With the implementation of a deposit insurance scheme, which injects further confidence and trust into the banking sector, South Africa has now been brought in line with international best practice, says SARB. Photo: File
There is no need for South African consumers to ever feel the need to stash their cash under beds, or even couches, due to lack of trust in the South African banking system after the South African Reserve Bank (SARB) yesterday launched Corporation for Deposit Insurance (CODI) to safeguard depositors in case of bank failures.
CODI, which is the newest SARB subsidiary, is designed to safeguard the most vulnerable depositors in our society. It provides cover of up to R100 000 to each qualifying depositor per bank in the unlikely event of a bank’s collapse. This coverage limit fully protects nine out of 10 qualifying depositors in the country.
What is a qualifying depositor?
CODI protects deposits held by retail and private non-financial corporate depositors in qualifying products. They typically include individual depositors and non-financial businesses, charitable or non-profit organisations, religious entities, trade unions, consumer associations and stokvels.
What are qualifying products?
CODI protects banking products where both the deposit and the accrued interest are guaranteed. Qualifying products typically include, but are not limited to, savings accounts; current accounts; transactional accounts; term and notice accounts; Islamic Wadi’ah, Qard and Murabaha products; and tax-free savings accounts.
The SARB said yesterday in line with its mandate to ensure financial stability, CODI would protect qualifying depositors, including individuals and non-financial businesses, as well as inform them of CODI’s protection benefits and limitations, should a bank fail.
Prior to CODI’s introduction, South Africa did not have an explicit deposit insurance scheme, compelling the government to use taxpayers’ money to compensate affected depositors on a case-by-case basis.
Under the auspices of the Financial Sector Regulation Act 9 of 2017 (FSR Act), CODI has established, and will maintain and administer a Deposit Insurance Fund. The fund is supported by, among other options, monthly premiums and loan contributions by member banks, reducing the financial burden on taxpayers.
CODI, which became operational on April 1, 2024, provides pre-planned, orderly access to deposits in qualifying products, and will inform qualifying depositors about when and how to access their funds.
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