National Treasury has published draft regulations for public comment for its new system designed to protect bank depositors in the event of a bank collapse.

2023 has seen a banking crisis, with several banks, including America’s Silicon Valley Bank and Switzerland’s Credit Suisse, collapsing.

Although South Africa has not seen a major bank collapse in 2023, African Bank and VBS Mutual Bank both failed over the last ten years due to bad management and liquidity problems.

However, a new central bank deposit insurance scheme guarantees the repayments of deposits up to a certain amount if a bank fails.

In March, the Corporation for Deposit Insurance (CODI), the nation’s first deposit insurance body, was established by the South African Reserve Bank (SARB).

CODI was established as part of the implementation of the Financial Sector Laws Amendment Act, which gives the SARB powers to act as a resolution authority and establish the body.

“CODI’s primary responsibilities are establishing, maintaining and administering a deposit insurance fund to protect the banks’ covered depositors and inform the depositors of its benefits and limitations should a bank be placed into resolution,” the SARB said.

National Treasury has now published the Draft Deposit Insurance Regulations for public comment, which are required to make the CODI fully operational by 2024 – with this new legislation needing to pass through the parliamentary process.

The purpose of the new regulations is to provide for the procedural and administrative matters to effectively operate the CODI and the relevant funds.

As per the regulations, covered depositors will receive a maximum amount of R100,000 if their bank is placed into resolution.

“For purposes of section 166AB(1) of the Act, the maximum amount the Corporation may apply from the Fund in respect of a qualifying depositor of a bank in resolution for their qualifying deposit balance is R100 000 ,” the regulations said.

Public comments must be submitted by 15 August 2023, a government notice signed by Finance Minister Enoch Godongwana said.

Below are the Draft Deposit Insurance Regulations:

Draft Deposit Insurance Regulations 2023.pdf