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. Brian Katjaerua, CEO at the Bankers Association of Namibia, shared more about how banks shield our assets from potential threats.

“Consumers can be rest assured that banks employ a number of complex measures to ensure the safety of deposits and to protect depositors' funds,” said Katjaerua.



Overview

Katjaerua recommended banks introduce deposit insurance. According to him, many countries, including Namibia, have deposit insurance schemes in place to protect depositors' funds up to a certain limit in the event of bank failure. These insurance programmes provide a safety net for depositors by guaranteeing the repayment of their deposits.

Katjaerua highlighted the importance of capital adequacy requirements. He explained that 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

Katjaerua also touched on risk management practices. According to Katjaerua, 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, depositor funds.

“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,” said Katjaerua.