Synopsis Of The Act

1. The definition of 'deposit'. The definition is similar to that in the Banking Act, the Financial Institutions Act, and the Bank of Jamaica (Building Societies) Regulations, 1995 and includes interest payable on the sum of money deposited. 'Insurable deposit' is defined as total deposits less interbank and Government deposits while 'Insured deposit' is that portion of an insurable deposit which is covered by insurance.
    
2. The establishment of an independent statutory body, i.e. the Jamaica Deposit Insurance Corporation (JDIC). JDIC's main objectives are to establish and manage the deposit insurance scheme to facilitate the insurance of deposits or part thereof against the risk of loss.
    
3. Establishment of a Deposit Insurance Fund (DIF). The Fund will be financed by initial and annual premiums from policyholders, sums borrowed by the Corporation and proceeds from investments made out of it. The Act stipulates that the total value if insurable deposits should be used as the premium assessment base. The main charges against the Fund are expected to be in the form of payments to depositors when a policyholder fails. The resources of the Fund must be conservatively invested, that is, in assets that have relatively little risk and are fairly liquid.
    
4. The granting of certain powers to the Corporation. These include powers to manage and administer the DIF, to levy premiums for the Fund, to make inquiries of a policyholder as to the conduct of its affairs and to act as receiver or liquidator of any policyholder. The Corporation may also arrange for the restructuring of a policyholder by way of a merger with or sale to another financial institution.
    
5. Relationship with the Bank of Jamaica. The Corporation will work in close collaboration with the Bank of Jamaica in order to avoid any duplication of activities and in so doing will receive copies of the Bank's on-site examination reports, and all material information relating to the safety and financial soundness of institutions under its purview. In return, the Corporation must make available to the Bank any available information to enhance the development of sound financial practice in Jamaica.
    
6. Compulsory membership. All applicable institutions are required to apply for and be issued a policy of deposit insurance. In other words, the scheme will be compulsory for all deposit-taking financial institutions supervised by the Bank of Jamaica. The Act stipulates that any financial institution that carries on the business of accepting deposit without a policy of deposit insurance commits an offense and shall be required to pay a fine after conviction in a RM's Court of an amount not exceeding J$3mn and in the case of a continuing offence to a further penalty not exceeding J$100,000 for each day during which the offence continues after conviction.
    
7. Limitation on insurance coverage. There is a limitation of insurance coverage of the deposit of any depositor to an amount of $600,000 in Jamaica currency and which is payable promptly in certain circumstances - e.g. when the policyholder's licence to carry on its business operations has been revoked by the Minister or the policyholder's policy of deposit insurance has been cancelled.
   
   Although the amount of J$600,000 reflects the level of de jure protection, de facto protection may result in an extension of coverage if failures are resolved in a manner (e.g. sale/merger) that protect all depositors from losses.
    
8. Cancellation of policy of deposit insurance. Provision is made for the cancellation of an insurance policy in certain circumstances - e.g. when the Corporation and the Bank of Jamaica are of the opinion that the policyholder is or is about to become insolvent or when the policyholder has ceased to accept deposits because of insolvency. However, allowance is made for the affected policyholder to appeal to the Minister.