President Robert Mugabe has assented to a Bill that bars the Reserve Bank of Zimbabwe (RBZ) from deregistering or placing banks under curatorship without the consent of the Deposit Protection Corporation (DPC).
He signed the DPC Bill into law last week. The Bill passed through Parliament last year and was presented to President Mugabe in November for assent.
The new law is part of reforms instituted by Finance minister Tendai Biti to create confidence in the banking sector by putting in place necessary statutes that protect depositors in the event of bank closures.
Under the DPC Act, the corporation, that was housed under the Banking Act, would be turned into a statutory body.
Section 65 of the Bill amends the Banking Act ensuring the DPC is consulted before banking institutions are registered, de-registered or placed under curatorship.
Before the legislation, the RBZ had the mandate to appoint curators and provisional liquidators of banking institutions.
Seven banks — Time, Trust, Royal, Barbican, CFX, Intermarket and ReNaissance — have been placed under curatorship in the past eight years.
The legislation states banking institutions should keep the DPC informed about the state of their business and requires RBZ supervisors to co-operate with its officials.
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The DPC will administer a deposit insurance scheme for protection of depositors against the risk of loss.
This means it will administer the fund and levy contributions from contributory institutions. DPC will pay compensation to depositors in the event of insolvency of a contributory institution.
The DPC will also assist the Finance ministry and the RBZ in the formulation and implementation of fiscal and monetary policy so as to ensure sound banking practices and fair competition among the country’s banks.
The new legislation makes it mandatory for contributory institutions to submit to DPC audited statement of accounts within 90 days of the financial year, although institutions can inform the corporation in advance if it cannot meet the deadline.
In extreme cases, the DPC revokes the institution’s status as a contributory institution.
Although functions would be similar to the existing board led by John Chikura, the new legislation gives the body “more teeth” to enable it to perform its duties without hindrance.
The legislation states the RBZ shall appoint the DPC as the provisional liquidator, provisional judicial manager, liquidator or judicial manager of a banking institution.
