:: Background
To The Deposit Insurance Scheme ::
Summary
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.
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. 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 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.
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
therefore 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.
Back
|
