THE Deposit Protection Corporation (DPC) has warned that depositors may fail to fully access their funds from failed financial institutions following plans by Treasury to cut banks’ contribution to the corporation.
Report by Victoria Mtomba Business Reporter
Speaking at the sidelines of a post-budget breakfast meeting organised by the Confederation of Zimbabwe Industries on Friday, DPC chief executive officer John Chikura said the announcement by Finance minister Patrick Chinamasa in the 2014 national budget that the levy be reduced to 0,2% from 0,3% of total deposits without fixing a cap could limit the corporation’s role should weaker banks fold.
The levy, however, excludes government deposits and foreign lines of credit.
“I am disappointed by the move because government has not capitalised the institution,” Chikaura said.
“This measure was put in place in the last budget and in 2014 it has been reduced. It’s a challenge because as a corporation we have paid depositors for Royal Bank, Trust Bank and we are yet to pay Interfin depositors. There are banks that are shaking on the market.”
The DPC chief said this year the corporation raised $10 million, adding that the reduction in levy could result in the institution raising less than $6 million next year.
Chinamasa said while it is necessary that depositors’ funds are protected by the corporation it is essential that levies do not become burdensome to the operations of the banks. The Finance minister’s intervention came after the Bankers’ Association of Zimbabwe in its pre-budget proposals said a cut in the levy would improve the profitability of banks as well as improve the underwriting capacity of financial institutions.
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CZI Economic and Banking committee member James Wadi in his analysis of the budget said the reduction in the levy will lessen the burden on banks. He said some banks were paying $280 000 per quarter to the deposit fund.
The economy has witnessed the cancellation of licences of banks that include Royal bank, Trust Bank, Genesis, Renaissance and others due to capitalisation and corporate governance issues.
The new Deposit Protection Corporation Act was gazetted on March 16, 2012 amending the functions of the Deposit Protection Corporation to enable it to do offsite surveillance, while onsite services will be covered by the Reserve Bank of Zimbabwe.
The new Act allows the corporation to receive information from banks and pick up exposures if there were any.
