Deposit Protection struggles to pay depositors

Deposit Protection struggles to pay depositors
Published: 25 March 2014

The Deposit Protection Corporation (DPC) has managed to reimburse only 1 606 depositors out of 8 496, whose accounts were closed when three banks were shutdown.

DPC chief executive officer John Chikura said depositors compensated so far were from Genesis, Royal Bank and Trust Bank.

"Genesis Bank closed on February 28 2014 with a total depositor of 85 and 56 of them were paid making it 68% of the depositors. Later on Royal Bank closed on March 3 2014, it had 5 453 depositors only 1 330 have been paid so far yet, that is only 25%.

"Trust Bank was closed on March 3 2014 and they had 2 958 depositors. Only 220 of them were paid which is 8%," Chikura made the revelations last week, at the World Consumer Rights commemorations.

The DPC was formed to compensate depositors in the event of a bank failure and if funds are inadequate, shortfalls may be covered by special assessments or additional capital injection from government.

The DPC is paying out only $500 as compensation. Review of the cover is flexible and it depends on the size of the fund. Ideally the fund should cover up to 90% of the depositors in full.

"The relation between a depositor and a bank is in such a way that the bank borrows funds (creates a liability) from the depositor and pledges to pay the nominal value of the deposit plus interest, as and when agreed," said Chikura.

The depositors compensation fund was formed after depositors of closed banks were in the past unduly prejudiced and failed to recover any of their funds. Some of them include Century Discount House, Rapid Discount House, and Sagit Finance House closed during the Zimbabwe dollar era.
- zimmail

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