Commercial Farmers' Union of Zimbabwe

Commercial Farmers' Union of Zimbabwe

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Depositors’ safety net a trifle US$1m

Depositors’ safety net a trifle US$1m

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.


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