HomeBusinessDeposit protection cover up by 900%

Deposit protection cover up by 900%


The government has increased the deposit protection cover level by 900% to a maximum of $10 000 per depositor per institution in line with the fund’s growth and prevailing macroeconomic conditions.

Officially launching the Deposit Protection Corporation’s (DPC) Bulawayo regional office last week, Finance and Economic Development minister Mthuli Ncube said government would continue to support the DPC inorder to ensure depositor protection.

“Financial inclusion does not only involve one accessing credit or having an account, but having access to basic financial information so that individuals and small businesses can make informed decisions on financial matters,” Ncube said.

“It is with great pleasure that I announce the increase in the deposit cover level from $1 000 to
$10 000 per depositor per institution.

“Consequently, the premium rate is reviewed from 0.2% to 0.3%.”

The DPC said the review was with effect from January 1, 2020.

It said the new cover level protects 98.9.% of depositors in full; and at a cover level of $500 per depositor per deposit-taking microfinance institution, 98.5% of depositors will be covered in full.

“The new cover levels fulfil the Corporation’s public-policy objective of ensuring that at least 90% of depositors are covered in full,” the DPC said in a statement.

“In the event of failure of a contributory institution, every client with a deposit balance equal to or below the specified cover level is guaranteed to receive full compensation of the amount in his or her account at the time of closure of the contributory institution, provided one submits a duly completed claim form.”

“Any outstanding deposit balance above the specified cover level is payable through the liquidation process on a pro-rata basis.”

Ncube said in the absence of an explicit scheme, depositors of the several failed banking institutions that went into liquidation would otherwise not have received any form of compensation.

He said the scheme had enhanced public confidence in the financial system as small depositors, who usually suffer the worst consequences of a bank failure, had been guaranteed of protection by the existence of the DPC scheme.

In a speech read on his behalf, Finance and Economic Development permanent secretary George Guvamatanga said deposit protection helps to foster confidence in the financial system.

“When there is confidence in the banking sector, naturally it encourages savings and mobilisation of deposits becomes easy. When there is confidence, depositors will have peace of mind knowing that their money in the banks is safe and in the event of bank failure, they will be reimbursed,” Guvamatanga said.

He said deposit protection plays a key role in protecting the financial sector from risks such as bank runs, which can cripple financial intermediation and derail the recovery and sustainable growth of the economy.

“There is no economy that can achieve sustainable economic development without having a pool of funds to invest,” he said.

Recent Posts

Stories you will enjoy

Recommended reading