COUNTRY EXPERIENCE TANZANIA 8/25/20151

Tanzania Experience Outline : An Overview Deposit Insurance Board of Tanzania DIB Experience Lessons and Challenges Way Forward 8/25/20152

1.1 Economic developments 2005 – 2009 recorded relative economic growth 12.1 % Annual average inflation in percent economic growth in 2009 Per Capita USD Population 40.7 million in /25/20153

1.2 Banking Sector Remained resilient despite global financial turmoil which distressed major international capital and fin. markets 8/25/20154

1.2 Banking Sector (Cont) Due to low degree of integration of the sector with major international capital and financial markets No securities of international banks held by local banks and financial institutions' 8/25/20155

1.2 Banking Sector (Cont) As at end of June, banking institutions 448 branches and agencies 33.5 % of branches in commercial city Dar es Salaam 8/25/20156

1.2.Banking Sector (Cont) As at end of June, 2010 Total Assets TZS 11,392.9 billion equivalent to USD. 8.4 billion Total Deposits TZS 9,172.5 billion equivalent to USD. 6.8 million 90.8% of banking funding structure is composed of deposits 8/25/20157

2. DEPOSIT INSURANCE BOARD OF TANZANIA 2.1 Mandate Deposit Insurance Fund is established under Section 37(1) of Banking and Financial Institutions Act, Establishment of Deposit Insurance Board is provided under section 38(1) of BFIA, /25/20158

2. DEPOSIT INSURANCE BOARD OF TANZANIA 2.2 Mission Statement: Effectively contribute to country’s financial stability by maintaining public confidence in the financial system through prompt payment of protected deposits to depositors of a failed member bank or financial institution 8/25/20159

2. DEPOSIT INSURANCE BOARD OF TANZANIA 2.3 Objectives : Protect small and unsophisticated depositors Maintain depositors confidence in the banking system 8/25/201510

2. DEPOSIT INSURANCE BOARD OF TANZANIA 2.4 Governance: Board of Directors Policy formulation and direction Director Day to day management 8/25/201511

2. DEPOSIT INSURANCE BOARD OF TANZANIA 2.5 Membership Compulsory to all licensed banking institutions in Tanzania 11 members in June, members in June, Banks 12 Non bank financial institutions 8/25/201512

2. DEPOSIT INSURANCE BOARD OF TANZANIA 2.6 Coverage TZS 250,000/= (USD. 250) from 1996 TZS 500,000/=(USD. 500) from 2003 TZS 1,500,000/= (USD.1,000) from May, /25/201513

2. DEPOSIT INSURANCE BOARD OF TANZANIA 2.6 Coverage (Cont) All types of deposits received by banks and financial institutions are insured except: Inter bank deposits Government Deposits Deposits of investment company or security firms 8/25/201514

2. DEPOSIT INSURANCE BOARD OF TANZANIA 2.7 Funding Main Source is premiums from members Size of the Fund by end June, 2010 was TZS 58,922.9 million equivalent to USD million 8/25/201515

3.0 DIB EXPERIENCE OF HANDLING BANK FAILURES Bank Failures were experiences between 1995 and Four bank failures: Meridien Biao Bank (T) Ltd April, 1995 Tanzania Housing Bank August 195 Greenland Bank (T) Ltd April, 1999 and Delphis Bank (T) Ltd June, /25/201516

3.0 DIB EXPERIENCE OF HANDLING BANK FAILURES 3.1 Tanzania Housing Bank Failed due to: Liquidity and Solvency Weak Management Weak internal controls Voluntarily Liquidate by shareholders All depositors were fully compensated by the government 8/25/201517

3.0 DIB EXPERIENCE OF HANDLING BANK FAILURES 3.2 Meridien Biao Bank (T) Ltd Failed due to: Poor Mgt Huge placement with parent abroad Sold to Standard Bank of South Africa limited Depositors were given choice of fully compensation or continue as customer of the new bank More than 95 % opted to continue as depositors of the new bank. by the government 8/25/201518

3.0 DIB EXPERIENCE OF HANDLING BANK FAILURES 3.3 Greenland Bank (T) Ltd Failed due to: Weakness on Board oversight Insider dealings Troubled parent company in Uganda DIB was appointed liquidator By BOT All depositors were compensated by government 8/25/201519

3.0 DIB EXPERIENCE OF HANDLING BANK FAILURES 3.4 Delphis Bank (T) Ltd Failed due to: Capital impairment Weak Board oversight and management Non performing assets Part of Assets and Liabilities sold to Federal Bank of the Middle East DIB was appointed liquidator By BOT All depositors were assumed by new bank hence no loss to depositors 8/25/201520

4. LESSONS AND CHALLENGES 4.1 Increase in Public confidence Proper handling by safety net players of the failed bank cases as there were no absolute loss Challenges Depositors not promptly compensated Wrong signals to the public that government will always rescue all failures 8/25/201521

4. LESSONS AND CHALLENGES 4.2 Need for safety net collaboration Early detection by regulator and timely intervention Timely failure resolution is paramount 8/25/201522

4. LESSONS AND CHALLENGES 4.3 Cross Boarder Issues Globalization Impact Establishment of East Africa Common market Need for a closer collaboration with foreign safety net players 8/25/201523

4. LESSONS AND CHALLENGES 4.4 Independence of Deposit Insurance System Enable public to comprehend roles, duties, responsibilities and limitations 8/25/201524

5. WAY FORWARD Undergoing reform of its legal and operational framework to enable: More effectively contribute to countries financial stability Operate in conformity with international best practices Improve Corporate governance Greater accountability More transparency 8/25/201525

8/25/ The END Thank you for your attention