Depositors’ safety net a trifle US$1m
http://www.theindependent.co.zw/
Friday, 06 May 2011 17:28
Brian Chitemba
DEPOSITS insurance in the country is weak and account holders do not have a
strong safety net to cushion them in the event of banks collapsing.
The Deposits Protection Board (DPB) –– created under the Banking Act Chapter
24:20 to administer the Deposit Protection Fund of Zimbabwe –– has raised
only US$1 million in the past two years and the treasury is not chipping in
with funds, the Zimbabwe Independent has learnt.
DPB CEO John Chikura said the money in the protection fund was raised
through premiums from banks but warned that it was not adequate to cater for
depositors if a bank closes.
In an interview on Wednesday, Chikura said the Ministry of Finance and the
Reserve Bank of Zimbabwe (RBZ) would intervene during a crisis through
releasing funds which would then be disbursed by the DPB to depositors.
“We raised money between 2004 and 2008 but the funds were eroded since it
was the Zimbabwe dollar era,” said Chikura. “We had to start sourcing funds
from 2009 and we still hope more will come into our coffers so that we
protect depositors in case a bank closes.”
This come amid recent reports that the seven financial institutions were
under distress and had failed to raise the statutory capital reserves as set
by the central bank.
The DPB was created under the Banking Act Chapter 24:20 to administer the
Deposit Protection Fund with a prime objective of offering deposit insurance
to depositors in financial institutions.
The board, Chikura said, mainly catered for small depositors against
disastrous consequences of a banking crisis.
But Chikura said the treasury had not financially supported the board
despite frantic efforts to seek assistance from the Finance ministry.
“We only got promises from the treasury that it will capitalise our board,
but it’s taking long. What we have in our coffers now may not cover many
banks but by design if the fund is not adequate, the Ministry of Finance and
RBZ will give us money,” he said.
Many account holders were affected by the 2004 banking crisis which saw some
financial institutions, including Royal Bank, Trust Banking Corporation and
Barbican Bank, being closed and had their assets merged to build the
Zimbabwe Allied Banking Group (ZABG). The banks were shut down by the RBZ
over alleged financial instability.
Chikura said DPB did not cover depositors during the 2004 crisis since the
organisation was still in its infancy.