Proposed DPC reforms to expand insurance, speed up bank payouts

Sikhulekelani Moyo [email protected]
New provisions in the Deposit Protection Corporation (DPC) Amendment Bill will extend insurance cover to depositors of microfinance institutions and building societies.
Additionally, the bill mandates banks to pay out compensation within seven days, according to the Parliamentary Portfolio Committee on Budget, Finance and Investment Promotion.
The committee, chaired by the MP for Chipinge East Mr Lincoln Dhliwayo, held a public hearing at Stanley Hall in Bulawayo yesterday as part of nationwide consultations on the Bill.
In an interview after the hearing, Mr Dhliwayo said the DPC Bill is of paramount importance, as it covers issues that include the protection of depositors’ money.
He said the key change in the Bill entails the definition of a contributory institution.
“What this bill is seeking to do is extend the definition of what we call a depository institution, a contributory institution. The contributory institution is the bank, building society or microfinance institution that contributes towards DPC,” he said.
“By extending the definition of the contributory institution, we are ensuring that more depositors are protected. Because prior to this amendment bill, depositors of microfinance institutions and building societies were not insured. Bringing microfinance institutions and building societies ensures that in the event of these financial institutions failing, the depositors are compensated for their loss by DPC.”
The Bill also seeks to reduce the payout period.
“That period has been reduced to seven days. Prior to this amendment bill, the period was open-ended because the bank could challenge that time in the court of law and maybe take three to four years to pay the compensation,” added Mr Dhliwayo.
He said the amendments align with the National Development Strategy (NDS) 2, adding that in line with the national development strategy, one of the priorities that are spelt out under NDS2 is macroeconomic stability.
“You cannot speak of macroeconomic stability without financial sector stability. So, the powers of the DPC, if they are enhanced, will result in a stronger financial sector that contributes towards macroeconomic stability,” said Mr Dhliwayo.
He said stakeholders who attended the public hearing in Gweru raised concerns over the exchange rate to be used during compensation.
“There is a clause that says the exchange rate used is the prevailing one on the date of payout or the date of compensation. People in Gweru were however saying the rate that was prevailing on the date of liquidation or the date of closure, should the one that must be used,” said Mr Dhliwayo.
He said in Bulawayo, participants raised issues around compensation for losses suffered in 2008.
“They were raising issues to do with compensation for the money lost during the 2008 era. We will sit down as a committee to consider whether this law is applicable in retrospect,” said Mr Dhliwayo.