COUNTRY EXPERIENCE

TANZANIA

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Tanzania ExperienceOutline :

An Overview

Deposit Insurance Board of Tanzania

DIB Experience

Lessons and Challenges

Way Forward

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1.1 Economic developments2005 – 2009 recorded relative economic

growth

12.1 % Annual average inflation in 2009

6.9 percent economic growth in 2009

Per Capita USD. 525.0

Population 40.7 million in 2009

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1.2 Banking Sector

Remained resilient despite global financial turmoil which distressed major international capital and fin. markets

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1.2 Banking Sector (Cont)

Due to low degree of integration of the sector with major international capital and financial markets

No securities of international banks held by local banks and financial institutions'

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1.2 Banking Sector (Cont)As at end of June, 2010

41 banking institutions

448 branches and agencies

33.5 % of branches in commercial city Dar es Salaam

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1.2.Banking Sector (Cont)As at end of June, 2010

Total Assets TZS 11,392.9 billion equivalent to USD. 8.4 billion

Total Deposits TZS 9,172.5 billion equivalent to USD. 6.8 million

90.8% of banking funding structure is composed of deposits

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2. DEPOSIT INSURANCE BOARD OF TANZANIA

2.1 Mandate

Deposit Insurance Fund is established under Section 37(1) of Banking and Financial Institutions Act, 2006.

Establishment of Deposit Insurance Board is provided under section 38(1) of BFIA, 2006.

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2. DEPOSIT INSURANCE BOARD OF TANZANIA

2.2 Mission Statement: Effectively contribute to country’s

financial stability by maintaining public confidence in the financial system through prompt payment of protected deposits to depositors of a failed member bank or financial institution

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2. DEPOSIT INSURANCE BOARD OF TANZANIA

2.3 Objectives :Protect small and unsophisticated depositors

Maintain depositors confidence in the banking system

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2. DEPOSIT INSURANCE BOARD OF TANZANIA

2.4 Governance:Board of Directors

Policy formulation and direction

DirectorDay to day management

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2. DEPOSIT INSURANCE BOARD OF TANZANIA

2.5 MembershipCompulsory to all licensed banking institutions in Tanzania11 members in June, 199641 members in June, 2010

29 Banks12 Non bank financial institutions

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2. DEPOSIT INSURANCE BOARD OF TANZANIA

2.6 Coverage TZS 250,000/= (USD. 250) from 1996

TZS 500,000/=(USD. 500) from 2003

TZS 1,500,000/= (USD.1,000) from May, 2010

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2. DEPOSIT INSURANCE BOARD OF TANZANIA

2.6 Coverage (Cont)All types of deposits received by banks

and financial institutions are insured except:Inter bank deposits

Government Deposits

Deposits of investment company or security firms

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2. DEPOSIT INSURANCE BOARD OF TANZANIA

2.7 FundingMain Source is premiums from members

Size of the Fund by end June, 2010 was TZS 58,922.9 million equivalent to USD. 43.6 million

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3.0 DIB EXPERIENCE OF HANDLING BANK FAILURES

Bank Failures were experiences between 1995 and 2003.

Four bank failures:Meridien Biao Bank (T) Ltd April, 1995

Tanzania Housing Bank August 195

Greenland Bank (T) Ltd April, 1999 and

Delphis Bank (T) Ltd June, 2003

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3.0 DIB EXPERIENCE OF HANDLING BANK FAILURES

3.1 Tanzania Housing BankFailed due to:

Liquidity and Solvency Weak Management Weak internal controls

Voluntarily Liquidate by shareholders

All depositors were fully compensated by the government

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3.0 DIB EXPERIENCE OF HANDLING BANK FAILURES

3.2 Meridien Biao Bank (T) LtdFailed due to:

Poor Mgt Huge placement with parent abroad

Sold to Standard Bank of South Africa limited

Depositors were given choice of fully compensation or continue as customer of the new bank

More than 95 % opted to continue as depositors of the new bank. by the government

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3.0 DIB EXPERIENCE OF HANDLING BANK FAILURES

3.3 Greenland Bank (T) LtdFailed due to:

Weakness on Board oversight Insider dealings Troubled parent company in Uganda

DIB was appointed liquidator By BOT

All depositors were compensated by government

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3.0 DIB EXPERIENCE OF HANDLING BANK FAILURES

3.4 Delphis Bank (T) LtdFailed due to:

Capital impairment Weak Board oversight and management Non performing assets

Part of Assets and Liabilities sold to Federal Bank of the Middle East

DIB was appointed liquidator By BOT

All depositors were assumed by new bank hence no loss to depositors

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4. LESSONS AND CHALLENGES4.1 Increase in Public confidence

Proper handling by safety net players of the failed bank cases as there were no absolute loss

Challenges

Depositors not promptly compensated

Wrong signals to the public that government will always rescue all failures

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4. LESSONS AND CHALLENGES4.2 Need for safety net collaboration

Early detection by regulator and timely intervention

Timely failure resolution is paramount

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4. LESSONS AND CHALLENGES4.3 Cross Boarder Issues

Globalization Impact

Establishment of East Africa Common market

Need for a closer collaboration with foreign safety net players

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4. LESSONS AND CHALLENGES4.4 Independence of Deposit Insurance System

Enable public to comprehend roles, duties, responsibilities and limitations

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5. WAY FORWARD

Undergoing reform of its legal and operational framework to enable:

More effectively contribute to countries financial stability

Operate in conformity with international best practices Improve Corporate governance

Greater accountability

More transparency04/19/23 25

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The ENDThank you for your attention