Under the Deposit Protection Corporation Bill that sailed through Parliament, the Deposit Protection Board (DPB) that was housed under the Banking Act would be turned into a statutory body, Deposit Protection Corporation (DPC) independent of the central bank.
Clause 64 of the proposed legislation would amend the Banking Act and state that the DPC should be consulted before banking institutions are registered, de-registered or placed under curatorship.
It also states that banking institutions should keep the corporation informed about the state of their business and requires RBZ supervisors to co-operate with officials of the corporation.
The proposed legislation, while it is designed to protect depositors in the event of bank failures, dilutes the influence of RBZ. It comes soon after the amendments of the RBZ Act left the bank to concentrate on its core business.
Before the amendments, the bank would, at the stroke of a pen, directed by the Ministry of Finance, engage in activities that should be covered by Treasury.
Although the functions would be similar to the existing board led by John Chikura, the corporation would have power “to obtain information from financial institutions that will allow it to detect early signs of difficulties within the financial system”.
The corporation would also be given power to “administer failed or failing institutions and, where possible, restore them to financial health”.
The proposed legislation states that RBZ shall appoint the DPC as the provisional liquidator, provisional judicial manager, liquidator or judicial manager of a banking institution.
Currently, RBZ appoints curators and provisional liquidators of banking institutions.
There has been concern in the banking sector that RBZ wields too much power and the proposed legislation would not have come at a better times according to analysts.
The proposed legislation could also be seen as Finance minister Tendai Biti’s moving to trim the powers of RBZ governor Gideon Gono through reforms in the financial sector.
Biti and Gono have been fighting over reforms of the central bank. Biti won round one of the battle after he steered through Parliament amendments of the RBZ Act to make the institution concentrate on its core business.
Under Gono, seven banks — Time, Trust, Royal, Barbican, CFX, Intermarket and ReNaissance — were put under curatorship for various misdemeanours.