The Ethiopian Deposit Insurance Fund Becomes Operational
After being established in accordance with the Council of Ministers Regulation No. 482/2021, the Ethiopian Deposit Insurance Fund becomes operational upon the appointment of Ato Merga Wakweya as the CEO of the Fund by the Prime Minister as of April 7, 2023.
What is the Ethiopian Deposit Insurance Fund?
The Ethiopian Deposit Insurance Fund is an institution with its own juridical personality that is accountable to the National Bank. It is mandated with the power to, inter alia, determine initial and annual premiums, set the coverage limits for insured money deposits (which may not be less than Birr 100,000), make payments to eligible depositors to the extent of insured deposits, recover the payments made from the liquidation proceeds of failed financial institutions, collect premiums from member financial institutions and various contributions from other sources, and deal with parties at fault in a member financial institution’s failure and manage court cases.
The Objective of the Fund
The main objective of the Fund is to ensure the safety, soundness, and stability of the Ethiopian financial system. It also aims to protect depositors by introducing a deposit insurance fund. The Fund is expected to enable payment to the member financial institution’s depositors with insured deposits in case of the insurance event. In doing so, it is also anticipated to mitigate risk and contribute to the stability of the financial system.
How does it work?
Every financial institution (commercial banks and micro-finance institutions) is a member of the Fund. These financial institutions are required to pay a premium to the Fund which will later be used to insure the deposit money of a person who holds funds as a deposit in these financial institutions. However, deposits of government agencies, deposits of an insurer, deposits of an influential shareholder and a CEO, and deposits frozen by a court decision are among some of the deposits not insured by the Fund. Other depositors of a ‘failed’ financial institution will get their insured deposits from the Fund within 90 days after the occurrence of an insurance event.