Credit unions closer to getting deposit insurance for members’ savings

The Barbados Co-operative & Credit Union League Limited (BCCULL) is reporting a major step towards getting protection for a portion of the billions of dollars of credit union members’ savings, similar to the protection given to commercial banks and other deposit-taking financial institutions.

According to BCCULL president Kemar Cumberbatch, the Ministry of Finance has authorised the Barbados Deposit Insurance Corporation (BDIC) to put measures in place to make deposit insurance a reality for credit unions, following a “major” cross-regulatory meeting earlier this month.

“The BCCULL, the trade association for credit unions, is pleased to report that our sector is now another step closer to achieving our goal of inclusion in the national deposit insurance financial safety net, currently managed by the Barbados Deposit Insurance Corporation (BDIC),” Cumberbatch said in a statement on Tuesday.

The BDIC, which commenced operations in 2007, is a statutory corporation established in 2006 under the Deposit Insurance Act. It provides protection for customers’ savings in commercial banks, deposit-taking trusts and finance companies, in the event of an institutional failure.

“Within recent weeks, Prime Minister and Minister of Finance the Honourable Mia Amor Mottley has followed through on a commitment from her 2022 Budgetary Proposals to make deposit insurance a reality for credit union members. Timelines are being addressed for the necessary legislative amendments and the establishment of minimum standards for entry,” said Cumberbatch.

The island’s six commercial banks, along with four non-bank deposit-taking financial institutions are BDIC fund members. This status ensures the savings of each of their depositors are covered up to a maximum of $25 000.

For the past decade, credit unions have been arguing for similar protection for deposits by their customers – about $3 billion from 220 000 members.

Welcoming the progress, the BCCULL president said the umbrella credit union body was aware that the process for entry into the BDIC would likely require some institutional adjustments and minimum sectoral standards and it has already started to put things in place.

“In preparation for that process, we have been engaging international consultant Dave Grace, the senior partner of Dave Grace & Associates, to provide guidance,” Cumberbatch said.

He said Grace was one of the world’s foremost thought leaders, working with the International Monetary Fund and the World Bank on the subject. He is expected to be in Barbados soon, from August 28 to 31, “for critical meetings with credit unions, Government and regulatory officials, from which we expect the path will be clearer for this long-awaited development”.

Noting that credit unions represent a critical component of the island’s overall financial infrastructure, Cumberbatch insisted that “the savings of credit union members also matter”.

“The credit union movement has been built on the backs of working-class Barbadians who have developed enormous strength over the years through solidarity and cooperation,” he said.

“The credit union sector is highly regulated by the Financial Services Commission (FSC), with enhanced oversight by the Central Bank of Barbados for credit unions deemed Systemically Important Financial Institutions (SIFIs). What further strengthens the case for credit unions’ inclusion in the national deposit insurance financial safety net is the fact that some credit unions in Barbados hold more deposits than some financial institutions that are members of the BDIC,” the BCCULL president added. (PR/MM)