Frequently Asked Questions and Answers
i) Foreword
The
Banking and Financial Institutions Act No. 12 of 1991( now repealed) allowed the
introduction of private Banks and Financial Institutions incorporated the
provision for establishing the Deposit Insurance Fund (DIF) under Section 23(1)
which became operational in January 1994. The Deposit Insurance Fund
exists by virtue of the provisions of section 36 and 37 of the banking and
Financial Institutions Act 2006. The management of the Fund is guided by
policies provided by the DIB.
ii) Q. No. 01. What is the Deposit Insurance
Board (DIB)?
A.
The Deposit Insurance Board is an Institution established under section
37(i) of the Banking and Financial Institutions Act No.12 of 2006 for the
purpose of providing policies for control and managing the Deposit Insurance
Fund.
Q.
No. 02.
What are the primary objectives of DIF/DIB?
A. To enhance public confidence in the banking and financial system by
being responsive to ailing banks and non-bank financial institutions as well as
providing insurance protection to depositors.
Q.
No. 03. What are the main functions of DIF/DIB?
A. (i) Risk Management
The
insurance function of the DIF/DIB deals with the insurance assessment and
premium collection from member Banks and non-bank Financial Institutions.
It also provides remedial measures to prevent closure by extending
financial assistance or guarantee to distressed banks and non-bank financial
institutions.
(ii) Claims, Receivership and liquidation functions.
Claims
refers to settlement of claims for insured deposits;
Receivership deals with the take-over and control of all assets, liabilities and
affairs of the closed bank or financial institution.
Liquidation covers the conversion of loans, disposal of fixed assets into
cash and implementation of final settlement with creditors. However, in the case of DIB, Receivership and Liquidation is
performed only if The Bank of Tanzania appoints DIB as Liquidator of a closed
Bank/Financial Institution.
iii) Q.
No. 04. Are the deposits of all Banks and non-bank financial
institutions insured with DIB?
A. Yes. Deposits of all
Commercial Banks and non-bank financial institutions are insured with DIB. However DIB insures only deposits in Tanzania. Deposits in
overseas branches of local banks are not insured by DIB.
All operating banks and Financial Institutions which are authorised to
perform banking functions are required to be members of the DIF as per Section
38 (i) of the Banking and Financial Institutions Act. No.5 of 2006.
Q. No.
05. What
types of deposits are insured by DIB?
A. All types of
deposits which include:-
(i) Savings account
(ii) Time deposits
(iii) Current or demand deposits or
cheque accounts and any other deposits
for which the bank is primarily liable.
Special deposits are charged a premium but are not covered. These
are:
Q.
No. 06 What is the maximum insurance coverage for each
depositor?
A.
By
virtue of the Banking and Financial Institutions (Maximum Deposit Insurance
Coverage) (Amendment) Order, 2003 Government Notice No. 187 of 2003 the maximum amount of deposit insurance coverage currently is
TZS.500,000/= per depositor per bank.
Q. No.
07. Can DIB terminate a bank’s insured status?
A.
Through BOT, DIB can
terminate a bank’s insured status due to either of the following reasons:-
(i) Non payment of insurance premium;
(ii) Continued engagement
in unsafe and unsound banking practices.
When a bank’s insured status is terminated, depositors are advised
through a notice of termination posted at the bank’s premises and publication
in the major newspapers of wide circulation.
Q. No.
08 How much can Joseph Baraka collect from DIB if he has the
following account balances as of the date of closure of his bank?
(i) Savings
Accounts TZS.250,000/=
(ii) Current
accounts TZS. 150,000/=
(iii) Time Deposit TZS.450000/=
Total
TZS.850,000/=
A.
All
his Accounts shall be added together to determine his total deposit, but the
amount he can collect from DIB cannot be more than TZS.500,000/= as the maximum
coverage per depositor.
Q.
No. 09. What are the insured amounts if the bank records show the following
account balances in the name of Joseph Baraka and his son James Baraka?
Joseph F. Bakara Savings A/C. TZS. 500,000/=
A. All the three
Accounts are insured for TZS.500,000/= each because the deposits are maintained
in different rights and capacities.
Q.
No. 10. What is the insured amount if
Joseph F. Baraka
and James
P. Baraka have two joint accounts as follows:
(i)
Joseph F. Baraka & James P. Savings A/C TZS.600,000/=.
(ii) James P. Baraka & Joseph F.
