14 February 2018

Tanzania: BoT Mulls to Review Deposit Payoffs

THE Bank of Tanzania (BoT) is considering to review deposit payoffs after when a bank collapses to ensure depositors get more from their deposits.

The central bank, through Deposit Insurance Board (DIB), currently pays a maximum amount of 1.5m/- per depositor if a bank goes under.

The amount was last reviewed eight years ago. The DIB Director Emmanuel Boaz said although the percentage paid was well above international standards, the bank is considering whether to raise or stick to the same amount. "The current amount paid (of 1.5m/-) covers 95.2 per cent of depositors in case a bank collapses... the international rate is 80 per cent," Mr Boaz said.

Though the size is above international standard, is based on a number of criteria among them GDP growth and inflation. However, the outcomes after reviewing the amount to be paid are subjected to approval of DIB board and Minister of Finance. "Bear in mind the outcomes after the consideration might not be necessary to raise the amount... it may remain the same," Mr Boaz said.

He said though the society currently have that the amount paid is small but on average it covers 95.2 per cent of depositors with 1.5m/- and less. According to DIB, each bank is supposed to insure its client deposits by providing 0.015 per cent to the board annually.

"In case a bank goes under, DIB is paying from its coffers and will reclaim back the amount after receivership exercise is closed," Mr Boaz said. The international practice does not encourage a 100 per cent compensation to avoid bank laxity on safeguarding customer deposits.

The issue of amount paid surfaced recently after six banks went under early this year. However based on Mbinga Community Bank experience, DIB said if the said banks have put their data in order may take a minimum of two months. "Mbinga had 7,000 customers and took us two months to settle depositor's claims... hope we might use the same period for the recently closed banks," he said.

DIB fund grew from 282.2bn/- in June 2016 to 370bn/- in June 2017. The fund was established in 1994 with 1.5bn/- seed money contributed by ministry of finance. The ability to pay also increased from 250,000/- in 1994 and reviewed to 500,000/- in 2003 and was increased to 1.5m/- in 2010

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