By Sheriece Smith [GIS]
Depositors of financial institutions in the Territory will be provided protection following the enactment of the Virgin Islands Deposit Insurance Act 2016.
The Government of the Virgin Islands acknowledged the need to offer some level of security to depositors and has enacted the Virgin Islands Deposit Insurance Act 2016 (VIDIC Act) providing the necessary framework to achieve this. The VIDIC Act was passed on April 25 and gazetted on May 19.
Premier and Minister of Finance, Dr. the Honourable D. Orlando Smith, OBE said the implementation of the deposit insurance system is designed to protect at minimum the entire savings of at least 94 percent of the domestic depositors in the Virgin Islands.
The Premier is optimistic that the VIDIC Act will help to strengthen the economic stability of the Territory’s financial system. As a result, this will contribute to increased consumer confidence, due to the introduction of depositor protection that was not previously offered.
The Deposit Insurance System is intended to provide protection to depositors who are not in a position to assess the risks of the institution in which they choose to put their deposits. This may be so because depositors are not generally able to undertake such risk assessment or there is insufficient information available to them, even if they were able to do so.
The deposit insurance will also automatically protect depositors’ insured funds against major financial losses, in the event of the failure of a financial institution. The VIDIC will promptly reimburse depositors their insured deposit amounts. It will, in achieving this objective, reduce the probability of contagious bank deposit runs on these institutions, which could jeopardise the health of the financial system as a whole.
The VIDIC Act speaks to the establishment of the Virgin Islands Deposit Insurance Corporation, which will be responsible to provide insurance against loss of deposits, manage and administer the fund or any other income of the Corporation, levy premiums for the fund and fees or other amounts payable and sensitise consumers on the corporations’ role and the rights of depositors in the event of failure of an insured institution.
The VIDIC will be governed by a six member Board of Directors that is inclusive of a Chief Operating Officer, responsible for the daily operations of the Corporation.