‘Amend Deposit Protection Act’

MEMBERS of Parliament have proposed amendments to the Deposit Protection Act to cater for all contributors.

They said the Act only served the interest of statutory depositors in its current form.

The Act administers the Deposit Protection Board which was set up following a wave of bank failures between 2004 and 2008 to compensate people who lost their savings.

The Act also provides deposit protection in the event of a bank being closed or liquidated.

Zaka South legislator and chairperson of the Budget and Finance Portfolio Committee, Clement Chiduwa, said the Act had to be amended as it did not give public confidence in Zimbabwe’s financial system.

“The Deposit Protection Act is relevant because it is a scheme that is established by the government and the regulator, in this case the Reserve Bank of Zimbabwe, to promote trust in our banking system,” Chiduwa said.

“This is critical for the wellfunctioning of our economy as it ensures that in the event of the closure of a bank, the depositors know very well that they will be compensated. The existence of such a law is important in as far as it promotes financial inclusion and bank use.”

Chiduwa, however, noted gaps in the current legislation.

“The current Deposit Protection Act does not protect small savers, but gives priority to statutory depositors,” he said.

“We have noticed over the years that quite a number of financial institutions have been closed or liquidated and the cost of liquidation was borne by depositors.

“Once depositors have lost confidence in the operations of the financial system, it will affect the ease of doing business, the saving culture of a country and even the use of our banking system.”

Chiduwa said a number of institutions were liquidated because their liabilities were greater than their assets.

“Having looked at the DPA and what is obtaining on the ground now, we have seen that the new Insolvency Act does not cover the liquidation of banks. Already it shows that there is a gap there. In the event of the closure of a bank, the small depositors can only be protected through Presidential Powers,” Chiduwa said.

Mpopoma-Mzilikazi legislator Charles Moyo supported Chiduwa adding that there was need to address issues affecting banks which calls for an amendment on the legislation.

“I am saying let us make sure that we respond to macro-economic instability by having a responsive monetary policy statement that will bring stability rather than the instability currently prevailing in our country.

“Obviously, we need to protect the depositors by quickly amending the Deposit Protection Act.”