Banking Law

The financial services consumer protection in the commercial banks, capital markets and insurance business has been secured through the deposit protection, investor protection and policy holder compensation funds.
Having regard to the structure and objectives of these funds, critically analyze how they have dealt with the twin problems of adverse selection and the moral hazard.
Structure and objectives of the funds
Deposit protection fund was established under section 36 of the banking act of 1985 and managed by the deposit protection fund board. The board was established as a deposit scheme to provide cover for depositors and act as a liquidator of failed member institutions. Its role being that of safeguarding depositors against losses they would otherwise incur if a bank or deposit taking institution closes its operation.
  However today, the deposit protection fund has been taken from the purview of the banking act to the deposit insurance act. The deposit protection fund has been replaced by the deposit insurance fund while the Kenya deposit insurance corporation has replaced the deposit protection fund board. The responsibilities of the commission are almost similar to that of the board and its they include providing a deposit insurance scheme for customers of the member institutions, administering the scheme, collecting contributions for the fund from the member institutions and holding and applying the fund. It also receives, liquidates and winds up institutions whein they fail.
  The deposit fund board was a functional department of the central bank of Kenya but the corporation operates independently from the central bank with its own management and staff who are answerable to the corporation This greatly enhances its independence in carrying out its functions.
The fund is established under section 20 of the Kenya deposit insurance act and vests it in the corporation to be administered by the board. Section 23 of the same goes ahead...