The South African Reserve Bank (SARB) has established the country’s first deposit insurance institution, the Corporation for Deposit Insurance (CODI).
The SARB said the new organization, which became a legal entity on March 24, aims to protect bank depositors and boost confidence in the financial industry, and has become a legal entity from March 24, 2023.
A central bank deposit guarantee scheme guarantees the repayment of deposits up to a certain amount if a bank fails.
The Deposit Insurance Body was established by Finance Minister Enoch Godongwana as part of the implementation of the Financial Sector Act. The act gave the SARB powers to act as a resolution authority and establish the body.
According to SARB, the CODI is part of the institution’s continued focus on maintaining financial stability and will increase confidence in South Africa’s banking institutions.
CODI aims to align South Africa with its international peers and further align its financial sector with the principles of international standards bodies.
“CODI’s primary responsibilities are to establish, maintain and manage a Deposit Insurance Fund to protect the banks’ covered depositors and inform depositors of its benefits and limitations should a bank be placed under resolution,” the central bank said.
As part of its primary objective of protecting bank depositors, CODI is also developing secondary legislation that specifies the depositor coverage limit.
The secondary legislation will pass the parliamentary process this year and be published by the National Treasury. The new regulations are necessary to have the CODI fully operational by 2024.
“While CODI is a statutory body and a subsidiary of the SARB, it has an independent board that will manage and control its affairs,” the SARB said.
“CODI is working with South African financial institutions and other stakeholders, including the World Bank, to ensure the smooth implementation of the Deposit Guarantee Scheme.”
The SARB has been under pressure to modernize and adapt to international standards.
Through Vision 2025, the Reserve Bank aims to examine and review existing regulatory frameworks and develop new frameworks in accordance with relevant international standards and principles.
According to the SARB, the creation of CODI is part of regulatory reforms dating back to the global financial crisis.
Its creation supports the SARB’s mandate to protect and enhance financial stability by monitoring the financial environment and mitigating systemic risks that could disrupt the financial system.
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