In September 1995, the Government established a Task Force to identify the main policy issues and legislative requirements and to make recommendations for the introduction of an explicit Deposit Insurance Scheme in Jamaica.
The regulatory authorities were of the view that a formal Deposit Insurance Scheme should be established to provide stability and safeguard depositors' interest in cases where financial institutions experienced difficulties and had to be closed. The Deposit Insurance Act (the Act) was passed by Parliament in March 1998, and the Jamaica Deposit Insurance Corporation (JDIC) formally commenced operation on August 31, 1998.
Arising from the recommendations of the Task Force and the deliberations of a Joint Select Committee, it was agreed that a modest level of coverage both in nominal and real terms would contribute towards a satisfactory level of market discipline. Large depositors would therefore be forced to monitor the condition of their bank or financial institution. It is for this reason that the level of coverage was set at $200,000 per depositor per institution. This limit represents over two times Jamaica's per capita GDP which satisfies the conventional maxim that coverage should be about twice a country's per capita income. On July 1, 2001 the level of coverage was increased to $300,000 per depositor/per institution, and again on July 1, 2007, to $600,000.
The Scheme is not intended to be a substitute for adequate regulation and supervision, or a panacea for the problems in the banking sector which may emerge from time to time. In this regard, steps were taken to strengthen the supervisory capacity of the Bank of Jamaica. Significant amendments were also made to the governing legislation of all deposit-taking financial institutions.