Deposit Insurance Act (Synopsis)

The Deposit Insurance Act (the Act) makes provisions for the following:

  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 the Scheme.
  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 parts 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. The Act stipulates that the total value of 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; levy premiums for the Fund; make inquiries of a Policyholder as to the conduct of its affairs and to act as receiver or liquidator of any Policyholder;  make loans or advances with security; borrow or raise funds; guarantee, indemnify or become liable for the payment of any obligation thereof. The Corporation may also arrange for the restructuring of a Policyholder by way of a merger 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.