Consumers can rest easier as SARB launches Codi deposit safeguard

• Published date: 26 April 2024
• Author: Philippa Larkin philippa.larkin@inl.co.za
• Publication title: Star, The (Johannesburg, South Africa)

This as Bank Zero says the move is significant and will disrupt South African banking dramatically away from “the banking oligopoly”

Codi aims to protect qualifying depositors in the face of bank collapses. It provides cover of up to R100 000 to each qualifying depositor per bank in the unlikely event of a bank’s collapse. This coverage limit protected nine out of 10 qualifying depositors in the country.

Codi protects deposits held by retail and private non-financial corporate depositors in qualifying products. They typically include individual depositors and non-financial businesses, charitable or non-profit organisations, religious entities, trade unions, consumer associations and stokvels.

Prior to Codi’s introduction, South Africa did not have an explicit deposit insurance scheme, compelling the government to use taxpayers’ money to compensate affected depositors on a case-by-case basis.

The fund is supported by, among other options, monthly premiums and loan contributions by member banks, reducing the financial burden on taxpayers.

Codi, which became operational on April 1 this year, provides pre-planned, orderly access to deposits in qualifying products, and will inform qualifying depositors about when and how to access their funds.

The cover is automatic and depositors do not have to register for Codi’s protection.

According to the SARB: “Codi is one of a number of Twin Peaks regulatory reforms introduced after the 2008-09 global financial crisis.

It is part of the wider financial sector safety net that includes the Prudential Authority (PA), which supervises financial institutions; the Financial Sector Conduct Authority (FSCA) that ensures that financial institutions treat their customers fairly and transparently; and the SARB, the lender of last resort and Resolution Authority responsible for the orderly resolution of failed designated institutions.”

Yatin Narsai, chief executive of Bank Zero, responding to the launch, said Codi finally aligned South Africa with the rest of the Group of Twenty.

By guaranteeing cash deposits of up to R100 000 per qualifying depositor in the event of a bank collapse, this new scheme had...