SARB Consults on Deposit Insurance Funding Model for South Africa
SARB published a discussion paper that describes funding model for the proposed deposit insurance scheme for South Africa. The paper also addresses the implications for banks in terms of the contributions they would be required to make to the deposit insurance fund, which will be established in terms of the Financial Sector Laws Amendment Bill (FSLAB). Once the FSLAB is promulgated, the provisions of the FSLAB, together with these proposals, will form the basis of secondary legislation. The comment period for this proposal ends on October 16, 2020.
SARB had published an initial discussion paper on designing a deposit insurance scheme for South Africa in May 2017. Significant consultations with banks, through the Banking Association of South Africa (BASA), resulted in a more cost-effective model of funding. Although the funding model has been informally shared with banks, this discussion paper provides banks with the opportunity to formally comment on the revised funding model. The discussion paper explains
- the tiered funding model and emergency funding that will be available to the future Corporation for Deposit Insurance or CoDI
- how the governance and administration will affect the operational costs of the Corporation for Deposit Insurance and the levy paid by members
- the processes for the calculation and payment of members’ financial contributions to the deposit insurance fund
- how instances of potential non-compliance by banks will be dealt with
The policy proposals take into account country-specific characteristics and applicable international standards and they are aimed at contributing to the creation of a deposit insurance scheme that would enhance the financial safety net to optimally serve the needs of the South African financial system. The proposed funding model has been subject to a peer review by FSB and the International Association for Deposit Insurers (IADI), in addition to a Financial Sector Assessment Program (FSAP) review by IMF and World Bank. SARB also expects to publish, in the future, a discussion paper covering the use of the deposit insurance fund for payout and resolution support.
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Comment Due Date: October 16, 2020
Keywords: Middle East and Africa, South Africa, Banking, FSLAB, Deposit Insurance Fund, CoDI, SARB
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