial institutions, which accounted for 68 per cent and 32 per cent, respectively.
Interest income stood at Shs86b while contributions from financial institutions totaled to Shs41b as of June 2019.

Deposit-Taking Institutions regulated by the Bank of Uganda are required to contribute annual premiums to the Fund.

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The premium is currently charged at 0.2 per cent of the average weighted deposit liabilities of financial institutions.

The Fund’s financial result show that premiums have grown steadily since 2017 due to growth in deposits. Total deposits within the banking sector grew by 8.9 per cent from Shs20 trillion in June 2018 to 22 trillion in June 2019, while deposit accounts increased from 11 million to approximately 14 million over the period.

The Fund’s results contain information about the performance of the banking sector during the period under review, which shows that the banking sector has improved, fostered by positive economic growth, improvement in domestic financing conditions, increased public settlement of domestic arrears and investment in energy and infrastructure.

Banking status

According to the Deposit Protection Fund results, total assets of the banking sector increased by 10.5 per cent, from Shs27.4 trillion in June 2018 to Shs30.3 trillion in June 2019.

Asset growth was mainly on the account of an increase in total industry gross loans and holdings of treasury instruments, which grew by 11.2 per cent and 14.7 per cent, respectively.

The banking sector was adequately capitalised with the aggregate industry total capital and core capital adequacy ratios of 22.1 per cent and 20.3 per cent above the minimum capital adequacy requirements of 12 per cent and 10 per cent, respectively.

moketch@ug.nationmedia.com

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