Consultation Paper - Securing Enhanced Protection for Depositors, Proposals for Introducing Deposit Insurance in Bermuda (2010-09)

Summary

This is a September 2010 consultation paper issued by the Bermuda Monetary Authority (BMA) proposing the introduction of a Deposit Insurance Scheme (DIS) in Bermuda, to be administered by a new statutory body called the Bermuda Deposit Insurance Corporation (BDIC) under a proposed Deposit Insurance Act. It sets out the rationale, objectives, proposed design, coverage, funding and governance of the scheme and invites public and industry comment; a draft bill is attached.

• Purpose: To protect small depositors, promote financial stability, and promote competition among Bermuda's deposit-taking institutions by introducing a deposit insurance scheme.
• Structure: A new independent statutory body, the BDIC, would administer the scheme with a narrow mandate (no supervisory duplication of the BMA), governed by a Board including the BMA CEO, the BMA's head of bank supervision, the Financial Secretary, and appointed directors.
• Membership: Proposed to be mandatory for all four Bermuda commercial banks and the one licensed deposit company under the Banks and Deposit Companies Act 1999; feedback sought on whether to extend coverage to credit union members.
• Coverage: Proposed maximum coverage of $25,000 per depositor per institution (with $25,000-$50,000 range considered), covering retail deposits (individuals, trusts, small businesses, charities), both resident and non-resident depositors, and local and foreign currency deposits.
• Funding: The scheme would be pre-funded via member institution premiums (flat rate initially, with possible future move to risk-based premiums of 0.2%-0.3% of insurable deposits), targeting a fund size of 2%-3% of total insurable deposits ($78-$117 million), with government emergency borrowing and a temporary surcharge power as backstops.
• Public awareness: The BDIC would run an ongoing public awareness programme, including requiring member institutions to display BDIC signage and coverage information on premises and advertising.

As a consultation paper, the document does not itself impose binding legal obligations; it proposes recommendations and a draft bill for comment. The only concrete near-term action required of readers is to submit feedback to the BMA by the stated deadline.

Key obligations

• Interested parties and members of the public wishing to comment on the proposals must send responses to policy@bma.bm by 31 October 2010.

Applies to

banks (institutions licensed under the Banks and Deposit Companies Act 1999), deposit companies, credit union (potentially, subject to consultation feedback)

Deadlines

• 31 October 2010: Deadline for members of the public and other interested parties to submit comments on the consultation paper to policy@bma.bm.