On 25 April 2024, the South African Reserve Bank officially launched the Corporation for Deposit Insurance (CODI), which aims to protect bank depositors and enhance the public’s confidence in South Africa’s banking system. CODI was established as a legal entity, with effect from 24 March 2023 pursuant to the amendments to the Financial Sector Regulation Act, 2017, by the Financial Sector Laws Amendment Act, 2021, and the Minister of Finance’s commencement schedule. CODI has been established to manage South Africa’s Deposit Insurance Fund, which will allow for bank depositors to have access to their deposits should their banks be placed into resolution.
On 25 April 2024, the South African Reserve Bank (SARB) officially launched the Corporation for Deposit Insurance (CODI), which aims to protect bank depositors and enhance the public’s confidence in South Africa’s banking system. CODI was established as a legal entity, with effect from 24 March 2023 pursuant to the amendments to the Financial Sector Regulation Act, 2017, (FSRA) by the Financial Sector Laws Amendment Act, 2021, and the Minister of Finance’s commencement schedule.
CODI has been established to manage South Africa’s Deposit Insurance Fund (Fund), which will allow for bank depositors to have access to their deposits should their banks be placed into resolution. The functions of CODI are to maintain and administer the Fund in the interests of the holders of covered deposits and to promote awareness among financial customers of the protections afforded by CODI through the FSRA.
The launch of CODI follows the amendment of the FSRA and promulgation of the Deposit Insurance Regulations issued under the FSRA (Regulations) that took effect on 1 April 2024. Whilst the FSRA provides the overarching framework for the establishment and governance of CODI, the Regulations set out the procedural and administrative requirements concerning the functioning of CODI and the Fund.
All banks and branches registered in terms of the Banks Act, 1990; mutual banks registered in terms of the Mutual Banks Act, 1993; and co-operative banks registered in terms of the Co-operative Banks Act, 2007 and licensed to hold covered deposits, are required to be members of CODI. A bank is a member of CODI from the date it is registered in terms of the relevant financial sector law that allows it to hold covered deposits. If the bank was licensed or registered before the establishment of CODI, it is automatically a member of CODI from the date CODI was established.
Members of CODI will be charged monthly deposit insurance premiums to ensure the Fund is able to make payments. Members of CODI will also be charged an annual levy to contribute to CODI’s operational costs. Members of CODI are further required to make monthly declarations to CODI about their total qualifying deposits.
The maximum amount that CODI may apply from the Fund in respect of a qualifying depositor of a bank in resolution for their qualifying deposit balance is ZAR 100 000 which applies to the bank’s operations in South Africa. A qualifying depositor includes a person who holds a qualifying deposit and is an account holder of a simple account, a beneficiary of a formal beneficiary account, or a holder of an informal beneficiary account.
CODI must apply the Fund to reimburse a qualifying depositor of a bank in resolution where a bank is a member of CODI and the SARB has decided that the covered deposits must be reimbursed (Conditions). The reimbursement must be effected by CODI in Rands in 20 calendar days from the date that the Conditions were met. However, the reimbursement period may be extended for various reasons, including that the person to be reimbursed has not been reliably identified under the requirements of the Financial Intelligence Centre Act, 2001; or the legal rights of the person to be reimbursed are not established or a covered deposit is the subject of a legal dispute; etc.
Qualifying depositors have a period of three years from the date that the Conditions were met to claim their covered deposits from CODI or to file a dispute where they have not received a reimbursement despite being a qualifying depositor. A qualifying depositor has a period of three months from the date of reimbursement to file a dispute with CODI where they disagree with the amount reimbursed.
CODI is required to develop and publish details of the protections it affords customers, the process and conditions for reimbursement and its operations. CODI is also required to make available to a bank, deposit insurance information for distribution to depositors, standardised material to communicate the bank’s membership in CODI to its depositors and training material on depositor protection. The chief executive officer of CODI has confirmed that they will be launching a public awareness campaign in partnership with its member banks.
Notably, the Regulations further protect qualifying depositors in the instance of a merger or amalgamation between banks to the extent that a transferring bank is required to give depositors 30 days’ notice of their transfer to another bank and afford qualifying depositors 90 days to withdraw or transfer their qualifying product or any part of the product (including fixed-term deposits) to another bank without incurring any costs.
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