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The Reserve Bank’s New Plan to Secure Bank Accounts in South Africa

The South African Reserve Bank (SARB) has established the country’s first deposit insurance body called the Corporation for Deposit Insurance (CODI).

The SARB said that the new organisation, which became a legal entity as of 24 March, aims to protect bank depositors and bring further confidence to the financial sector became a legal entity as of 24 March 2023.

A central bank deposit insurance scheme guarantees the repayments of deposits up to a certain amount if a bank fails.

The deposit insurance body was established by finance minister Enoch Godongwana as part of the implementation of the Financial Sector Laws Amendment Act. The Act gave the SARB powers to act as resolution authority and establish the body.

According to SARB, the CODI forms part of the institution’s continued focus on maintaining financial stability and will improve confidence in South Africa’s banking institutions.

CODI aims to put South Africa on par with its international peers and further align its financial sector to the principles of international standard-setting bodies.

“CODI’s primary responsibilities are establishing, maintaining and administering a deposit insurance fund to protect the banks’ covered depositors and inform the depositors of its benefits and limitations should a bank be placed into resolution,” the central bank said.

As part of its primary objective to protect bank depositors, the CODI is also developing secondary legislation which specifies the cover limit for depositors.

The secondary legislation will be passed through the parliamentary process and published by National Treasury this year. The new regulations are required in order for the CODI to become fully operational in 2024.

“While CODI is a statutory body and a subsidiary of the SARB, it has an independent board which will manage and oversee its affairs,” the SARB said.

“CODI has been collaborating with South African financial institutions and other stakeholders, including the World Bank, to ensure a smooth implementation of the deposit insurance scheme.”

The SARB has been undergoing a push to modernise and align itself with international standards.

Through its Vision 2025, the Reserve Bank aims to research and review existing regulatory frameworks and develop new frameworks in line with relevant international standards and principles.

According to the SARB, the establishment of CODI comes as part of the regulatory reforms stemming as far back as the global financial crisis.

“Its establishment supports the SARB’s mandate of protecting and enhancing financial stability by monitoring the financial environment and mitigating systemic risks that might disrupt the financial system,” said the SARB.

Source : BT