dyton mupawaenda
Herald Reporter
LEGISLATORS yesterday called on the Government to bar directors and owners of financial institutions that collapse due to poor corporate governance from holding similar positions in other financial institutions or opening new ones.
This is part of measures to protect depositors’ funds and restore public confidence in the banking and financial services sector.
Parliamentarians said this during debate on a motion moved by Murehwa West legislator Cde Farai Jere for the amendment of the Deposit Protection Act to enhance protection of depositors’ funds and their compensation when a bank fails.
Seconding the motion, Chairman of the Portfolio Committee on Finance, Economic Development and Investment Promotion, Cde Clement Chiduwa, said directors and shareholders should also not benefit from proceeds that accrue from liquidation of such institutions.
“The new law should bar directors and shareholders of failed banks from benefiting from liquidation of assets of failed banks. The law should bar them from opening new banks.”
Cde Chiduwa said the current Deposit Protection Act was skewed in favour of statutory bodies and against small depositors that include ordinary members of the public.
“Protection of depositors funds is fundamental for financial inclusion and public confidence in the banking sector,” he said.
Dzivarasekwa legislator, Mr Edwin Mushoriwa, said some directors and shareholders of failed banks had grown richer following the collapse of the institutions because “of gaps in the law”.
Goromonzi West representative, Cde Beatrice Nyamupinga, said the law should be amended to ensure prosecution of directors and shareholders that abuse depositors’ funds.
“A lot of people lost their life savings due to corrupt actions of some directors and shareholders that led to the collapse of some of the banks. The law should provide for prosecution of such people due to the losses they caused. Some people died due to stress following the loss of their savings,” she said.
However, Nyanga South representative, Cde Supa Mandiwanzira, said the amendments should not scare away potential investors.
“We should not be extreme in making laws because of the contagion effect due to interconnectedness of financial institutions and not the actions of their directors. As we amend the law, we should not make laws that threaten investment in the banking sector,” he said.
In his recommendations while moving the motion, Cde Jere called on the Ministry of Finance, Economic Development and Investment Promotion to come up with comprehensive legislation which will redress challenges that have not been adequately solved by financial reforms that were put in place from 2013 to date.
He said measures compelling financial institutions to start compensating clients who lost savings and investments owing to poor corporate governance issues in the Banking sector by March 31 should be put in place while amendments to the Deposit Protection Corporation Act should be proposed. “Depositors should be fully compensated in the currency in which they deposited their money.”
At the turn of the century, the local banking and financial services sector experienced upheavals that resulted in some of the institutions being shut down by authorities mainly due to poor corporate governance resulting in depositors and investors losing their money.
Online Reporter