After several years of advocacy by the nation’s credit union league, the savings of credit union members may soon be safeguarded if the Protection of Depositors Insurance Bill is passed by Parliament.
Minister of Finance Ryan Straughn piloted the bill in the House of Assembly on Tuesday in the presence of directors and management of the Barbados Co-operative & Credit Union League Limited, together with representatives from across the credit union sector, after more than 15 years of advocacy by the League.
The legislation would repeal the existing Deposit Insurance Act and extend coverage to credit unions for the first time.
Straughn explained that through the Barbados Deposit Insurance Corporation (BDIC), established 20 years ago, only depositors in banks and other deposit-taking institutions are currently covered under a deposit insurance scheme with a threshold of $25 000. Credit unions are not included.
“In 2007, the credit unions had assets of roughly $403m and at the end of 2025, it was $3bn, and so you can see the significant increase in just 20 years of the assets of the credit union sector to the point now that it is almost 20 per cent of the total deposits across the financial system and therefore, it is not insignificant nor inconsequential that we have to ensure that we cover those who represent the 20 per cent.
“Those are many of the people that we pass out there in Marhill Street, the vendors, the barbers in our communities, the coconut vendors, small business people utilise services through the credit union movement, and therefore right across the length and breadth of Barbados, this inclusion of credit unions in the deposit protection system will actually enhance and give greater confidence for those persons who every day come and make deposits in the credit unions.
Straughn said he hoped there would never be a need to use the legislation but stressed that it was important to ensure ordinary Barbadians who do not have bank accounts and save primarily through credit unions are protected.
“Should there ever be a failure of a financial institution in this country again, that accepts deposits, this piece of legislation that we are piloting today would allow the Deposit Insurance Corporation to ensure that it has in place a regime that would allow persons to be paid out, up to the insured threshold for the specific institution that would allow for a seamless as possible transition thereafter.”
Based on consultations involving the United States Federal Deposit Insurance Corporation (FDIC) which insures the deposits in American banks, Straughn said the process had already encouraged consolidation among credit unions.
“We’ve already seen as a result of those consultations, some credit unions are already starting to consolidate. The consolidation is intended to strengthen the balance sheets of each of the credit unions because, as you would appreciate, the financial ecosystem is becoming more and more dynamic.”
He added: “This bill, in part, will help change part of that equation, whilst the review of the full suite of legislation will seek to remove some of those requirements that still exist, allowing us to be able to drive more innovation within the credit union sector and allow for full participation in the financial system.”
The legislation would modernise the deposit insurance framework and introduce a mechanism to periodically review the current $25 000 insurance threshold, the finance minister said.
“We will be reviewing the threshold, but I want to make the point that internationally, we have a couple of benchmarks. Internationally, you tend to try to cover deposits within a 90 to 95 per cent range, because you want to make sure that you have the widest possible coverage with respect to deposit insurance; each institution pays into the deposit scheme the premiums to make sure that the funds can be built up such that BDIC can discharge of their responsibilities should an event happen and therefore it takes some time to build these resources up in order to have the resolution up to the threshold that persons can be comforted should there be a failure.”
Straughn declared that Barbados could not afford a repeat of the prolonged resolution process that followed the collapse of CLICO financial group and said the new framework was intended to provide certainty and confidence in the financial system.
Straughn explained that coverage would be reviewed every five years to ensure adequate insurance levels based on the growth of deposits.
“Across the system; banks, part threes, credit unions. Once that is determined, then the communication between BDIC and its members will go to say, well, your premium was X, now it will be Y, because we need to make sure that we have the coverage, and the truth is the credit unions doing their own internal monthly assessments and monitoring would know that this is coming down the pipeline, because obviously by investing more in the economy, more money is coming into the credit union movement. They will have the ability to track what’s happening at the individual level.”
He confirmed that joint accounts would also be covered.
Under the current legislation it could take between three and 15 months before insured deposits are paid, but the new bill would allow payments to be made within seven days, Straughn told lawmakers.
“The current $25 000 threshold will cover 91 per cent, approximately, of depositors in the credit unions movement as it is. If we move to $50 000, it will cover 95 to 96 per cent of the members within the credit union movement. I anticipate that whichever number we choose that once this is done and the framework is put in place, the credit unions will come back and say, ‘Well, minister, we’re going to need to increase this coverage.’”
The new framework would allow BDIC to act immediately once a financial institution is declared insolvent.
“So FSC made a determination that a particular credit union is insolvent, or the central bank makes a determination that a part three or a bank is insolvent and needs to be wound up. That information is being communicated to the BDIC, the BDIC stepping in as the liquidator, the resolution authority now allows the BDIC, using the records that were submitted to it by the member institution… up to the insured threshold, which is currently $25 000. That the BDIC will be able to pay persons within seven days.”
Straughn announced that the government would contribute $1.7m to establish deposit insurance coverage for credit unions “to kickstart the formation of deposit insurance for credit unions in this country because we believe that there must be equity within the system and whilst we are 20 years behind, that little extra is to make up for the time. This is what the government promised we will deliver for the credit unions and their members.”
He also revealed that the bill contains provisions targeting negligent directors, executives and officers.
“If you or myself happen to be a manager, a director, a CFO or anybody who is a chairman, anybody that has the responsibility, the fiduciary responsibility for managing financial institutions. If you are found to be negligent, and we made different decisions that were not in the interest of the financial institution and caused the financial institution to be embarrassed, such that it becomes insolvent, then the BDIC having to come in and wind up any money that you or I might have in there, we can’t get none of that because we would forfeit our right to insurance because we would have contributed directly to the failure of the institution.”
(LG)
The post Credit union deposits to receive first-ever insurance cover appeared first on Barbados Today.
