IADI core principle 15: Reimbursing depositors
TO effectively protect depositors and contribute to financial stability, the Deposit Protection Scheme (DPS) should be able to compensate depositors in the shortest possible time. The International Association of Deposit Insurers (IADI) recommends that the DPS should have capacity to pay within seven days of closure of a failed bank.
In Zimbabwe, the Deposit Protection Corporation (DPC) is empowered by law to pay depositors as soon as reasonably practicable once the triggers for reimbursement specified in the DPC regulations have crystallised. The DPC Act, as amended by the Banking Amendment Act of 2015, section 42(d), provides that payout should commence within 60 days of the contributory institution being declared insolvent.
To date, the DPC has compensated insured depositors of nine banking institutions, whilst it has been appointed liquidator of six banking institutions, judicial manager of a merchant bank and curator of a deposit-taking micro finance institution.
In the event of a bank failure, DPC compiles the deposit register detailing the balance in each account, debt owed by the depositor, unprocessed Real Time Gross Settlement (RTGS) balances, any other liabilities owed to the bank and automatically sets off against the individual’s deposit balance. Balances in more than one account benefitting the same person are aggregated and reimbursed to the maximum limit, which is currently ZWL10 000 per depositor per bank, effective January 2020. The DPC advertises through circulars advising the public on information regarding the conditions the Corporation will start the reimbursement process. The information on coverage limits and scope of coverage is provided in the circulars advertised to the public. The scope of deposits covered (insured/uninsured) is clearly defined in the DPC regulations.
Generally, the DPC has managed to reimburse depositors within 30 days from the date of provisional liquidation. Claims for payment out of the Fund must be made up to 18 months after the trigger event date on which the DPC becomes obliged to make a payment to depositors of the policyholder. If the claim is not made within this period, it will be claimed through the liquidation process using the formula applicable to all creditors. For the DPC to promptly pay depositors within seven days or earlier, there is need to implement a single customer view. The single customer view puts the Reserve Bank, DPC, and other relevant stakeholders in a position where they will quickly have all the information required for payout at their disposal in the correct format, in order to make a faster payout. The DPC is working with relevant authorities to ensure the implementation of such a system.
Other conditions necessary for a faster payout include adequate resources and trained personnel (in-house or contractors) dedicated to the reimbursement function and information systems to process depositor information in a systematic and accurate manner. In Zimbabwe, DPC has the power to act as a liquidator.