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The IADI-Africa Region Annual Conference The Benefits of Deposit Insurance in Africa Design Features of Effective Deposit Insurance System. Kevin Chew Senior Manager, MDIC Tanzania, 24 July 2010 . Four Common Essential Elements of Effective Deposit Insurance Systems.

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The IADI-Africa Region Annual ConferenceThe Benefits of Deposit Insurance in AfricaDesign Features of Effective Deposit Insurance System

Kevin Chew

Senior Manager, MDIC

Tanzania, 24 July 2010

Clear and precise mandate 1
Clear and Precise Mandate (1) Insurance Systems

  • Overlaps in roles and responsibilities.

  • Without clarity:

    • Unproductive overlaps/duplication of roles/working at cross purposes (undermines confidence)

  • With clear differentiation:

    • Financial system as a whole is stable

    • Policy decisions can be made quickly

Clear and precise mandate 2
Clear and Precise Mandate (2) Insurance Systems

  • Rules for cooperation provided for by laws

  • Malaysia – enables MDIC and BNM to enter into a SAA

  • The SAA:

    • Formalises coordination of actions and information sharing

    • Forms basis for clear division of labour and areas for coordination

  • Becomes important if DIs have powers to intervene and resolve troubled banks.

  • Benefits of being operationally independent
    Benefits of Being Operationally Independent Insurance Systems

    More credible in eyes of general public

    Seen as good practice

    Minimises likelihood of regulatory forbearance

    Minimises likelihood of regulatory capture

    Gives policy decisions greater legitimacy

    Can undertake financial stability functions quickly that allow for more rapid and effective response to crisis situation

    Mdic governance features that promotes accountability
    MDIC Governance Features that Promotes Accountability Insurance Systems

    • Separation of Board, CEO and Management

    • Strategic Planning – Operationalise Management’s Accountability to Board

    • Board Governance Policy – 15 standards that deals with Board’s roles and responsibilities

    • Strong and independent internal audit function

    • Enterprise risk management function

    • Checks and balances on CEO by Board

    • MDIC required to have annual financial statements verified by independent external auditor and submitted to Parliament

    Transparency 1
    Transparency (1) Insurance Systems

    Refers to process of informing the public on how the organisation is being governed and managed, what it planned to achieve, and whether goals were achieved.

    Enable interested parties to assess performance and determine whether we achieved our core objective.

    Transparency 2
    Transparency (2) Insurance Systems

    Mdic channels of reporting
    MDIC - Channels of Reporting Insurance Systems

    Conclusion Insurance Systems

    4 common elements - clear mandate. independence, transparency and accountability

    At MDIC, these elements underpin MDIC progress in gaining public confidence.

    Official endorsement of its ability and effectiveness, MDIC mandate extended to cover insurance industry.

    Thank You Insurance Systems