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DEPOSIT INSURANCE BOARD

DEPOSIT INSURANCE BOARD. RECENT BANK RESOLUTION EXPERIENCE IN TANZANIA. AGENDA. BACKGROUND FAILURE RESOLUTION PRACTICAL EXPERIENCE WAY FORWARD. BACKGOUND. DIB is an institution wholly owned by the Government of Tanzania

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DEPOSIT INSURANCE BOARD

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  1. DEPOSIT INSURANCE BOARD RECENT BANK RESOLUTION EXPERIENCE IN TANZANIA

  2. AGENDA • BACKGROUND • FAILURE RESOLUTION • PRACTICAL EXPERIENCE • WAY FORWARD

  3. BACKGOUND • DIB is an institution wholly owned by the Government of Tanzania • Started operations in January, 1994 and is operating under the auscipices of the Bank of Tanzania • Protects deposits of both Tanzania Mainland and Zanzibar • Key responsibility: Manages and Controls Deposit Insurance Fund

  4. BACKGOUND (cont’d….) • DIB is managed by Board of Directors under the Chairmanship of Governor of the Bank of Tanzania • Other members of the BOD are Permanent Secretaries (2) and three appointees of Minister for Finance • Tanzania has had so far four (4) bank failures: two in 1995, one in 1999 and one in 2003.

  5. FAILURE RESOLUTION • Power to seize a bank or financial institution and determination of appropriate failure resolution is vested to the Bank of Tanzania. • After taking possession of a bank or financial Institution the Bank of Tanzania: • Makes inventory of assets and liabilities • Evaluates the capital structure and management

  6. FAILURE RESOLUTION (cont’d…) • Determines whether to restructure, reorganize or liquidate the bank; and • Establishes a plan of resolution based upon any combination of restructuring, re-organization or liquidation of the bank or financial institution that provides for expeditious resolution

  7. FAILURE RESOLUTION (cont’d…) • Where the resolution plan calls for liquidation of the institution, then the Bank of Tanzania may appoint DIB to be a liquidator

  8. PRACTICAL EXPERIENCE • Tanzania so far has experienced four (4) bank failures as follows: • Tanzania Housing Bank (THB) • The first failure was state owned THB in 1995. • THB applied short term deposits to finance long term housing loans which led it to liquidity problem

  9. PRACTICAL EXPERIENCE (cont’d..) • Was closed in 1995 and placed under voluntary liquidation • DIB was not involved and the Government paid all the depositors • Meridian Biao Bank (T) Ltd (MBBTL) • The bank started operations in Tz in 1993 • It was owned by Meridian Biao Group of Cos based in Hamburg.

  10. PRACTICAL EXPERIENCE (cont’d..) • The group suffered huge losses in 1994 which caused market reaction through withdrawal of credit line, and enforcement of collateral. • The group tried to contain this through drawings on foreign exchange from subsidiaries. • As a result, this led to the solvency problems of many African Meridian banks including MBBTL.

  11. PRACTICAL EXPERIENCE (cont’d..) • Bank of Tanzania had to put MBBTL under statutory mgt and the bank was finally taken over by the Standard Bank of South Africa. • It operates in Tanzania now as Stanbic Bank (T) Ltd. • Again, DIB was not involved as Liquidator

  12. PRACTICAL EXPERIENCE (cont’d..) • Greenland Bank (T) Ltd (GBTL) • This was the third failure in Tanzania. • GBTL was licensed to operate in Tanzania in 1995. • It was a subsidiary of Greenland Bank (Uganda) Ltd. • GBTL was put under statutory management in April, 1999 following the closure of the parent bank

  13. PRACTICAL EXPERIENCE (cont’d..) • GBTL was later audited by independent auditors and was found to be insolvent. It was placed under compulsory liquidation and DIB was appointed as a Liquidator. • Liquidation process is still on.

  14. PRACTICAL EXPERIENCE (cont’d..) • Delphis Bank (T) Ltd (DBTL) • DBTL originated from Trust Bank (T) Ltd which was a subsidiary of Trust Bank of Kenya. • The transition started in 2000 when Trust Bank (T) Ltd was purchased by a group of shareholders from Mauritius who changed the name of the bank to DBTL. • In 2002, DBTL ran into problems.

  15. PRACTICAL EXPERIENCE (cont’d..) • Bank of Tanzania played its role and at the end the bank was placed under compulsory liquidation and DIB was appointed as a liquidator in 2003. • DIB in its capacity as a liquidator sold most of the assets to the Federal Bank of Middle East Ltd. • Liquidation process is still going on

  16. WAY FORWARD • Government of Tanzania had requested a technical assistance from IMF that will assist to improve Deposit Insurance and Bank Resolution Regime in Tanzania • The IMF carried out a study and made recommendations which are now under consideration by the relevant authorities. • Among the recommendations is the need to have in place a Special Resolution Regime and early involvement of DIB in bank resolution framework process.

  17. THE END THANK YOU VERY MUCH FOR YOUR ATTENTION

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