National Treasury has published draft regulations for public comment for its new system designed to protect bank depositors in the event of a bank collapse. <\/p>\n\n\n\n
2023 has seen a banking crisis, with several banks, including America’s Silicon Valley Bank and Switzerland’s Credit Suisse, collapsing. <\/p>\n\n\n\n
Although South Africa has not seen a major bank collapse in 2023, African Bank and VBS Mutual Bank both failed over the last ten years due to bad management and liquidity problems. <\/p>\n\n\n\n
However, a new central bank deposit insurance scheme guarantees the repayments of deposits up to a certain amount if a bank fails. <\/p>\n\n\n\n
In March, the Corporation for Deposit Insurance (CODI), the nation’s first deposit insurance body, was established by the South African Reserve Bank (SARB). <\/p>\n\n\n\n
CODI was established as part of the implementation of the Financial Sector Laws Amendment Act, which gives the SARB powers to act as a resolution authority and establish the body.<\/p>\n\n\n\n
\u201cCODI\u2019s primary responsibilities are establishing, maintaining and administering a deposit insurance fund to protect the banks\u2019 covered depositors and inform the depositors of its benefits and limitations should a bank be placed into resolution,\u201d the SARB said.<\/p>\n\n\n\n
National Treasury has now published the Draft Deposit Insurance Regulations for public comment, which are required to make the CODI fully operational by 2024 – with this new legislation needing to pass through the parliamentary process. <\/p>\n\n\n\n
The purpose of the new regulations is to provide for the procedural and administrative matters to effectively operate the CODI and the relevant funds. <\/p>\n\n\n\n
As per the regulations, covered depositors will receive a maximum amount of R100,000 if their bank is placed into resolution. <\/p>\n\n\n\n
“For purposes of section 166AB(1) of the Act, the maximum amount the Corporation may apply from the Fund in respect of a qualifying depositor of a bank in resolution for their qualifying deposit balance is R100 000 ,” the regulations said. <\/p>\n\n\n\n
Public comments must be submitted by 15 August 2023, a government notice signed by Finance Minister Enoch Godongwana said. <\/p>\n\n\n\n
Below are the Draft Deposit Insurance Regulations:<\/p>\n\n\n\n