Most Frequently Asked Questions and Answers
Foreword
The Banking and Financial Institutions Act No. 12 of 1991 which 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 Management of the Fund is guided by policies provided by the Deposit Insurance Board. The purpose of this Most Frequent Questions and Answers Booklet is therefore to assist Banks, Financial Institutions and Depositors to understand services provided by the Deposit Insurance Board.
Q. 01.What is the Deposit Insurance Board (DIB)?
A. The Deposit Insurance Board is an Institution established under section No.24(1) of the Banking and Financial Institutions Act No.12 of 1991 for the purpose of providing policies for control and managing the Deposit Insurance Fund.
Q. 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. 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.
Q. Q. What types of financial assistance can DIB offer to a bank or non-bank financial institution in danger of closing?
A.
A.
There
are two types of financial assistance. These
are short-term loans not exceeding ninety working days and purchase of
non-performing assets of the ailing institution.
B. The
amount of the loan shall not exceed the amount of insured deposits and shall be
adequately secured by acceptable collateral.
On the same basis, DIB in
exchange for
purchase of non-performing
assets,
DIB may require rights, title and interest on certain assets such as overseas
deposits placed by the bank or financial institution. DIB can also offer
guarantee if the ailing institution wants to acquire a loan.
As it is for short term loans, a guarantee has also to be secured against
a collateral.
However,
it is worth to note that financial assistance is given after DIB having been
fully satisfied that the problems encountered by the institution were beyond the
control of the management and that there are good prospects that the institution
would get back on its own feet fairly quickly.
Also if it is in the opinion of the Board that the continued operations
of the problem bank or financial institution in the country is essential to
provide adequate banking services to avoid possible losses to the depositors or
to reduce/avert threatened loss to the Fund or to avoid bankrupting some of its
customers especially companies or to avoid possible failure of other banks and
financial institutions that held deposits with the problem bank or to avert
widespread bank runs in the banking system that could lead to collapse of the
payment system.
Q. 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 25(1) of the Banking and Financial Institutions Act. No.12.
Q.
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.
Q.
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 Governement Notice No. 187 of 2003 the maximum amount of deposit insurance coverage currently is
TZS.500,000/= per depositor per bank.
Q.
07. Can DIB terminate a bank’s insured status?
A. Yes.
In close collaboration with the Directorate of Bank Supervision, 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.
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. 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.
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. 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. 250,000/=. The unpaid balance may be claimed from DIB after the final liquidation of the remaining assets and consideration of payment priorities.
Q.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.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. 15. Is the depositor liable to pay insurance premium to DIB?
A. No. The Bank or non-bank financial institution where deposits are maintained pays the insurance premium.
Q. 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. 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.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. 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. 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. 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.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. 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.