Transcript DEPOSIT INSURANCE BOARD RECENT BANK RESOLUTION EXPERIENCE

DEPOSIT INSURANCE
BOARD
RECENT BANK
RESOLUTION
EXPERIENCE IN
TANZANIA
AGENDA

BACKGROUND

FAILURE RESOLUTION

PRACTICAL EXPERIENCE
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WAY FORWARD
BACKGOUND
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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
BACKGOUND (cont’d….)
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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.
FAILURE RESOLUTION
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Power to seize a bank or financial institution
and determination of appropriate failure
resolution is vested to the Bank of Tanzania.
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After taking possession of a bank or financial
Institution the Bank of Tanzania:
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Makes inventory of assets and liabilities
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Evaluates the
management
capital
structure
and
FAILURE RESOLUTION (cont’d…)
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Determines
whether
to
restructure,
reorganize or liquidate the bank; and
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Establishes a plan of resolution based upon
any combination of restructuring, reorganization or liquidation of the bank or
financial institution that provides for
expeditious resolution
FAILURE RESOLUTION (cont’d…)
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Where the resolution plan calls for liquidation
of the institution, then the Bank of Tanzania
may appoint DIB to be a liquidator
PRACTICAL EXPERIENCE
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Tanzania so far has experienced four (4)
bank failures as follows:
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Tanzania Housing Bank (THB)
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The first failure was state owned THB in
1995.
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THB applied short term deposits to finance
long term housing loans which led it to
liquidity problem
PRACTICAL EXPERIENCE (cont’d..)
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Was closed in 1995 and placed under
voluntary liquidation
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DIB was not involved and the Government
paid all the depositors
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Meridian Biao Bank (T) Ltd (MBBTL)
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The bank started operations in Tz in 1993
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It was owned by Meridian Biao Group of Cos
based in Hamburg.
PRACTICAL EXPERIENCE (cont’d..)
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The group suffered huge losses in 1994 which
caused market reaction through withdrawal of
credit line, and enforcement of collateral.
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The group tried to contain this through
drawings on foreign exchange from
subsidiaries.
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As a result, this led to the solvency problems of
many African Meridian banks including
MBBTL.
PRACTICAL EXPERIENCE (cont’d..)
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Bank of Tanzania had to put MBBTL under
statutory mgt and the bank was finally taken
over by the Standard Bank of South Africa.
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It operates in Tanzania now as Stanbic Bank
(T) Ltd.
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Again, DIB was not involved as Liquidator
PRACTICAL EXPERIENCE (cont’d..)
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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
PRACTICAL EXPERIENCE (cont’d..)
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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.
PRACTICAL EXPERIENCE (cont’d..)
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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.
PRACTICAL EXPERIENCE (cont’d..)
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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
WAY FORWARD
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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.
THE END
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