Credit union leaders hail deposit insurance ‘fairness’

Legislation to extend deposit insurance to credit union members is set to transform confidence in the sector, placing their savings on an equal footing with those held in commercial banks and marking a major shift in the financial landscape, the credit union umbrella leader said on Tuesday. 

Speaking outside the House of Assembly where the Protection of Depositors Bill was passed, Kemar Cumberbatch, president of the Barbados Co-operative and Credit Union League, said the legislation comes after years of lobbying. 

“We’re happy to be here. It’s been a long time, 15 years of advocacy so that we could get deposit insurance and parity with the other commercial banks,” Cumberbatch said. “So my board is happy. Our membership is extremely happy.”

While the financial services industry prepares for the change, the exact number of participating credit unions is still being determined by regulators.

“That is not something that I would be at liberty to discuss right now,” Cumberbatch said. “The [Financial Services Commission] and the [Barbados Deposit Insurance Corporation], they need to do certain things first, and then once that happens, then we can have that conversation with you.”

The real benefit of the bill is that it makes saving money fairer, the league president said. For a long time, commercial bank clients had government-backed protection for their money, while credit union members did not. This new law addresses that gap.

“All of our savings, the credit union members, their savings, that’s gonna now be protected because of this deposit insurance,” Cumberbatch said. “So it gives our members overseas in the diaspora and persons who may want to send money back home that added layer of protection. So in the event that there is some catastrophic failure or run on the credit union, members know that their deposits are protected, which is something that the commercial banks currently enjoy. So it is absolutely pivotal for our membership.”

The size of the credit union movement underlines how many people the law will affect. The sector manages significant assets and includes a large share of the population.

“Well, in terms of assets under management, we are at US$1.7bn [$3.4bn],” Cumberbatch revealed. “In terms of membership base, we are in excess of 200 000 members at present, so more than 90 per cent of the Barbadian population actually are credit union members at present.”

Cumberbatch dismissed concerns that stricter rules could disadvantage smaller credit unions or exclude ordinary savers, stressing the sector’s focus on serving communities.

“Our mantra is people helping people, to be honest, and the reality is that every day, D.I. [deposit insurance] or no D.I. , we’re looking to be stronger and to be better so that we can service and meet the needs of our members. 

“So if there is consolidation that occurs, we’re looking forward to it being voluntary so that those small affiliates can partner with each other or with larger affiliates and that they can do more for their members. So we do not anticipate that there will be, as you might term it, a negative fallout, but if there are any mergers or consolidation, that will benefit all of our members.”

Beyond protecting current savings, the new law also allows credit unions to invest in major national projects, including green energy and housing.

Cumberbatch continued: “We hope that with the legislation there’d be greater investment, so the government did make certain allowances so that we can invest in other areas that we were not able to do previously.

“So with that, we expect that persons in the diaspora to be willing to send money back home to invest in renewable energy, climate-related things, housing and that kind of stuff. But as you’d appreciate, somebody with significant wealth overseas, they expect that their savings, whatever they may be, will be protected. So we’re hoping now that with deposit insurance in place, persons are willing to send even greater sums of money back to Barbados.”

According to the credit union leader, this security has already begun to attract interest from Barbadians living abroad:

“We’ve seen some of it already because we would have been overseas very recently having a diaspora roadshow and there were persons there who were willing and interested in sending significant sums back home.

“So with deposit insurance in place now, we anticipate that it’s gonna be easier to convince them to be able to do that.”

At home, the law is expected to support members in building wealth through new investment opportunities, including green projects.

“Two of our larger affiliates right now are working on what they’re calling green bond loans so that they can come and borrow from the credit union to be a part of renewable energy projects, and we are always willing to facilitate any kind of financial opportunity for our members.

“That’s the purpose of the movement and the credit union way. So we want to create generational wealth, of course we want to encourage our members to save, but we want to enfranchise them. Any opportunities we have that meet the legal requirements, we are willing to participate in and our members know that we’re here for them.”

(RR)