Strengthening financial stability through deposit insurance scheme

Segonetso
Segonetso

If a bank collapses today, beyond interventions that may include management takeover by the regulator and perhaps bail out by the government, what compelling mechanisms of recourse could be promulgated in the 21st century where banks can have a fair share of the bailout with little to no knock-on effect on the tax payers’ funds, asks financial analyst, IKANYENG SEGONETSO

In the current regulatory environment, are depositors’ funds guaranteed in the likely event that a particular bank goes bust? Do regulators have unambiguous resolution framework that provides for reimbursement of depositors in the event of a bank failure?

These are some of the hotly debated topics in recent times particularly following the global recession. The aftermath of the 2007/2008 global financial crisis has brought with it a plethora of regulations laced with a layer of fees particularly in the banking sector, a phenomenon that is supposedly aimed at minimising idiosyncratic risks in the banking system, with the initial objective of protecting tax payers’ funds used to bail out banks in financial distress.

Editor's Comment
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