South African Reserve Bank on advancing domestic financial sector

The South African Reserve Bank has made significant progress in advancing the domestic financial sector through the successful implementation of the Corporation for Deposit Insurance (CODI) scheme. Deputy Governor Mampho Modise shared key insights into the achievements and future goals of the scheme during an exclusive interview with CNBC Africa. Since its launch on the 1st of April last year, CODI has demonstrated remarkable success in establishing a deposit insurance fund, which currently holds approximately 19 billion. This fund serves as a safety net in the event of a bank failure, ensuring that qualifying depositors can be promptly compensated. Moreover, the development of a robust database has enabled CODI to efficiently manage customer information and facilitate communication with depositors when necessary. Collaboration with banks has been instrumental in raising awareness about CODI among depositors. By engaging with various stakeholders, including the media and newspapers, CODI has effectively communicated the coverage provided by the scheme. All registered banks are members of CODI, ensuring that a wide range of financial products are covered, with a maximum limit of 100,000 per depositor. Notably, CODI has achieved a commendable milestone by processing depositor payouts within just 20 days. In terms of funding, the CODI scheme operates on a sustainable model where banks contribute through premiums and levies. Banks pay a premium of 0.2% of covered depositors, in addition to a 0.015 levy for operational expenses. To bolster the deposit insurance fund, banks also allocate 0.3% of covered depositors for liquidity reserves, providing a financial buffer in case of an unforeseen bank failure. This prudent funding approach has enabled CODI to accumulate substantial funds, with the aim of reaching 40 billion in the next decade. Deputy Governor Modise emphasized the importance of continually assessing and adapting the scheme to meet evolving needs. While the current coverage limit stands at 100,000, ongoing reviews will ensure that CODI remains effective in safeguarding depositors' interests. By prioritizing structural reforms and enhancing operational efficiency, CODI aims to uphold its mandate of protecting depositors across South Africa. Regarding the inclusivity of the CODI scheme, Deputy Governor Modise clarified that participation is mandatory for all licensed banks in South Africa. Every bank that holds a banking license is required to be a member of CODI, ensuring comprehensive coverage and financial stability within the banking sector. As South Africa's banking sector continues to be recognized for its resilience and stability, initiatives like CODI play a crucial role in enhancing consumer confidence and mitigating financial risks. The successful implementation of the deposit insurance scheme underscores the Reserve Bank's commitment to fostering a secure and resilient financial environment for all stakeholders. In conclusion, Deputy Governor Mampho Modise's insights shed light on the impactful progress made by CODI and the strategic vision for further advancing the domestic financial sector. With a strong foundation in place and a clear roadmap for future growth, CODI stands as a vital pillar in safeguarding depositors' interests and promoting financial stability in South Africa.