In a move that solidifies trust and confidence in South Africa’s financial landscape, the South African Reserve Bank (SARB) launched the Corporation for Deposit Insurance (CODI) on 1 April, 2024. Designed to protect depositors in the event of a bank failure, and mandated by law, CODI marks a significant step forward in bolstering consumer protection and reinforcing the country’s banking system.
CODI, established under the Financial Sector Regulation Act of 2017, is South Africa’s Deposit Insurance Scheme. It is a statutory body and a separate legal entity with its own Chief Executive Officer (CEO) and Board of Directors (Board). Though it remains a subsidiary of SARB which will handle it’s support functions, such as the investment of funds, legal services, information technology services and financial services.
The board members listed below are in positions that are prescribed as per the Financial Sector Laws Amendment Act 23 of 2021 (FSLAA):
- Vukile Davidson (Chief Director: Financial Markets & Stability: National Treasury – representative from National Treasury appointed by the Director-General);
- Mampho Modise (Deputy-Governor appointed by the Governor);
- Fundi Tshazibana (Deputy Governor and CEO: Prudential Authority);
- Unathi Kamlana (Commissioner of the FSCA);
- Sabihah Mohammed (CEO CODI);
- Shoki Ralebepa (Group Chief Financial Officer of the SARB); and
- Bongi Kunene (Managing Director BASA – one of the no more than two persons appointed by the Governor as directors with the concurrence of the Minister of Finance.)
- Andre Bezuidenhout (Independent Director – one of the no more than two persons appointed by the Governor as directors with the concurrence of the Minister of Finance.)
Its primary objective is to safeguard the interests of qualifying depositors, including individuals, non-financial businesses, charitable organisations, and more, in the unfortunate scenario of a bank collapse. By providing cover of up to R100,000 per qualifying depositor per bank, CODI ensures that the vast majority of depositors are protected in times of financial distress.
Prior to CODI’s introduction, South Africa lacked an explicit deposit insurance scheme, leading to ad hoc interventions and reliance on taxpayers’ money to compensate affected depositors. With CODI in place, the burden on taxpayers is reduced as member banks contribute to a Deposit Insurance Fund through monthly premiums and loan contributions. This not only promotes financial stability but also fosters a more sustainable and resilient banking sector.
CODI provides automatic cover to qualifying depositors across all banks, including commercial, cooperative, mutual, and local branches of foreign banks. Qualifying products, such as savings accounts, current accounts, term deposits, and more, are protected, ensuring that depositors have peace of mind knowing their funds are secure.
The introduction of CODI aligns South Africa with international best practices and strengthens the country’s financial regulatory framework. By instilling confidence and trust in the banking sector, CODI contributes to a more robust and inclusive financial ecosystem. Additionally, it promotes competition and innovation in the banking industry, paving the way for customer-focused and cost-effective banking solutions.
As South Africa embraces the Twin Peaks regulatory model, with bodies like the Financial Sector Conduct Authority and the Prudential Authority at the forefront, the future of financial regulation looks promising. Through proactive measures and structural reforms, South Africa is poised to build a financial system that is transparent, accountable, and resilient.
In conclusion, the launch of CODI represents a significant milestone in South Africa’s journey towards financial stability and consumer protection. By safeguarding depositors’ interests and reducing systemic risks, CODI plays a crucial role in shaping a brighter future for the country’s financial landscape. As consumers, it’s essential to stay informed and aware of the protection afforded by CODI, ensuring that our hard-earned money remains safe and secure in the face of uncertainty. For more information, visit https://www.resbank.co.za/codi