A deposit insurance scheme may be on the cards for South Africans to protect you from losing your money should a bank collapse.
Christo Wiese, the Registrar of Banks, says a task team, comprising members of the National Treasury and the South African Reserve Bank, has been set up to took into the feasibility of such a scheme. Details of the scheme will be made public towards the middle of the year.
Usually, deposit insurance is aimed at protecting small depositors from losing their savings if a bank fails. For example, deposits up to R50 000 could be guaranteed.
The guarantee means that depositors can withdraw their money even if their bank fails.
This assurance is intended to give people security about their savings so that in the event of rumours of a bank collapse, they do not rush out and withdraw their money. A run on a bank can result in a bank collapsing, as was the case with Saambou in February this year.
In a deposit insurance scheme, all banks are compelled by law to contribute to a deposit insurance fund. This cost is usually passed on to the consumers in the form of higher transaction fees.
Deposit insurance is only one of the safety nets protecting a banking system. Others include prudential regulation and supervision and a lender of last resort. Lender of last resort assistance is when the Reserve Bank provides special liquidity assistance to help a bank out of a cash crunch.
Wiese says if proposed legislation is fast-tracked through Parliament, a deposit insurance scheme could be in place by the end of the year.