National Assembly passes bill that protects depositors should a bank go under

The new legislation was passed at a sitting of the National Assembly on Tuesday. It will now be sent to the National Council of Provinces for concurrence.

FILE: The bill sets out an international standard for resolution regimes to address the problem of banks that are considered too big to fail. Picture: Eyewitness News.

CAPE TOWN - The National Assembly has passed the Financial Sector Laws Amendment Bill that will offer depositors some protection from losing their money should a bank go under.

The draft law will also protect public funds from being used to bail out financial institutions that find themselves in trouble.

The new legislation was passed at a sitting of the National Assembly on Tuesday. It will now be sent to the National Council of Provinces for concurrence.

The bill sets out an international standard for resolution regimes to address the problem of banks that are considered too big to fail.

It also promotes competition involving smaller banks and hopes to reduce the risk of a bank closing during a crisis.

Deputy Finance Minister David Masondo believes the measure would protect the fiscus.

“Indirectly, it will protect the fiscus and ensure expenditure is channeled at developmental objectives, rather than failing.”

Freedom Front Plus MP Wouter Wessels said the VBS Mutual Bank scandal showed such legislation was desperately needed.

“As a result of the VBS Mutual Bank by the EFF fat cats to the detriment of the poorest of the poor, proved the need such a resolution” he said.

Deposits will be protected to an insurance scheme, which will be established and managed by the Reserve Bank.

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