Savers have braved risks; welcome guarantee fund

What do you do when a bank goes bust? You saved your hard-earned millions and then suddenly, news break that the bank you were relying on for ‘growing your money’ is going into administration. It closes, leaving your lips dry and cracking with stress. Legal battles ensue, but that only serves the bank accounts of lawyers. The prospect of a bank going bust is not something that would cross the minds of savers. Savers believe once deposited, robbery, fire, embezzlement or whatever happens to the bank, cannot affect their savings. Few ever think of a financial institution going into administration. But in 2007 UK’s biggest mortgage and lending institution, Northern Rock, teetered into uncertainty, testing the patience of savers. Subsequent crises at Halifax/Bank of Scotland, Bradford & Bingley and Royal Bank of Scotland, left bank clients with lessons to forget. And, in this era where micro-finance institutions are playing a significant role in enhancing savings culture in the citizenry, savers cannot continue relying on a farfetched dream that “banks are the safest places to keep your money.” That is why the proposed Deposit Guarantee Fund, currently before Parliament for scrutiny, is a dream-come-true. The draft law, once enacted, will see a fund that will effectively contribute to financial stability by maintaining public confidence in the financial system through prompt payment of protected deposits to depositors of a financial institution gone bust. That the government’s plan for the fund is double-faceted to ensure that both banks and Saccos (savings and credit co-operative societies) are covered, making it even more rigorous. Gone will be any cloudy atmosphere caused by financial institutions running to government to be bailed out from crisis. Bailouts are often wastage of taxpayers’ money. This is one of the salient pro-people policies for the financial sector. With banks already warming up to the fund, let Parliament expedite the scrutiny; savers have braved the risks long enough.

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Savers have braved risks; welcome guarantee fund