BVI News

Gov’t implementing Deposit Insurance Policy to protect insured residents

Premier Andrew Fahie

Government has announced plans to implement a ‘deposit insurance policy’ in the British Virgin Islands before the end of this year.

Deposit insurance is effectively a safety net to protect depositors — in this case, Virgin Islanders and residents — in case their bank or insured financial institution is unable to pay off its debts when they are due.

While making the announcement in the House of Assembly on Thursday, Premier Andrew Fahie said the policy was laying dormant in the House of Assembly after being passed almost four years ago.

“The Virgin Islands Deposit Insurance Act, 2016 sought to establish the Virgin Islands Deposit Insurance Corporation and a Deposit Insurance Fund for the purpose of providing protection to depositors, especially those who some may describe as small and unsophisticated, as they are not in a position to assess the risks of the institution in which they may put their hard-earned savings,” Premier Fahie stated.

“The full establishment of the corporation and fund would meet international requirements and address the recommendations found in the Michael Foot Report of 2009 and the International Monetary Fund, Financial Sector Assessment Program (FSAP) in 2010,” the Premier added.

Deposit insurance scheme to provide more formal mechanisms

Premier Fahie, who is also the Minister of Finance, further said a deposit insurance scheme will be able to maintain stability within deposit-taking institutions.

“Establishment of such a scheme would provide your government, in conjunction with the Supervisory and Regulatory authorities, with a more formal mechanism for dealing with problem financial institutions, with a view to protecting depositors and their funds,” Fahie said.

“The scheme will, therefore, replace discretion with an established legal regime, thus allowing for a faster, and more consistent administrative process. This policy will allow the government and the relevant authorities to have an avenue to pursue recourse for citizens in certain circumstances, where otherwise they would have had no options,” he further explained.

Consultancy contract inked

The Finance Minister also said government has entered into a consultancy contract to gain advice on the proper development of a subsidiary legislation and resolution powers, to support the Virgin Islands Deposit Insurance Act, 2016.

“Through persistence and dedication to task, your government was able to enter into a consultancy contract with Ms Vilma Rosa Leon-York to provide the necessary legal and resolution framework for a cutting-edge Deposit Insurance Corporation known as DIC,” Fahie stated.

He added: “The work is expected to take approximately 928 hours or 24 weeks to complete over a one-year period. Simultaneously, your government will be instituting the board which will commence the other logistical works required for the proper operation of the Corporation and its board.”

Premier Fahie said his government intends to implement the Virgin Islands Deposit Insurance Corporation before January 1, 2021.

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11 Comments

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  1. Ange says:

    Awesome government. Keep it up!!!!

  2. Hmmmm says:

    Another consultancy, another board.

  3. Me says:

    Another tax? Where is the money coming from to deposit in this Fund?

    Like 3
    Dislike 1
    • BVI lawyer says:

      I would expect it would be funded by a bank levy on customer accounts to pay the insurance premia.

      • Max says:

        So long as it’s the bare minimal. Banks invest depositors money sometimes at great risks which was one of the roots causes of the 2007/2008 financial crisis. The banks should be willing to fund 99% of the amount to cover the Insurance deposit.

  4. Nice says:

    VIP is doing excellent

    Like 5
    Dislike 3
  5. FDIC says:

    In USA this is called FDIC. See website below:

    http://www.fdic.gov

  6. Socrates says:

    What is deposit insurance: Here is a definition by Wikipedia, “Deposit insurance is a measure implemented in many countries to protect bank depositors, in full or in part, from losses caused by a bank’s inability to pay its debts when due. Deposit insurance systems are one component of a financial system safety net that promotes financial stability.”

    1. Will government operate the deposit insurance scheme or will it be operated by the private sector?
    2. Will government be depositors insurance agent?
    3. If government is the insurer, how will claims be paid? Will payment be pay as you go or from a special reserve fund?
    4. What is the limit of the policy?
    5. Will depositors have to be enrolled in programme or it will be automatic?
    6. Will all banks operating in the territory be covered?
    7. Are all banking products covered or just demand deposits?
    8. Will banks have to contribute premiums?
    9. Will deposit insurance result in banking taking more risks and more liberal in lending?

  7. Quiet Storm says:

    With government deposit insurance, depositors will enjoy an insurance benefit but will they have any skin in the game, ie, will they have to contribute anything to the insurance pool or will all taxpayers have to pay for the benefit? Further, since commercial banking started in the BVI in either the late 50s or early 60s, has any bank defaulted or was there any run on a bank(s)? Since government may be getting into deposit insurance business, will it also get into property, auto…….etc insurance?

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