Redouble efforts and focus on the “critical policy intervention” of Deposit Insurance, CARICOM Assistant Secretary-General, Trade and Economic Integration, Mr. Joseph Cox, said Monday.
He was at the time addressing a Regional consultation at the Radisson Resorts in Barbados that focused on the development of a harmonised deposit protection model for Caribbean Community (CARICOM) Member States. Deposit insurance is protection offered to depositors by many countries against the risk of losses caused by a bank’s inability to pay its depositors in case of a bank failure.
Mr. Cox lauded the timeliness of the consultation as he said that the implementation and sustainability of such a scheme was an urgent economic and Regional imperative
“In fact, this event could not be more timely and as it reflects a confluence of events inclusive of political renewal and change in some Member States, the fact that the Eastern Caribbean Central Bank has vowed to have a deposit protection mechanism in place by yearend, and the fact that some Member States have already taken the initiative and launched their own deposit protection mechanism which provides us with valuable insights with respect to mistakes made, lessons learnt and best practices to be adopted,” he told the gathering at the forum.”
Providing some background, the Assistant Secretary-General recalled the financial crises the Region experienced over the years, especially the crisis of January 2009 which was occasioned by the collapse of CL Financial, a Trinidad-based financial conglomerate with extensive cross-border operations in the real and financial sectors.
“It is to be noted that while the collapse of CL Financial was not a banking crisis, the failure of this financial conglomerate placed significant pressure on the financial systems in the Region because the impact was so widespread. Governments were forced to bailout the failing subsidiaries to prevent substantial losses for depositors, policy holders and creditors. This created a renewed interest in deposit insurance,” he pointed out.”
In fashioning the harmonised model, Mr. Cox said that there should be clarity with respect to who and what there would be protection for; the implementation of ceilings which would provide protection for the most vulnerable but “not provide undue solace” for those who persist in reckless behaviour compromise and negotiations in good faith; and strategic interventions that were congruent with the Banking Acts at the level of Member States.
In his remarks at the forum, the Assistant Secretary-General also made reference to two consultancies which were launched recently by the CARICOM Secretariat to develop financial markets within the Community. The first consultancy is aimed at developing a legal and regulatory framework to facilitate credit information-sharing among CARICOM Member States while the second consultancy seeks to promote financial stability within the Community through the development of a Deposit Protection Model for Member States. Both consultancies are slated for completion by yearend.
Indeed, the Secretariat, in spearheading this Project, to develop a model deposit protection framework for Member States, recognises that deposit insurance schemes form an important aspect of the financial safety net. In addition, a harmonised framework to safeguard deposits will ensure that depositors in the home and host countries receive a minimum level of protection. Further, a model deposit insurance scheme should reduce systemic risk by restoring market confidence in financial markets within the Region,” Assistant Secretary-General Cox said.
