Zambian union calls for establishment of deposit protection scheme

A trade union representing workers in the financial sector in Zambia on Tuesday called on the government to revive a bill that was meant to establish a Deposit Protection Scheme in order to protect depositors in times of a bank becoming insolvent.

The Zambia Union of Financial Institutions and Allied Workers said the Ministry of Finance should consider reviving the Deposit Protection Bill in the wake of the abrupt closure of one commercial bank which has left depositors stranded.

Ackim Mweemba, the union's president said the volatility in the market demands that a Deposit Protection Scheme be put in place to ensure that depositors' monies were reimbursed in the event of bank failure.

According to him, it was important to actualize the Deposit Protection Bill because it will not only create a safety net for depositors but also enhance public confidence in the banking sector as a whole.

He said in a statement that the establishment of a Deposit Protection Scheme will make both depositors and workers not overreact to bad news of bank failure, adding that the schemes have proved useful in other countries where they have been established.

"It is high time that both the Ministry of Finance and the Ministry of Labor and Social Security put their acts together and ensure that workers are equally protected and their benefits are prioritized and guaranteed," he said in a statement.

According to him, commercial banks by their nature were highly leveraged institutions and susceptible to liquidity and insolvency challenges hence the need to have safety net measures to protect both the depositors and workers.

Last week, the country's central bank, the Bank of Zambia, took over operations of Intermarket Banking Corporation after it became insolvent and not in a position to meet its obligations as they fall due.

This has caused consternation among stakeholders, with unconfirmed reports indicating that more banks are expected to be closed because of the high minimum capital requirement. Endit