More Banks Want Deposit Insurance

SA banks are looking into deposit insurance Deposit insurance helps protect a bank's clients from losses caused when the bank is unable to pay its its debts when due

When PricewaterhouseCoopers ran a survey among South African banks in 2005, asking who was interested in the introduction of deposit insurance, only seven banks were in support of the idea.

In 2007, that number had jumped slightly to nine banks.

However, in the latest PricewaterhouseCoopers survey, it was found that this number has risen significantly. All in all, 15 banks - 70% of the country's financial institutions - favour the introduction of deposit insurance.

The main idea of the insurance would be to protect the savings of lower income groups.

The banking and capital markets leader of PricewaterhouseCoopers, Tom Winterboer, said that the current financial situation in South Africa may have been instrumental in the change in banking attitude.

Out of those banks who agreed to the concept of deposit insurance, six said that it should cover deposits from between R100K to R500K. Five banks said it should focus the low end of the market instead - deposits of up to R50K.

While the numbers may seem relatively acceptable by South African standards, in comparison with deposit insurance in other countries, the suggestion were dismally low.

For example, deposit insurance in North America (Canada and the United States), recently rose to $250K a year - a far cry from the amounts suggested by South African banks.

The rest of the world seems to have taken to this concept remarkably well. Out of the 30 members of the Organization for Economic Cooperation and Development (OECD) - of which South Africa is not a member - New Zealand became the last country to implement deposit insurance.