SA is considering insuring people’s savings in the event of a bank failure. But in contrast to the US where a government agency, the Federal Deposit Insurance Corporation, was created after the Great Depression, SA should use a privately funded system, the Reserve Bank argued in a discussion document released on Tuesday. "Because SA does not have explicit and privately funded deposit insurance, pay-outs to depositors in the event of a failed bank have, in the past, been funded by government on a case-by-case basis. No arrangements are in place to recover such compensation to depositors from the private sector, resulting in taxpayers ultimately funding the costs of bank failures," the discussion document said. Until the 2008 financial crisis — which prompted the US to update its 1933 deposit insurance laws with the Dodd–Frank Act which, among other things, raised the amount insured from $2,500 to $250,000 — deposit insurance tended to be viewed as academic. There were no examples whe...
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