Shaw welcomes changes to Deposit Insurance Act

Minister of Finance and the Public Service, Hon. Audley Shaw, says changes to the Deposit Insurance Act will create the basis for enhanced depositor entitlements, and improved operational efficiencies in the Deposit Insurance Scheme

“Clause 3 (Section 5), which outlines the functions of the Jamaica Deposit Insurance Corporation (JDIC), is now being amended to allow the Corporation to make loans or advances with security and to borrow or to raise funds,” Mr. Shaw said.

He also informed that clause five (Section 17) is being amended to facilitate the repayments of loans and advances from the fund, and to allow the JDIC to invest in securities issued or guaranteed by the Bank of Jamaica.

“In clause six, the maximum payout on insured deposit was changed from $300,000 to $600,000 by Order. The amendment now to Section 18 is to incorporate this change in the Act,” Mr. Shaw explained.

The Act, which was passed in the House of Representatives on Tuesday (January 12), was also amended to specify that the regulations may provide for the imposition of penalties on summary conviction, in a Resident’s Magistrate Court or Circuit Court, of a fine not exceeding $500,000, or imprisonment for a term not exceeding six months, or both.

He said that another area of concern was the treatment of a depositor with insurable deposit, with more than one policy holder, that subsequently merges. The existing Act provides protection to depositors per institution meaning that, if institutions merge, payout to depositors would be reduced. The new provision indicates the outcome if institutions merge and continue to operate as one policy holder.

“So, it means in those circumstances the policy holder, having had two accounts, will benefit from insurance for both accounts,” Mr. Shaw said.

The Finance Minister also stated that the actual deposit insurance fund balance, at the end of November 2010 is in the order of $7.4 billion.

The Jamaica Deposit Insurance Corporation was created by the Government of Jamaica to protect depositors, and promote stability and confidence in Jamaica’s financial sector. Emerging at an important juncture in the development of the country’s financial system, it has become the latest plank in strengthening the sector’s regulatory framework since August, 1998.