ST JOHN’S, Antigua- There is no set timeline for the establishment of an Eastern Caribbean Deposit Insurance Corporation or three other new institutions announced by the Eastern Caribbean Central Bank (ECCB) last week.
Under a deposit insurance system – already in place in more than 100 countries – commercial banks are required to deposit a portion of their funds into a deposit insurance institution.
The safety net provided by the system protects depositors in the event a bank collapses.
The ECCB announced that this along with a Resolution Trust Corporation, Eastern Caribbean Stabilisation Fund and Eastern Caribbean Credit Bureau would be formed in its 2011/2012 annual report.
Antigua & Barbuda’s representative on the ECCB’s board of directors Whitfield Harris Jr said there is an urgent need for the bodies to be established in the sub region.
“There has not been pinned down a timeline but what is clear and what everyone agrees with is it is an initiative and an enterprise that needs to be taken, not only seriously, but we have to work assiduously towards realising these institutions,” said Harris.
“I can’t tell you that by January next year the deposit insurance scheme will be in place but what I can say is we are getting technical assistance to look at these matters so that we can proceed to start speaking about definitive timelines, so there is an urgency.”
Harris said the deposit insurance scheme would help reduce the need for governments to bail out struggling banks.
“In recent years, the government has had to put quite a bit of money and funds into stabilising the financial sector so the merits are clear,” said Harris.
“The deposit insurance will protect depositors and if you have deposit insurance the government will then not have to use their funds in the significant portions that it has already,” he added.
Deposit insurance Schemes reimburse a limited amount of deposits to depositors whose banks have failed. From the depositors’ point of view, this protects a part of their wealth from bank failures. From a financial stability perspective, this promise prevents depositors from making panic withdrawals from their banks, thereby preventing severe economic consequences.
Harris said the intention with the four new institutions is to build a system of protection for regional financial institutions and in turn for the governments and economies of the Eastern Caribbean.
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