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Protection Corporation Bill, 2010
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PROTECTION CORPORATION BILL, 2010
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
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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