The nation’s credit union umbrella rejected claims the new Deposit Insurance Bill will harm small institutions, maintaining that the long-awaited law will strengthen protections for more than 240 000 savers.
The Barbados Co-operative and Credit Union League Limited defended the soon-to-be-introduced legislation as a safety net for credit union members following its annual general meeting at the weekend
General Manager Tracia Pounder told Barbados TODAY that the bill, years in the making, is designed to protect credit union members in the event of institutional failure.
“The risk would be that in the event that anything had to happen to a credit union, for example, failure of a credit union, they would be fully exposed,” she said.
She explained the purpose of deposit insurance to credit union members. “What deposit insurance does is it protects a portion of the member’s deposit in the event of failure, so it literally is insurance… under the law right now, you would be protected up to $25 000.”
The league had been advocating for this protection on behalf of members for more than a decade, said Pounder, expressing surprise at concerns raised by the Barbados Consumer Empowerment Network (BCEN).
“This goes back pretty far, since 2010, they’ve been lobbying for deposit insurance,” Pounder explained. “The affiliates have asked for it for some time now, for the same protection for their members that the banks enjoy.”
To date, no credit unions have expressed concern to the league about the new legislation, she said.
While the league is backing the bill, a board member of one of the smaller credit unions shared a very different view.
The board member, who spoke to Barbados TODAY on condition of anonymity, said the way the Financial Services Commission (FSC) communicated the pending legislation created confusion and fear among smaller players.
“A whole bunch of credit unions over the last couple of months have been scrambling to either shut down or amalgamate with somebody else,” the source said.
The source explained that many small credit unions operate on modest margins and were blindsided by the sudden notification.
“You have to have been profitable for the last three years … your net profit must be above eight per cent of your equity,” he said.
He further explained why this was a major pain point for those credit unions: “When you have small credit unions, they don’t have large capital, they’re running on a small margin, but they’re able to maintain it for years and help their members and meet the needs of their members.”
The board member added that some institutions had made recent investments to improve services, unaware that the standards were coming, thus preventing them from meeting the criteria of the Deposit Insurance Bill.
When asked how the bill will work for small credit unions that struggle to meet criteria, Pounder stated that the FSC is currently leading a process of remediation to determine what compliance will look like for credit unions that may not yet meet all the requirements.
She hinted that the issue will likely be discussed at the next quarterly meeting between the League and the regulators.
Pounder, however, insists the league is dedicated to supporting strong member protection. She referred to the Barbados Deposit Insurance Corporation, which provides information and protection for members.
She encouraged the public to learn more about deposit insurance and its role in protecting savers.
“On the Barbados Deposit Insurance Corporation’s website, there are some pretty decent FAQs that give insight into how long the fund has been around and the protection that’s currently offered to persons who have their savings in a bank,” she said.
While acknowledging that some smaller credit unions may still be working through regulatory requirements, Pounder insists that deposit insurance is a positive step for the industry.
“It’s about protecting depositors in case an institution fails,” she said. “That’s why I’m a bit surprised at the pushback, because it really is to the benefit of members.”
Following the AGM, the League released a press statement highlighting that deposit insurance protection will cover more than 240 000 credit union members, whose combined savings now total over $2.19 billion.
President Kemar Cumberbatch described the launch of deposit insurance as the culmination of a more than ten-year effort to ensure members’ deposits are protected in the same way as savings in commercial banks.
He said: “These are substantial sums of money. In some cases, they represent the entire life’s savings of our credit union members. We are, therefore, thrilled that members can soon rest assured that this new layer of security will be there for savings. Most importantly, the framework will have the backing of the Government of Barbados.”
He added that the introduction of deposit insurance is not about creating burdens for credit unions, but about building strong, responsible institutions that members can trust.
“These standards are not meant to exclude anyone. They are meant to protect everyone — especially members,” Cumberbatch said.
louriannegraham@barbadostoday.bb
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