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DEPOSIT INSURANCE BOARD. RECENT BANK RESOLUTION EXPERIENCE IN TANZANIA. AGENDA. BACKGROUND FAILURE RESOLUTION PRACTICAL EXPERIENCE WAY FORWARD. BACKGOUND. DIB is an institution wholly owned by the Government of Tanzania

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DEPOSIT INSURANCE BOARD

RECENT BANK RESOLUTION EXPERIENCE IN TANZANIA


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AGENDA

  • BACKGROUND

  • FAILURE RESOLUTION

  • PRACTICAL EXPERIENCE

  • WAY FORWARD


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BACKGOUND

  • 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


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BACKGOUND (cont’d….)

  • 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.


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FAILURE RESOLUTION

  • Power to seize a bank or financial institution and determination of appropriate failure resolution is vested to the Bank of Tanzania.

  • After taking possession of a bank or financial Institution the Bank of Tanzania:

  • Makes inventory of assets and liabilities

  • Evaluates the capital structure and management


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FAILURE RESOLUTION (cont’d…)

  • Determines whether to restructure, reorganize or liquidate the bank; and

  • Establishes a plan of resolution based upon any combination of restructuring, re-organization or liquidation of the bank or financial institution that provides for expeditious resolution


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FAILURE RESOLUTION (cont’d…)

  • Where the resolution plan calls for liquidation of the institution, then the Bank of Tanzania may appoint DIB to be a liquidator


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PRACTICAL EXPERIENCE

  • Tanzania so far has experienced four (4) bank failures as follows:

  • Tanzania Housing Bank (THB)

  • The first failure was state owned THB in 1995.

  • THB applied short term deposits to finance long term housing loans which led it to liquidity problem


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PRACTICAL EXPERIENCE (cont’d..)

  • Was closed in 1995 and placed under voluntary liquidation

  • DIB was not involved and the Government paid all the depositors

  • Meridian Biao Bank (T) Ltd (MBBTL)

  • The bank started operations in Tz in 1993

  • It was owned by Meridian Biao Group of Cos based in Hamburg.


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PRACTICAL EXPERIENCE (cont’d..)

  • The group suffered huge losses in 1994 which caused market reaction through withdrawal of credit line, and enforcement of collateral.

  • The group tried to contain this through drawings on foreign exchange from subsidiaries.

  • As a result, this led to the solvency problems of many African Meridian banks including MBBTL.


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PRACTICAL EXPERIENCE (cont’d..)

  • Bank of Tanzania had to put MBBTL under statutory mgt and the bank was finally taken over by the Standard Bank of South Africa.

  • It operates in Tanzania now as Stanbic Bank (T) Ltd.

  • Again, DIB was not involved as Liquidator


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PRACTICAL EXPERIENCE (cont’d..)

  • 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


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PRACTICAL EXPERIENCE (cont’d..)

  • 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.


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PRACTICAL EXPERIENCE (cont’d..)

  • 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.


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PRACTICAL EXPERIENCE (cont’d..)

  • 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


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WAY FORWARD

  • 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.


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THE END

THANK YOU VERY MUCH FOR YOUR ATTENTION


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