If the rest of the world, including some Barbadians are starting to have episodes of post-traumatic stress disorder (PTSD) following the sudden collapse of two banks in the United States, no one can blame them.
Those operating in the financial sector are closely monitoring the situation in the US with the failure of Silicon Valley Bank (SVB), an institution that focused on lending to tech companies.
The perception that the collapse of this institution with US$175.4 billion in customer deposits was an isolated event and its impact limited to a particular group has been erased, as we learned that Signature Bank, with assets of US$110 billion has also collapsed in equally dramatic and rapid fashion.
Some may wonder what these developments have to do with us in Barbados. One only has to recall the housing market crash in the US in 2007 that mushroomed into a global financial meltdown.
Countries that had absolutely nothing to do with the events of the US housing bubble and the shenanigans of some bank bosses there, found themselves caught in the vortex that would later engulf the entire world in the “global financial crisis”.
While the US was in the position to bail out its banks and introduce new, stricter banking rules to prevent predatory lending, it took almost a decade before economies like Barbados’ fully recovered from the crisis.
As a result, it is not over-reaction for those with their life’s savings in financial institutions, to pause and closely watch what is unfolding in the US financial system.
The collective memories of Barbadians have not been washed of the spectacular collapse of CL Financial in Trinidad and Tobago in 2009, and the resulting impact on the citizens in Barbados and across the Eastern Caribbean.
The fallout from the Port-of-Spain debacle and bad actions would entangle thousands of households in Barbados as policyholders and investors in CLICO International Life Insurance discovered their investments, policies and health coverage were either wiped out or compromised.
Some people who invested, for example, in the Executive Flexible Premium Annuities (EFPAs) died without receiving a cent. Businesses that invested in the EFPAs lost everything as it was discovered these policies were not to be sold to corporate entities.
As we monitor the two American bank failures, that country’s government has already moved to assure citizens the financial system there is “safe”.
Of course, no one knows what is likely to happen next. Governments cannot control how citizens will respond, especially if they perceive an absence of transparency.
What the developments in the US have demonstrated is the need for every client of registered deposit-taking financial institutions to be covered by a nationally backed deposit insurance facility.
In the US, each account holder is protected to a maximum of US$250,000. In Barbados the maximum coverage of bank deposits is just $25,000.
However, there is a section of depositors in the credit union movement still demanding equal treatment and inclusion in the government backed Barbados Deposit Insurance Corporation (BDIC) facility.
The BDIC’s door, disappointingly, remain firmly closed to thousands of credit union members, despite the stiff lobbying of credit unions, and promises from politicians to pry them open.
Hally Haynes, the immediate past president of the Barbados Co-operative & Credit Union League repeatedly appealed to government to make the necessary legal amendments to facilitate the inclusion of credit unions in the deposit insurance scheme.
From as early as 2015, former Minister of Finance Chris Sinckler promised the movement that all the legislative and administrative requirements necessary for the implementation of deposit insurance for credit union members would be in place by the following year. But alas, the status quo remains.
A new administration has taken control and again the movement was promised inclusion. In 2021, Minister in the Ministry of Finance Ryan Straughn outlined Government was in the process of working through the framework for a new Deposit Insurance Act, which would allow credit unions to have some level of coverage as commercial banks had, were there to be major financial disruptions.
One cannot predict the future and financial crises can sweep across countries overnight. As such, time is of the essence. Credit union depositors who are mostly working-class Barbadians deserve and have a right to the same protection as that accorded to commercial bank customers.
Read our ePaper. Fast. Factual. Free.
Sign up and stay up to date with Barbados' FREE latest news.
Barbados Today firmly discourages any commentary or statements that are libelous, disruptive in nature or incites others to violate our Terms of Use. Any submissions made on our comment section, are solely the views of the individual and not Barbados Today.