Corporation for Deposit Insurance
The Corporation for Deposit Insurance (CODI) is South Africa’s Deposit Insurance Scheme (DIS), created and mandated by law to protect qualifying bank depositors in the unlikely event of their bank failing. CODI is a subsidiary of the South African Reserve Bank (SARB) and became operational on 1 April 2024.
The Corporation for Deposit Insurance is South Africa’s Deposit Insurance Scheme.
The Corporation for Deposit Insurance (CODI) is South Africa’s Deposit Insurance Scheme (DIS), created and mandated by law to protect qualifying bank depositors in the unlikely event of their bank failing. CODI is a subsidiary of the South African Reserve Bank (SARB) and became operational on 1 April 2024. CODI manages the Deposit Insurance Fund (DIF) that CODI will use to give qualifying bank depositors access to up to R100 000 of their qualifying deposits should their bank be placed into resolution, thereby enhancing public confidence in the country’s banking system. The establishment of CODI supports the SARB’s statutory mandate of protecting and enhancing financial stability by identifying and mitigating systematic risks that might disrupt the financial system. In addition to safeguarding depositors, CODI operates under what is known as a paybox-plus mandate, entailing additional responsibilities to support various resolution strategies as determined by the SARB as the Resolution Authority. This may include providing a secured loan to the bank in resolution; entering into a loss-sharing agreement between CODI and the bank in resolution or a person assuming liability for covered deposits of the bank in resolution; or providing a guarantee in favour of the bank in resolution, the SARB or another person in respect of the bank’s obligations in relation to the covered deposits of the bank in resolution. CODI is also mandated to promote awareness among financial customers of the protection it offers.
What is CODI?
CODI stands for Corporation of Deposit Insurance. It is an independent legal entity formed as a subsidiary to the South African Reserve Bank, with governance and reporting obligations to the SARB.
Why do we need deposit insurance?
While South Africa has a resilient financial sector, deposit insurance brings further confidence and stability to the sector. In the past, when a bank failed, the government used taxpayers’ money to compensate affected depositors on a case-by-case basis. With deposit insurance, qualifying depositors will be given reasonable access to their covered deposits should their bank fail through CODI’s use of the DIF. Approximately 100 countries in the world have a DIS similar to the one South Africa has adopted.
How does CODI fit into South Africa’s financial sector safety net?
South Africa has one of the world’s most resilient financial sectors, overseen by a network of institutions aimed at safeguarding its stability and public confidence, collectively known as the financial sector safety net. This network includes the PA that regulates financial institutions and market infrastructures; the SARB that acts as the lender of last resort, offering loans or liquidity to banks that are experiencing financial difficulty; the SARB as the RA that is responsible for the orderly resolution of designated institutions; and CODI. As the country’s Deposit Insurance Scheme, CODI ensures the orderly and timely protection of or access to covered deposits in the event of a bank failure. Another vital component of the financial sector safety net is the FSCA that ensures that financial institutions treat their customers fairly and transparently. All these institutions are governed by the FSR Act that was enacted following the 2008–09 global financial crisis.
Why do we need deposit insurance?
While South Africa has a resilient financial sector, deposit insurance brings further confidence and stability to the sector. In the past, when a bank failed, the government used taxpayers’ money to compensate affected depositors on a case-by-case basis. With deposit insurance, qualifying depositors will be given reasonable access to their covered deposits should their bank fail through CODI’s use of the DIF. Approximately 100 countries in the world have a DIS similar to the one South Africa has adopted.
Who are the members of CODI?
All registered banks in South Africa are automatic and compulsory members of CODI.
What is the limit of cover?
R100k per qualifying customer per bank
Which banking products are covered by CODI?
CODI protects banking products where the depositor is entitled to the full balance at a specific date. These products include:
• Fixed products
• Notice Products
• Savings products
• Tax-free Savings
• Islamic Murabaha products
• Transactional products
• Current account products
• Islamic Qard and Wadjáh products
Who will qualify for deposit insurance protection?
- Individual depositors of all ages
- Foreign retail/ individual depositors
- Sole proprietors
- Legally incapacitated depositors
- Deceased depositors
- Non-profit depositors/ charities
- Religious entities
- Trade unions
- Consumer associations
Who does not qualify for deposit insurance protection?
- Banks
- Government institutions
- Private financial sector institutions
Which banking products are covered by CODI?
CODI protects banking products where the depositor is entitled to the full balance at a specific date. These products include:
- Fixed products
- Notice Products
- Savings products
- Tax-free Savings
- Islamic Murabaha products
- Transactional products
- Current account products
- Islamic Qard and Wadjáh products
Which banking products are not included in the scope of cover?
- Deposits by banks
- Electronic money products
- Non-Bank financial sector deposits such as money unit trusts (money market and non-money), pension funds, fund managers, insurers, and private sector institutions.
- Deposits by Government institutions
- Investment accounts where capital is not guaranteed and not repayable at par, such as unit trusts and shares.
- Holdings of commodities
How does CODI cover sole proprietorships?
Sole proprietorships are covered up to R100k for their business accounts and up to R100k in their personal capacity. The business and personal accounts must be reported separately to CODI.
How does CODI cover a stokvel?
A stokvel is an informal beneficiary account holder and is covered by CODI, up to R100k, for its consolidated account balances in qualifying products.
What is a formal beneficiary account?
A formal beneficiary account (FBA) is an account held and managed by a third party for the benefit of one or more beneficiaries. The FBA holder is the bank’s customer while the underlying beneficiaries are the owners of the funds in the account.
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