Deposit Protection Corporation is a statutory body that protects depositors’ funds in the event of a bank failure. It was established in 2002, informed by bank failures in the late 1990s and early 2000s. The Corporation is wholly-funded by Contributory Banking Institutions in Zimbabwe. Currently there are twenty-seven contributory institutions in Zimbabwe which include, commercial banks, deposit-taking microfinance institutions and building societies.
One of the core mandates of the Corporation is to pay compensation to depositors in the event of insolvency of a contributory institution. It guarantees that depositors will receive their insured funds, up to a certain limit (US$1,000 equivalent at interbank rate for commercial banks and US$500 equivalent for deposit taking microfinance institutions), even if the bank is no longer operating. Depositors do not need to apply for this insurance cover, they are covered if they bank with a registered deposit taking institution licensed by the Reserve Bank of Zimbabwe.
The Corporation has quite a number of roles in the financial safety net of Zimbabwe and some of them are as follows:
- Promote financial stability: it helps maintain public confidence in the banking system, particularly during periods of financial stress. By assuring depositors that their funds are safe up to a certain limit, the system reduces the risk of bank runs and contributes to overall financial system stability.
- Protect small and unsophisticated depositors: the schemes is designed to protect individuals and small businesses who may not have the expertise or resources to assess the financial soundness of banks. This protection helps ensure fairness and confidence across all segments of society
- Resolution of failed banks: When a contributory institution is declared insolvent, the Corporation works closely with the Reserve Bank of Zimbabwe and other regulatory bodies to ensure the institution is resolved in a way that minimizes systemic risk. This may involve reimbursing insured depositors, supporting asset recovery, and managing the liquidation process.
- Risk minimization: The Corporation plays a risk minimization role by monitoring member institutions for signs of distress in collaboration with the Reserve Bank of Zimbabwe. Through early warning systems and data analysis, the Corporation contributes to proactive risk management and timely intervention.
Overall, the Deposit Protection Corporation is a multifaceted institution that not only provides a financial guarantee to depositors but also contributes to financial system stability, depositor protection, and overall economic resilience in Zimbabwe.
