Harare, (New Ziana) – The government has increased the amount a depositor gets in compensation from a failed bank to $10 000 from $1 000, the Deposit Protection Corporation (DPC) said on Tuesday.
The DPC, whose purpose is to compensate depositors in the event of bank failure, has paid out millions to clients of collapsed financial institutions in the last 10 years.
Quite a number of banks have collapsed during the period, most due to mismanagement involving insider loans. However, Zimbabwe has not had a bank failure in the past five years.
“The public is hereby advised that effective 1 January 2020, the deposit protection cover level has been increased from ZWL$1 000 to a maximum of ZWL$10 000 per depositor, per account type, per banking institution and up to a maximum of ZWL$500 for deposit-taking microfinance institutions,” the DPC said.
In terms of the DPC’s rules, every depositor is automatically covered for compensation when they open a bank account.
Clients with more than the $10 0000 limit in their accounts will receive additional compensation on a pro-rata basis after the collapsed institution has been liquidated.
The DPC said the new limit covers at least 98.9 percent of current bank account holders.
“The new cover levels fulfill the corporation’s public policy objective of ensuring that at least 90 percent of depositors (are covered),” the DPC said.
The corporation said the new cover will not be applied in retrospect.
The threshold was last reviewed in 2016, and before that it was $500.