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Deposit Protection Corporation Bill, 2010
Parliament of Zimbabwe
October 22, 2010

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DEPOSIT PROTECTION CORPORATION BILL, 2010

MEMORANDUM

When banks, building societies and other financial institutions become insolvent or collapse, for whatever reason, the effects are felt not only within the financial system but more widely by ordinary members of the public who stand to lose money they have deposited with the failed institutions. To lessen the impact of bank failures on the general public, a fund known as the Deposit Protection Fund has been established under the Banking Act [Chapter 24:20], to which financial institutions must contribute and out of which compensation is paid to people who have deposited money with failed institutions. The fund is administered by a board of trustees known as the Deposit Protection Board.

The purpose of this Bill is to replace the Deposit Protection Board with a new statutory body to be called the Deposit Protection Corporation, which will be largely independent of the Reserve Bank. The Corporation’s functions will be similar to those of the existing Board, but more extensive: the Corporation will have power to obtain information from financial institutions that will allow it to detect early signs of difficulties within the financial system; the Corporation will also be given power to administer failed or failing institutions and, where possible, restore them to financial health.

In more detail, the individual provisions of the Bill are as follows:

Part I: Preliminary

Clause 1 sets out the Bill’s short title, while clause 2 will define terms that are used throughout the Bill. The definitions themselves are self-explanatory.

Clause 3 will define when financial institutions that contribute to the Deposit Protection Fund are to be regarded as financially distressed, troubled or insolvent for the purposes of the Bill. A financially distressed institution will be one which has failed to meet the Corporation’s standards for the capital, conduct and management of financial institutions; a troubled institution will be one which has been declared troubled by the Reserve Bank in terms of the Troubled Financial Institutions (Resolution) Act; and an insolvent institution will be one which is to be wound up under the Companies Act or is otherwise to be dissolved, or which is no longer entitled to carry on business in Zimbabwe.

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