Depositors to have safety net by year’s end
A Deposit Insurance Scheme (DIS) designed to protect banks and credit union depositors if the institution holding the money fails, should be fully operational by the end of this year, according to a Finance Ministry spokesperson.
The spokesman said the new scheme’s primary objective was: “ ... to complement the existing supervisory regime, thus strengthening the local financial safety net, thereby promoting financial stability”.
It will be administered by the Bermuda Deposit Insurance Corporation (BDIC), the members of which were appointed by Minister of Finance ET (Bob) Richards earlier this year. They are are Wendell Emery, who is the chairman, Sheila Brown, Peter Everson, Miguel DaPonte, chief executive officer of the Authority, the officer of the Bermuda Monetary Authority responsible for the supervision of scheme members and the Financial Secretary. This team is currently preparing to get the Bermuda Deposit Insurance Corporation established and operational.
The DIS was introduced to the House of Assembly in July 2011 by former Premier and Finance Minister Paula Cox. The Government approved the policy framework, and the scheme was partially brought into force at the end of 2011.
When Mrs Cox introduced the Bill, she told legislators: “The purpose of this Bill is to establish a deposit insurance scheme in Bermuda that will provide a level of protection to individual and small company depositors in the event of a bank failure. The Bill is drafted to provide insurance coverage to specified depositors in banks and credit unions that are members of the scheme.”
She added: “Mr Speaker, deposit insurance is a guarantee to depositors in a bank that they will be compensated up to a maximum specified amount of their deposits upon failure of that institution. The primary function of a DIS is to provide enhanced protection for depositors in the event that an individual banking entity has solvency or other problems that threaten its survival.”
She said a DIS should help bolster public confidence and help reduce the risk of problems escalating into a crisis, or spreading to other banks. “Deposit insurance should be viewed as an integral part of the arrangements for deposit protection in Bermuda. The implementation of a sound deposit insurance scheme, coupled with a prudent and effective banking regulatory and supervisory framework, would bolster the banking safety net in Bermuda.”