‘Nostro accounts balances won’t be compensated’  - Zimbabwe Situation

‘Nostro accounts balances won’t be compensated’ 

Source: ‘Nostro accounts balances won’t be compensated’ | The Herald July 24, 2019

‘Nostro accounts balances won’t be compensated’

Enacy Mapakame
Balances in nostro foreign currency accounts will not be compensated as they are currently not covered by the Deposit Protection Corporation (DPC), in the event of bank failure, an official has said.

Deposit protection is a scheme established by Government to protect depositors against loss of their insured deposits placed with member institutions licenced to operate banking or finance business.

Responding to questions at the DPC first annual general meeting (AGM) in Harare yesterday, chairman Agmos Moyo indicated that the current regulations do not mandate DPC to compensate any foreign currency deposits held in banks in the event of failure.

Currently, DPC compensation only covers the local currency following policy pronouncements by Government to separate local RTGS$ from nostro foreign currency accounts as well as the abolishment of the multi-currency basket for local transactions.

Mr Moyo highlighted that DPC was not levying any contributions in respect of accounts which are denominated in USD.

“We are aware that there are still accounts called nostro accounts which are denominated in USD. We did approach the RBZ (Reserve Bank of Zimbabwe) and shareholder as to whether we should have a separate cover to cater for those (nostro) accounts in the event of bank failure

“The current policy directive is that they be quarantined and therefore not covered, as per the directives from the Ministry of Finance. So it follows that we are not levying any contribution in respect of for the accounts, which are denominated in USD.

“So it follows therefore that if there is (bank) failure, we will not pay for the USD accounts or any other currency. That is the current position,” he said. Mr Moyo, however, acknowledged the necessity to provide cover for both local and nostro balances as a way of enhancing consumer protection and build confidence on the market.

He said: “But in an ideal world both the accounts must be recovered so that there is confidence which is important, for both the RTGS$ account and nostro account.”

In the event of bank failure, depositors who made deposits in USD terms, for instance in 2014, prior abolishment of the multi-currency system will now be compensated in local RTGS$ terms in line with the current regulations.

“The question speaks more to policy, what we are saying is at the conversion, all balances became RTGS$. Therefore, it means that we are setting those claims in the current currency (RTGS$),” he said.

As of December 31, 2018, the DPC had paid 15 313 depositors of various failed banks between 2014 and 2018 with a total value of $3,6 million. Cumulative recoveries amounted to $77,6 million during the 2014 to 2018 period.

During the 2018 financial year, DPC’s total income jumped 39 percent to $21 million with a $17 million surplus compared to $11,6 million reported in the prior year.

Total assets grew 35 percent to $63 million from $43 million in the comparable year. Fund balance closed the year at $60 million representing a growth of 40 percent, but still below the target of 2 percent of total deposits.

COMMENTS

WORDPRESS: 1
  • comment-avatar
    Mukanya 3 months ago

    Forex Accounts will not be compensated,hence the unbridled raiding/looting by the Powers that be.