Government has announced plans to implement a ‘deposit insurance policy’ in the British Virgin Islands before the end of this year.

Deposit insurance is effectively a safety net to protect depositors - in this case, Virgin Islanders and residents - in case their bank or insured financial institution is unable to pay off its debts when they are due.

While making the announcement in the House of Assembly on Thursday, Premier Andrew Fahie said the policy was laying dormant in the House of Assembly after being passed almost four years ago.

“The Virgin Islands Deposit Insurance Act, 2016 sought to establish the Virgin Islands Deposit Insurance Corporation and a Deposit Insurance Fund for the purpose of providing protection to depositors, especially those who some may describe as small and unsophisticated, as they are not in a position to assess the risks of the institution in which they may put their hard-earned savings,” Premier Fahie stated.

“The full establishment of the corporation and fund would meet international requirements and address the recommendations found in the Michael Foot Report of 2009 and the International Monetary Fund, Financial Sector Assessment Program (FSAP) in 2010,” the Premier added.

Deposit insurance scheme to provide more formal mechanisms

Premier Fahie, who is also the Minister of Finance, further said a deposit insurance scheme will be able to maintain stability within deposit-taking institutions.

“Establishment of such a scheme would provide your government, in conjunction with the Supervisory and Regulatory authorities, with a more formal mechanism for dealing with problem financial institutions, with a view to protecting depositors and their funds,” Fahie said.

“The scheme will, therefore, replace discretion with an established legal regime, thus allowing for a faster, and more consistent administrative process. This policy will allow the government and the relevant authorities to have an avenue to pursue recourse for citizens in certain circumstances, where otherwise they would have had no options,” he further explained.

Consultancy contract inked

The Finance Minister also said government has entered into a consultancy contract to gain advice on the proper development of a subsidiary legislation and resolution powers, to support the Virgin Islands Deposit Insurance Act, 2016.

“Through persistence and dedication to task, your government was able to enter into a consultancy contract with Ms Vilma Rosa Leon-York to provide the necessary legal and resolution framework for a cutting-edge Deposit Insurance Corporation known as DIC,” Fahie stated.

He added: “The work is expected to take approximately 928 hours or 24 weeks to complete over a one-year period. Simultaneously, your government will be instituting the board which will commence the other logistical works required for the proper operation of the Corporation and its board.”

Premier Fahie said his government intends to implement the Virgin Islands Deposit Insurance Corporation before January 1, 2021.