DPC targets rogue banks
CLOUDINE MATOLA
The Deposit Protection Corporation (DPC) is seeking sweeping amendments to its governing law that would introduce stiff civil penalties for financial institutions and directors who fail to comply with regulatory requirements, a move aimed at strengthening governance, depositor protection and confidence in Zimbabwe’s banking sector, Business Times can report.
The proposed amendments to the Deposit Protection Corporation Amendment Bill would empower the DPC to impose substantial financial penalties on non-compliant institutions and their directors, with imprisonment remaining a possibility where prescribed fines are not settled.
DPC corporate secretary Kiitu Zawanda said the existing Act lacks adequate enforcement mechanisms to deter poor corporate governance and regulatory breaches.
“The current DPC Act does not provide sufficient consequences for non-compliance with DPC laws and regulations,” Zawanda said.
“We have therefore introduced a civil penalties regime. Unlike criminal penalties, which may result in imprisonment, civil penalties allow us to impose financial sanctions on institutions and directors that fail to comply with the Act.”
She said directors who ignore the penalties could ultimately face criminal sanctions if they fail to satisfy the requirements prescribed under the law.
“The objective is to give the DPC greater enforcement powers to ensure accountability, transparency and discipline within the financial sector. Where poor governance attracts financial penalties, institutions will have a stronger incentive to comply with the law,” she said.
According to Zawanda, the penalties will be significant enough to discourage non-compliance and could have reputational implications, including disclosure in annual reports and financial statements.
“The penalties will be quite severe. It is therefore in the best interests of banks to comply fully with the DPC Act to avoid financial losses arising from fines and other sanctions,” she said.
Beyond strengthening enforcement, the proposed legislation seeks to bolster depositor protection by ensuring customers receive maximum compensation in the event of a bank failure.
Zawanda said the amendments were informed by Zimbabwe’s history of bank collapses, currency reforms and inflationary episodes that eroded depositors’ savings.
“The amendment Bill seeks to ensure that depositors do not suffer the kind of losses experienced during previous economic crises. We have introduced provisions to protect depositors from future losses arising from bank failures, inflation or currency changes,” she said.
One of the key reforms removes the current legal provision that allows shareholders to receive residual assets after liquidation before depositors are fully compensated.
“Previously, any residual assets remaining after liquidation could be returned to shareholders. Under the proposed framework, those funds will instead continue to be used to compensate depositors until they are made whole.
“We do not want a situation where depositors recover only a fraction of their savings. Our objective is to ensure they are compensated to the fullest extent possible.”
She said the reforms were also intended to rebuild public trust in the banking sector after years of financial instability.
“We want to restore confidence in banks and encourage more people to keep their money within the formal financial system. Increased confidence in the banking sector ultimately contributes to broader economic stability,” she said.
Zawanda added that aligning Zimbabwe’s deposit insurance framework with international best practice would also enhance the country’s investment appeal.
“It is important for Zimbabwe to have a robust deposit insurance scheme that is consistent with international standards. A strong deposit protection framework signals a sound financial system, supports investor confidence and enhances the country’s attractiveness as an investment destination,” she said.
