ABSTRACT
In the last ten years, global bank insolvency laws have been characterised by public interest considerations such as public accountability, civil litigation, criminal litigation as well as human rights. All these have been a direct result of the impact of the Global Financial Crisis 2007–2009 (GFC) and how banks have been resolved. The debates and approaches have always oscillated between non-judicial control and a supra-national approach to dealing with failing banks. Most recently, thoughts about the special nature of banks have been addressed in resolving these debates. Kenya has experienced three significant waves of major bank failures since the 1980s. At the end of 1998, roughly 40 banks had failed, resulting in the attempt to modernise and strengthen the regulatory framework. However, by 2015, three more commercial bank failures occurred. Though not systemic, it revealed a weakened public trust in the stability of the banking system, which created panic amongst depositors. It additionally revealed the weaknesses in the existing legal framework, which had failed to capture the special nature of bank insolvencies and the inherent corporate governance failings within Kenyan banks that the regulatory framework had overlooked. Fundamental to this discussion is the evolution of the design of Deposit Insurance Schemes, which have become a dominant component of general bank regulation in the post-GFC framework. This chapter, therefore, will examine the paradigm shift that is necessary for addressing bank insolvencies, which should now seek to balance the competing interests between both creditors, depositors, and the public’s perception at large while developing a ‘resolution regime’. Within this broader context, a consideration of the Kenya Deposit Insurance Act, 2012, will be undertaken and the shift towards bank restructuring and insolvency law as an area of coherent study at the national law level.