Baraka
Current A/C. TZS.600,000/=.
A. The
two accounts are considered as one because they are maintained in the same
rights and capacity despite the different order in which the names of the
depositors are stated.
Q.
No. 11. Jesca
Peter has a deposit of TZS.560,000/=. She
has matured loan of TZS.40,000/=. How
much is her insured deposit?
A. The
net amount of her deposit is TZS.520,000/= (560,000/=-40,000/=).
However, the insured deposit is TZS.
500,000/=.
Q.12.
How much can Abdul Suleiman collect from DIB if his deposit balances in
the following branches
belonging to one bank of a closed bank are:-
(i)
X Branch TZS.
200,000/=
(ii) Y Branch
TZS. 200,000/=
(iii) Z
Branch TZS.
160,000/=
ANS. He
shall be paid the maximum amount of TZS. 500,000/=. The Accounts in the three
branches are added together to determine what is due to him, but he can only
collect the maximum insurance deposit of TZS. 500,000/=.
The unpaid balance may be claimed from DIB after the final liquidation of
the remaining assets and consideration of payment priorities.
Q.No.13. Alex Andrew placed with bank “A” TZS.300,000/= in five Bearer
Certificates of Time Deposits (BCTD) at TZS.60,000/= each.
All the (BCTDs) were signed by Alex Andrew. He later on sold two BCTDs to
Bernard Bright. Mr. Bright did not register his ownership of the BCTDs he
bought. Later on bank “A” was
closed, can Mr. Bright as a holder of the two BCTDs collect their value from
DIB.
ANS.
No,
because as per bank’s records, he is not the registered owner of the BCTDs. Even after the sale of BCTDs Mr. Bright failed to have his signature
registered on the two (2) certificates.
Q.
No.14. Alex Andrew had TZS.300,000/= in his
Savings account in bank B at the time
of its closure. Can he collect the maximum
amount of TZS.500,000/= as insurance cover to his deposit?
ANS. No,
the amount of TZS.500,000/= represents the maximum amount of insurance coverage.
Thus, if his total deposit in the same bank (whether deposited in
different branches) do not amount to or exceed TZS. 500,000/= he is entitled
only to the amount he keeps in his account (TZS. 300,000/=) less any statutory
obligations.
Q.
No.15. Is the depositor liable to pay
insurance premium to DIB?
A.
No. The bank or financial institution where deposits are maintained pays the
insurance premium.
Q. No.16. What specific risks to a bank does DIB cover?
A. Only risk of bank closure. Thus,
losses due to thefts are not covered by DIB.
Q. No.17. When is an insured
bank
deemed closed?
A.
An
insured bank shall be deemed closed on account of insolvency upon the order of
closure by the Bank of Tanzania. Insolvency
refers to a situation wherein a bank’s liabilities exceed its assets resulting
in the bank’s inability to repay its creditors.
Q.No.18.
When does the DIB pay the insured deposits of bank depositors?
A.
Whenever
an insured bank is closed on account of insolvency, payment of insured deposits
of such bank shall be made by DIB as soon as possible.
Q. No.19. Is there a need for a
depositor to file his/her claim for insured deposits with DIB?
A. Yes, it is an indispensable requirement before payment could be made.
Q. No.20. When should the
depositor of a closed bank file her/her claim with DIB?
A. The
depositor of a closed bank should file a claim for his/her insured deposit
within a reasonable time after the Bank of Tanzania has ordered the closure of
the bank on account of insolvency. Normally the time limit of the claim will be
announced together with the notice calling for depositor’s claims.
Q. No. 21. How long does it
take DIB to settle claims for insured deposits?
A. Claims
for insured deposits shall be settled within a short reasonable period of time
provided that the claim is submitted within the prescribed time and the
documents are complete and correctly completed.
Q. No. 22. What is the meaning
of “ claims settlement”?
A. “Claims
settlement” means the actual payment of claims due to the claimant as
determined by DIB. However,
settlement of claims may also refer to the denial of the claim due to
insufficiency of supporting documents/papers required by DIB and other reasons
that may result in denial of the claim under the law of the land.
Q. No. 23 . How does DIB
determine ownership of funds?
A.
The
DIB presumes that funds are owned as shown in the Deposit Account Records of the
insured depository institutions. If
DIB determines that the Deposit Account Records of the institution are not
ambiguous, those records are binding to the depositor.
No other records are considered in determining legal ownership.
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