Depositors’ Bill sails through

Presidential assent before it becomes law.
Information and Communication Technology Minister Nelson Chamisa steered the Bill on behalf of Finance Minister Tendai Biti.
The Bill was passed in the House of Assembly earlier this year. Minister Biti said the Bill was a culmination of work that started in 2000 when Government recognised the need for a Deposit Protection Scheme to protect the public, especially small depositors, from the worst consequences of bank failure.
“Prior to the establishment of the scheme, a public policy document was developed which envisaged a phased implementation of the scheme. In the first phase, the Deposit Protection Scheme would mainly be a ‘Pay Box’ with limited powers under the Reserve Bank whilst in the second phase; the scheme would be operationally independent and have an expanded mandate of participating in the resolution of failing or failed banks.
“The first draft of the Deposit Protection Corporation Bill was produced in 2007 when the second phase should have commenced. However, due to developments in the financial sector, the Bill had to be amended in 2009. This is the Bill that I am now presenting before the House,” Minister Biti said.
He said the objectives of the Bill were to replace the current Deposit Protection Board with a new statutory body to be called the Deposit Protection Corporation.
“The Bill will give the corporation enhanced powers to protect depositors, particularly small depositors, against losses caused by the failure of banks and other financial institutions.
“As mentioned earlier, the DPS was established in 2003 in terms of the Banking Act (Chapter 24: 20), Section 65 -72 and some parts of Section 81 of the same Act.
“Financial institutions which are regulated under the Banking Act (Chapter 24:20) and the Building Societies Act (Chapter 24:02) contribute to the fund out of which payment to depositors is made in the event of bank insolvency or failure. The fund is administered by a board of trustees known as the Deposit Protection Board, appointed in terms of the Banking Act (Chapter 24: 20),” he said.
Minister Biti said the public policy objectives of the Deposit Protection Scheme as administered by board of trustees were to protect the small and less financial sophisticated depositors and to promote stability in the financial systems
“To promote stability in the financial system through strengthened depositor confidence in the banking industry as a whole.
“To enhance competition within the financial sector as depositors will more readily put money into indigenous banks and building societies if they know they will be protected by the scheme in the event of bank failures.
“As observed in the Three-Year Macro- Economic Policy and Budget Framework 2010 – 2012 (STERP II), the development of the Deposit Protection Scheme up to this stage is termed Phase One which has mainly been a “Pay Box”.
“As a “Pay Box”, the Scheme’s functions were mainly focusing on setting and collecting premiums from banks and building societies, payment of compensation to protected depositors in failed contributory institutions and managing the Deposit Protection Fund,” Minister Biti said.