Dumisani Nsingo, Senior Business Reporter
THE Deposit Protection Corporation is working on setting-up an integrated protection fund aimed at safeguarding people’s funds in various investment portfolios.
DPC chief executive officer Mr John Mafungei Chikura said the organisation was engaged in talks with the Government and a number of players with a view of coming up with a protection fund to cover other investment portfolios. Presently DPC is only protecting banks depositors.
“We are looking at setting-up an Integrated Protection Fund. It included depositors, insurance policy holders (consumers in the insurance industry), investors on the stock exchange, pensioners who are contributing to the pension fund.
“We are discussing with Government and other players with a view to establishing funds to cater for consumers in these other sectors but having those funds run under the DPC,” said Mr Chikura.
He said the concept of an integrated protection fund has been a success in countries such as Malaysia, South Korea and the United Kingdom.
“If two or three banks fail we can deal with that, as you can notice we have paid from seven banks, everybody has been paid and we are saying those who have not come to claim they can come to claim. If more banks fail we can deal with that,” said Mr Chikura.
He, however, said the institute was finding it difficult to raise adequate funds to pay depositors of liquidated banks.
“There are two challenges. The first is that when the bank closes there are no more assets. They (assets) are either given as security to the people they (owners of banks) borrowed from or they have been taken out of the bank by the directors or owners, so they are no longer there. So there are very few assets and if we sell those assets you do not get enough money to pay deposits.
“So that’s why we are saying if we can’t get enough, we are then going to go and sue the directors who were running the bank in order to recover the losses of the depositors. So this is one of the challenges we get when we are trying to recover because when the bank closes you find that their liabilities are higher than their assets,” said Mr Chikura.
He also said it was proving to be difficult to obtain real value from the assets that would have been attached from liquidated banks due to the depressed economy.
“At the moment who is buying buildings, houses if they have houses? The market is so depressed. So those assets if you sell them you don’t get the value for your money. You don’t get the real value you actually get forced sells value because the market has no money that affects how much you can collect as well,” said Mr Chikura.
DPC has paid has in the past five years paid over $3,5 million to depositors of failed banks and collected $35 million in terms of assets and debtors. Mr Chikura said the prevailing cash shortage was impacting negatively on the banking public’s confidence of the country’s banking sector.
“At the moment people are not getting money from the banks because of liquidity challenges. You put your money in the bank the next morning when you want it you can’t get it, that destroys confidence. So there are a number of factors that militate against what we trying to achieve.
“We want to build confidence in people, we want people to think when they put their money in the bank they go home and sleep and if the bank closes they can come to DPC and get their money but these challenges tend to erode confidence,” he said.