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Business Reporter
THE Deposit Protection Corporation says over 92 percent of bank depositors covered under the existing minimum insurable limit. DPC said 1,5 million depositors were covered in full, slightly against of its target to insure 90 percent coverage, the institution said in an update. Chief executive John Chikura said late last year that the deposit insurance fund had grown to over $15 million and was sufficient to cover the risk of prejudice to small depositors in the event of bank failure.

The deposit insurer said cover “is done by providing an orderly means of compensation in the event of failure of a member institution”. “At the current cover of $1 000, about 92,98 percent, which represents about 1,5 million depositors are covered in full,” DPC said.

The measures are in line with its policy objective of covering at least 90 percent of insured depositors in full in the event of a bank failure. Through deposit insurance, DPC said that it fosters confidence in the banking system and prevents self-fulfilling panics or bank runs. This reduces the likelihood of contagion and cascading defaults.

Deposit protection also reduces financial uncertainty and promotes financial intermediation to enhance economic and financial stability. DPC said its objectives include monitoring business and activities of contributory banks to promote sound risk management, good corporate governance and protection and consumer.

DPC is currently in the process of facilitating resolution or liquidation of a number of failed banks that include AfrAsia, Interfin, Allied Bank, Trust Bank, which are at different stages of liquidation.

Mr Chikura said DPC had nothing in reserve for deposit insurance at dollarisation in 2009, but it now has in place a fund enough to cover all risks. He pointed out that the insurance fund had grown in leaps and bounds, starting from scratch after savings were all wiped out by inflation while Zimbabwe adopted new currency system in early 2009. DPC gets its funding from quarterly premium levies collected from members.

Currently the prescribed annual premium rate levied on banks is 0,2 percent of average eligible deposits paid on a quarterly basis. In terms of its policy target and mandate, the deposit insurer, which is established by an Act of Parliament, is expected to provide deposit cover for a minimum of 90 percent of all depositors.

DPC doubled the amount payable to small depositors late last year, from the previous maximum of $500 to $1 000 per depositor per institution, however applicable to new cases of bank failure. An amount of $250 is also payable to clients of failed deposit-taking micro-finance institutions to cover against the risk of failure.