Nicholls makes case for insurance cover in non-banking sector

A Government senator has called for a deposit insurance scheme to form part of the regulatory framework for the non-banking financial sector.

Government Senator Gregory Nicholls said now may be the right time for the introduction of a deposit insurance scheme for the non-banking financial sector, to ensure the protection of commercial assets belonging to Barbadians who are investing in these institutions, to ensure that if there is a problem at least some basic minimum is recovered.”

He made the comments while making his contribution to the Financial Services Commission (Amendment) Bill, 2022 which was passed in the Upper House on Wednesday.

“I am talking particularly about the securities and mutual funds and so forth. As we develop the financial services sector, should we not look at creating and establishing a deposit insurance scheme so that Barbadians may feel more comfortable in putting out their money in the financial instruments that are being offered by these entities?” he asked.

Deposit insurance is a measure implemented to protect bank depositors, fully or partially, from losses caused by a bank’s inability to pay its bills and debts when due. Deposit insurance systems are considered to be one component of a financial system’s safety net that promotes financial stability.

Making it clear that he fully supported the amendments which will allow the FSC to step up its act as a regulatory body, Nicholls stressed that the commission has been placing too much attention on regulating credit unions.

The attorney-at-law indicated that while the FSC may seek to suggest who should act as the chief executive officer of a credit union, it is unlikely for the Central Bank of Barbados which regulates the banking sector to advise commercial institutions on who they should appoint to management posts.

Arguing that credit unions operate responsibly, Nicholls said he believes that the FSC should be focussed on the viability and financial stability of these institutions instead of interfering with their daily managerial operations.

“And I say to those in the credit union movement, you do as you are required because it really doesn’t make sense fighting up with your regulator. At the end of the day, we don’t have anything to fear because no credit union in Barbados has gone belly up.

“In fact in the history in the financial services sector in Barbados it has not been the credit unions that have left thousands of Barbadians out to sea. It has not been the credit unions that have been giving unlawful political donations in millions of dollars that have featured in a most callous way in terms of the demise of one insurance company and the imprisonment of a former government minister,” Nicholls said.

He added: “Too much attention has been on the part of the FSC on the day-to-day management of credit unions. I don’t think you can tell any of the mutual funds who can act as ceo when the ceo goes on vacation, they would laugh you out of Bridgetown.(AH)