DPC unveils strategy for failed banks takeover

09 Aug, 2015 - 00:08 0 Views
DPC unveils strategy for failed banks takeover Mr John Chikura

The Sunday News

Mr John Chikura

Mr John Chikura

THE Deposit Protection Corporation (DPC) has come up with a new strategy to deal with failing banks by allowing a stable bank to take over the assets of a closing bank, a move that is set to stabilise the troubled sector, an official has said.

Speaking in Bulawayo last week, (DPC) chief executive Mr John Chikura said they had come up with the new plan to authorise a healthy bank to hold the assets and liabilities of failing institutions without inconveniencing clients.

“There was no mechanism to resolve failing banks and now we have a fund and skills to deal with failing banks. In the way forward you will notice that we will be involved in restructuring of banks and intervening by way of providing liquidity using what are called purchase and assumption, which is a process where when banking is failing we can quietly resolve the issue without making much noise,” said Mr Chikura.

“If a bank is failing and has some assets in Chipinge or Filabusi we then approach a strong bank to take over the assets. The assets of a weak bank are assumed by a strong bank and this is done without people knowing and there will be no interruption to the banking services.”

He said this was the same method used in some countries like the United States of America.

“Just to give for example in the United States, they will announce on a Friday afternoon that a bank is being closed and from the same announcement, they will tell that you those who were banking with that bank will access same services from another bank.”

Meanwhile Mr Chikura said his organisation had no fund to compensate the Zimbabwe dollar account holders. Reserve Bank of Zimbabwe (RBZ) governor Dr John Mangudya had said the DPC would compensate Zimbabwe dollar accounts that were held by financial institutions that closed post dollarisation as the apex bank.

However, Mr Chikura said DPC was not in a position to compensate the Zim dollar account holders.

“The compensation of the Zimdollar accounts is the responsibility of Government. The Government has worked with RBZ who are reimbursing the Zim dollar balances. DPC has not been involved in these payments and we have not paid any one at all, not even a penny. We still need to get the funding. We can’t pay from our funds because we don’t have that funding. That is a Government responsibility,” he said.

Six banks — AfrAsia Bank Zimbabwe, Interfin, Trust Bank, Allied Bank, Capital Bank and Royal Bank — have closed operations since dollarisation in 2009, with DPC charged with compensating their account holders. The Deposit Protection Fund was established under section 66 of the Banking Act (Chapter 24:20) as read with section 13 of the Deposit Protection Corporation Act (Chapter24:29).

The primary objective of the Fund is to compensate depositors in full or in part, for losses incurred in the event of insolvency of a contributory institution. The Fund is vested in and administered by DPC.

Under its current mandate, the Corporation will immediately upon verification, pay all eligible depositors up to the maximum insurable limit of US$500 per depositor.

Deposit balances above the insurable limit will be paid through the liquidation process upon the realisation of assets.

 

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