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Behind the scenes – how banks safeguard your money

Behind the scenes – how banks safeguard your money

Consumers don’t give much thought to depositing their hard-earned money into their bank accounts or having their salaries directly deposited. But when was the last time you considered the myriad of ways that banks ensure your finances are secure, giving you one less thing to worry about?

Safeguarding your hard-earned money is a top priority for any bank. We caught up with Brian Katjaerua, Chief Execuive at the Bankers Association of Namibia to find out just how banks shield our assets from potential threats.

“Consumers can rest assured that banks employ a number of complex measures to ensure the safety of deposits and to protect depositors’ funds,” said Katjaerua. As custodians of our funds, these are just some of the safeguards in place, and steps that banks take, to successfully protect your finances:

* Deposit Insurance: Many countries, including Namibia, have deposit insurance schemes in place to protect depositors’ funds up to a certain limit in the event of a bank failure. These insurance programmes provide a safety net for depositors by guaranteeing the repayment of their deposits.

* Capital Adequacy Requirements: Banks are required to maintain a certain level of capital (which is the bank’s own money) to absorb potential losses and ensure their stability. Regulatory authorities set capital adequacy ratios that banks must meet to safeguard depositors’ funds.

* Risk Management Practices: Banks implement robust risk management practices to identify, assess, and mitigate various risks, including credit risk, market risk, liquidity risk, and operational risk. This involves conducting regular risk assessments, stress testing, and implementing risk mitigation strategies. The purpose of these assessments is to safeguard financial stability and therefore depositors funds.

* Liquidity Management: Banks maintain sufficient liquidity to meet depositor withdrawals and other obligations. They carefully manage their liquidity position through liquidity risk management practices and maintain liquid assets to cover potential cash outflows. This again ensures financial stability while allowing depositors access to their hard earned cash, as convenient to them.

* Diversification of Assets: Banks diversify their asset portfolios to spread risk and reduce concentration in any single asset class or borrower. This diversification helps mitigate the impact of potential losses on depositors’ funds.

* Regulatory Oversight: Regulatory authorities such as the Bank of Namibia supervise banks to ensure compliance with all banking laws and safeguard depositor interests. They conduct regular examinations, audits, and inspections to assess banks’ financial health and risk management practices.

* Internal Controls and Governance: Banks have internal control mechanisms and governance structures in place to prevent fraud, misconduct, and mismanagement. These controls include segregation of duties, internal audits, and oversight by independent board committees.

* Business Contingency Planning: Banks develop business contingency plans and business continuity strategies to manage potential disruptions, such as cyberattacks, natural disasters, or financial crises. These plans outline procedures for maintaining essential banking services and protecting depositors’ interests during emergencies.

“Overall, banks employ a combination of regulatory requirements, risk management practices, and internal controls to ensure the safety of deposits and protect depositors’ funds from potential risks. These measures aim to maintain depositor confidence and financial stability in the banking system,” concluded Katjaerua.


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