Finance Minister On Deposit Insurance Scheme

May 16, 2019

Minister of Finance Curtis Dickinson provided an overview of the implementation of a Deposit Insurance Scheme in Bermuda and the establishment of the Bermuda Deposit Insurance Corporation, which is responsible for managing the Scheme.

Minister Dickinson said, “Deposit insurance is a guarantee to eligible depositors in a local financial institution that they will be compensated up to a maximum specified amount should that institution fail, thereby providing them with some protection against losing all of their money deposited.

“Unlike many other jurisdictions that have consumer protections in place against such a failure, Bermuda did not, prior to the establishment of the Deposit Insurance Act in 2011.

“Instead, Bermuda historically had to rely almost exclusively on the Bermuda Monetary Authority to regulate and supervise local financial institutions to ensure that they conduct their business in a prudent manner.

Ms. Erica Smith, Executive Director, BEDC, Mr. Neville Grant, Chairman, BEDC, Mr. Stephen Todd, Chairman of BIDC Board, the Minister, Mr. Thomas O’Rourke and Mr. Ian Truran, Bermuda Bankers Association

BDIC Bermuda May 2019

“The global financial crisis of 2008 affected many businesses and people in Bermuda, whether directly or indirectly. Because of that, businesses and people began to pay more attention to the systems that were in place that could protect them in the event of the failure of a financial institution.

“In the aftermath of those events, the Deposit Insurance Scheme was established and it now plays an important role in providing an enhanced financial safety net to small retail depositors in Bermuda.

“The Deposit Insurance Scheme has three principal objectives:

  • To protect small depositors, as they are more likely to have all or most of their financial assets in the form of bank deposits and are therefore more likely to lose all of their money in the event of a bank failure;
  • To promote stability in Bermuda’s financial system and economy by providing prompt reimbursement or access to insured depositors’ funds in the event of a failure of a member financial institution; and
  • To enhance Bermuda’s attractiveness as a world-class financial jurisdiction as countries look to regulation and insurance as a way of gauging the stability and security of the financial environment in any given country.

“The protection provided by the Scheme is limited to Bermuda Dollar deposits and provides compensation up to a maximum of $25,000 [twenty-five thousand dollars] in total for each eligible depositor at each member financial institution.

“The Scheme applies to the local operations only of qualifying Scheme members.

“I also note very importantly that the Deposit Insurance Scheme is in its early stages of establishment and it is not expected that the Scheme will provide an effective resolution option for at least another 15-20 years as the Deposit Insurance Fund is accumulating through premiums paid and earned investment income.

“I am especially grateful to the 4 licensed banks, HSBC Bermuda, The Bank of N.T. Butterfield, Clarien Bank and Bermuda Commercial Bank who have contributed to the Scheme since it commenced operations in 2016.

“I also welcome the BIU Members’ Credit Union who are presently being integrated into the Scheme.

“In closing, I would like to take this opportunity to thank the Board of the BDIC, the member firms of the Bermuda Bankers Association and the many others, who have contributed, through several years of hard and steady work, to bring to fruition this important and valuable Scheme which contributes towards creating an enhanced financial safety net in Bermuda.”

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Comments (15)

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  1. question says:

    Of course the BIU Credit Union is in there.

    Do they ever file audited financials? Why is the government guaranteeing a fly-by-night bunch of amateurs?

  2. Paul says:

    Thank you so much finance minister,you are looking out for we Bermudians.

    • Wahoo says:

      Yes thank you very very much for looking out for us lot. Please continue to create more taxes.

    • Sailor says:

      it started in 2016.

    • Double S says:

      “Commenced operations in 2016.”

      Who was finance minister in 2016?

  3. Jane says:

    Two points to make:

    1. More civil servants spending the country’s wealth rather than creating it – all for petty politics. The reality is that if a bank went bust, no more than BNTB a decade ago, the Government would have to keep it afloat and then find a buyer. This little red herring is exactly that, more so called jobs for the gang.

    2. In the highly unlikely event of a payout, 25K BDA does nobody any good. All the big money depositors will be so distressed that they will simply collapse the entire economy until they get their money.

    This whole thing is dumb, pretentious exercise in rhetoric at taxpayer expense.

    • SMF says:

      The last time I checked, the if the banks went bust yes the government can step in but they are not legally obliged to keep them afloat. Insuring deposits like they do in the states up to $100,000 do things like prevent bank runs in case of a panic and adds a level of stability. As you said,” in the highly unlikely event of a payout” wouldn’t you like to at least have something come back to you instead of nothing? I’ll admit that 25K doesn’t seem like a lot of money, but it is a step in the right direction. Also keep in mind that if all you had is 25K and now it’s gone… that’s a lot of money. On the flip side the folks with lots of deposable income aren’t going to let it sit up in a bank account, their money would more than likely be busy “working” so this scheme isn’t really geared to them as it would be for the average Joe Blow walking the street (but the article said that). To be honest I’m surprise we had never done it before and it’s my hope the finance minister comes up with more mechanisms with some even geared towards those folks with lots of disposable income as this one is for the “little guys”.

      • Jane says:

        You entirely missed my point – no Government is going to let a bank go bust (even if they should), as the economic disruption and jurisdiction reputation damage are simply too great. The bank might be Government owned for a while or simply bailed out with a large guarantee and (mostly perceived white) shareholders wiped out – as was the case with BNTB. So this entire exercise is simply sinecure jobs for the Alaska Hall insider clique…

        • SMH says:

          No Jane I got your point… my point was that your working under the assumption that we’ll always have a government that will do the sensible thing.

  4. Kathy says:

    $25,000????? That is it? The minimum in the USA is $100,000.

  5. Kathy says:

    …and why only on BMD accounts?

  6. I will not bank in any insitution that is involved with a credit union or a govt.

  7. You cannot keep buses running on time , (which had been done for decades before you) , Nor proper trash pick up. Nor pave roads properly.
    Duty alone is more money than is needed to run this country better than it is currently.
    What a tangled web we weave when we practic to deceive.

  8. frank says:

    I thought that banks were required to have funds to back up what was help on deposit

    • Jane says:

      Most money in banks does not exist which works just fine as long as deposits keep growing – it’s called the multiplier effect:

      Deposit $100.00. The bank lends out $90.00 of it, keeps 10% in reserve.Very soon that $90.00 is back in the bank, deposits therefore total $190.00. The bank then lends $81.00, keeping 10% in reserve. The $81.00 of course eventually ends up as deposits again, total deposits now total $271.00… All from that initial $100.00 bank note deposit. So the question that no one can answer is – does that extra $171.00 exist or is banking just a sophisticated Ponzi scheme…

      Problems arise when more starts being taken out than is good no in.