The Corporation for Deposit Insurance (CODI)

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Questions and Answers

What is the primary function of deposit insurance?

To regulate the stock market and prevent financial fraud.
To increase bank profits by attracting more customers.
To provide a safety net for depositors' money in case a bank fails. (correct)
To offer loans to small businesses.

Before the establishment of CODI, South Africa had a formal deposit insurance system in place.

False (B)

What is the maximum amount that CODI insures per depositor in South Africa?

100,000 rand

CODI was established under the Financial Sector ______ Act.

Regulation Signup and view all the answers

Match the following:

Deposit Insurance = A financial safety net for depositors' money. CODI = The Corporation for Deposit Insurance in South Africa. Financial Sector Regulation Act = The law under which CODI was established. Signup and view all the answers

Why is trust in the banking system crucial, according to the discussion?

It encourages people to deposit their money in banks, strengthening the financial system. (C) Signup and view all the answers

Deposit insurance increases the likelihood of taxpayer-funded bailouts in the event of a bank failure.

False (B) Signup and view all the answers

What date did CODI begin operating in South Africa?

April 1, 2024 Signup and view all the answers

Deposit insurance helps prevent ______ during financial crises by offering a safety net everyone can rely on.

panic Signup and view all the answers

What is one of the benefits of having CODI in place?

Reduced risk of everyday people losing their savings if a bank fails. (C) Signup and view all the answers

Flashcards

Deposit Insurance

A financial safety net that ensures customers get their money back up to a certain limit if a bank fails.

CODI

The Corporation for Deposit Insurance. It manages the deposit insurance system in South Africa.

CODI's Coverage Limit

Protects bank customers by covering deposits up to one hundred thousand rand if a bank collapses.

Benefit of Deposit Insurance

Reduces the need for government bailouts, protecting taxpayers' money.

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Impact of Trust

When people know their money is safe, they are more likely to keep it in banks, which strengthens the financial system.

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Deposit Insurance Benefit

It helps prevent panic during financial crises by offering a safety net everyone can rely on.

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Study Notes

Deposit insurance is a financial safety net ensuring customers get their money back up to a certain limit if a bank fails.
In South Africa, the Corporation for Deposit Insurance (CODI) manages this system.

CODI

CODI was established under the Financial Sector Regulation Act.
CODI began operating on April 1, 2024.
It protects bank customers by covering deposits up to a hundred thousand rand if a bank collapses.
Before CODI, South Africa lacked a formal deposit insurance system, requiring the government to decide on assistance case-by-case, often using taxpayer money.
CODI provides a clear, reliable system to protect depositors and ensure financial stability, reducing the need for taxpayer-funded bailouts.

Benefits

Deposit insurance helps build trust, encouraging people to keep money in banks, strengthening the financial system.
It helps prevent panic during financial crises by offering a safety net.
Deposit insurance protects money, reduces the financial burden on taxpayers, and helps keep the banking system stable and trustworthy.