Suspicious consumers can now breath a sigh of relief, after the Reserve Bank launched the Corporation for Deposit Insurance (CODI).
CODI scheme is created and mandated by law to protect R100,000 qualifying bank deposits in the unlikely event of their bank failing or bank collapse.
Previously investors had to accept the risks and liabilities of making investments with banking institutions.
Reserve Bank Governor Lesetja Kganyago has sought to explain that the fact that the bank is only introducing deposit insurance now, in the 21st century, does not meant that the country spent the past century ignoring the risks.
He emphasised that depositors have been well protected in the country.
“We have had a much more orderly system and even where banks have been in trouble, ordinary depositors have been protected.
“For example, when VBS (VBS Mutual Bank) went into curatorship, its regular depositors were provided with accounts at another bank which carried over their cash balances, for amounts up to R100,000.
“What we are really gaining with a formal deposit insurance scheme is a more explicit and consistent set of arrangements,” said Kganyago.
The Governor said they’re formalising a scheme on how the costs of the insurance will be apportioned.
Meanwhile, Finance Minister Enoch Godongwana, who was speaking at the launch, said the scheme will help strengthen the country’s financial sector.
“The establishment of CODI underpins the consumer protection pillar, securing depositors by guaranteeing access to up to R100 000 of their deposits in case of a bank failure, an essential safety net in our rapidly evolving financial landscape and advancing the Twin Peaks model.
“This model not only enhances the system’s stability but also bolsters consumer confidence by offering clearer oversight and reducing financial crisis risks,” said Godongwana.
The Minister highlighted that the scheme will further help develop trust between customers and banking institutions, adding that trust is fundamental to any financial systems effectiveness and existence.
“Yet, global trends, especially post-2008, show a marked decline in trust towards financial regulators, attributed to regulatory failures and perceived alignment with financial elites rather than the public.
“Regaining public trust in financial regulation requires deep structural reforms and a shift towards greater accountability, transparency, and public inclusivity,” added the Minister.
Kganyago said the scheme is free and that depositors don’t have to apply for it, and it extends to all the banks and local branches of international banks.
The scheme became operational on 1 April 2024.
