JOHANNESBURG (Reuters) - South Africa's central bank and government launched a deposit insurance fund on Thursday that will protect individual customer cash deposits up to 100,000 rand ($5,267) from any bank failure.
The Corporation for Deposit Insurance scheme will formalise how customer deposits are treated in the unlikely event of a bank failure, Governor Lesetja Kganyago said at a conference in Johannesburg.
The policy has been in the works for over 20 years but implementation had been delayed until recently.
"There were debates amongst policy makers about whether you need a formal deposit insurance scheme or not," said Kganyago.
"There was even a view that it might encourage moral hazard amongst banks," he added.
The coverage limit of 100,000 rand fully protects nine out of 10 depositors in the country, the central bank said.
Kganyago said the recent collapse of VBS Mutual Bank was an example of how deposit insurance can be beneficial. Regular depositors were provided with accounts at another bank, which carried over their cash balances and covered 98% of that bank's depositors.
The fund will be supported by monthly premiums and loan contributions by member banks with the aim of reducing the financial burden on taxpayers the central bank said.
South Africa's banking system is widely viewed by economists as one of the most sophisticated on the continent and its financial markets are deep and well capitalised.
($1 = 18.9860 rand)
(Reporting by Kopano Gumbi; Editing by Gareth Jones)
