The global financial crisis that hit many parts of the world
including Tanzania tested resilience of individual countries and
economic zones. The crisis underscored the need for reforms in financial
institutions and a radical system for protection of depositors.
It resulted in greater convergence in practices across jurisdictions
and an emerging consensus about appropriate design features.
The DIS is one of the mechanisms employed by governments to enhance
public confidence in the banking systems and consequently maintain
stability of the financial system.
Before the crisis, the functioning of
DISs differed significantly across FSB members and the views about
appropriate design features were rather general and non-prescriptive.
Tanzania is currently undertaking modernisation of DIS intended to
protect small and unsophisticated depositors from losses of their
deposits resulting from a failed banking institution.
The Deputy
Governor of the Bank of Tanzania (BoT) Mr Lila Mkila, who is also the
Chairman of the Steering Committee for modernisation of DIS, said last
weekend that currently, the Deposit Insurance Board of Tanzania (DIB)
operates as a ‘Pay Box’ under the Central Bank.
Currently, the DIB is receiving technical assistance from Korea
Deposit Insurance Corporation (KDIC) to make the DIS contribute more
effectively in maintaining stable financial system in the country,” he
said at the opening a final reporting workshop on 2012 Knowledge Sharing
Program (KSP) jointly organised by KDIC and DIB.
According to the Bank of Tanzania (BoT) the amount of protected
deposit shall be the aggregate credit balance of any sums maintained by a
customer at a bank or a financial institution less liability of the
customer to the extent determined by the Minister for Finance from time
to time by order published in the Gazette.
The amount of protected deposit was raised from 500,000/- up to
1.5m/-.
The reform programme aims at having a separate governing law
that would among others entail an operationally independent deposit
insurance institution with extended mandate.
The KSP between KDIC and
DIB is governed by a Memorandum of Understanding (MoU) signed in January
last year by the tripartite parties namely, the Ministry of Finance,
BoT on behalf of DIB and KDIC.
The MoU aims to promote cooperation and collaboration on common areas
of interest and coordinate the participants’ efforts in strengthening
the financial infrastructure for a better economic development.
Apart
from appreciating the assistance, Mr Mkila appealed to the KDIC and the
Korean government to consider extending the technical assistance to DIB
on areas of Information and Communication Technology (ICT) necessary for
identifying and providing appropriate financial and operational
software.
He appealed for the provision of a Resident Advisor to guide DIB on
financial and operational issues and capacity building to DIB staff and
government officials, responsible for the reform of the DIS.
The
Tanzania Postal Bank (TPB) Chief Executive Officer Mr Sabasaba Moshingi
said the move by the BoT to have an effective insurance system is
welcomed with the aim of building depositors’ confidence but with
ultimate goal of attracting more saving into the banks.
He thanked KDIC, its Chairman and president, Mr Kyoungho Kim, the
Project Manager, the team members and fellows in particular for the
success which DIB has so far registered during the two years of KSP.
“The sharing of specific experiences on the reform of Korean Deposit
Insurance System, successes on the approach taken during the Asian and
global financial crisis and current status of KDIC key activities is a
very valuable investment for the future strength and sustainability of
the DIS,” he emphasized.
In his welcoming remarks, the DIB Director Mr Abraham Rasmini, said
DIS was one of the mechanisms employed by governments to enhance public
confidence in the banking systems and consequently maintain stability of
the financial system.
He said it is a complimentary element of an
extensive financial safety net that includes Banking Law and
Regulations, Lender of Last Resort and Banking Supervision.
The DIS, Mr Rasmini added, was intended to protect small and
unsophisticated depositors from losses of their deposits resulting from a
failed banking institution.
However, he said, it was the belief of his
organization that the design of the most effective should be a path
dependent on the country’s own circumstances.
These, he said included economic and financial environment, history
and culture as well as harmonizing opinions from stakeholders.
The
Korean delegation recommended that DIB should have its own IT system
which would enable an efficient operation of the deposit insurance
system in Tanzania since at the moment it had no specific system for its
own operations but rather rely on Bank of Tanzania.
On the modernisation of DIS, Dr Seungkon Oh, a senior research fellow
from KDIC said in order to accommodate most of the gaps found in the
current law governing it, a new and distinct piece of legislation should
be enacted as well as related regulations which comply with the
International Association of Deposit Insurers (IA DI) Core Principles
for Effective DIS.
The Head of the KSP Consultant Unit at the Korea Development
Institute (KDI), Mr Jan Saeng Kim said the KSP was launched in 2004 by
Korean Ministry of Strategy and Finance with KDI as the key organization
designing and implementing institution.
He said, “KSP was a
demand-driven, participation- oriented and comprehensive consultation
programme designed to assist development partner countries in key policy
areas by sharing Korea’s development experience and knowledge”.
He further said that the KSP has implemented in countries in Asia,
Middle East, Africa and Latin America as well as Eastern Europe.
Source: The Daily News, www.dailynews.co.tz, reported by Sebastian Mrindoko in Dar es Salaam
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