BARBADIANS’ deposits in credit unions could soon receive guaranteed protection in the event that a credit union fails.
That’s because the credit union movement is working to establish a deposit insurance fund similar to that created by commercial banks for their customers.
Over the past seven years the savings in local credit unions have grown from $406 million to more than $1 billion.
In 2007 the Barbados Deposit Insurance Corporation (BDIC) provided $25 000 for each depositor in the event of a bank failure; however, credit union depositors “have no explicit protection”.
The Barbados Co-operative Credit Union League is working to change this situation and has enlisted the help of the World Council of Credit Unions (WCCU).
Following a request from the league, the WCCU undertook an analysis last year of the local movement and among its recommendations was $25 000 initial coverage for each credit union depositor.
The global body also recommended to credit unions that they establish a separate fund within the BDIC.
Presently, commercial banks make annual premium payments to the BDIC of 0.05 per cent of their insurable deposits.
The world credit union body suggested that Barbados modify its Deposit Insurance Act and that “there should be financial standards for entering into deposit insurance”.
“For political, supervisory and financial reasons, it is recommended that credit unions utilise the structure of the BDIC to obtain deposit insurance but that banks and credit unions each have their own separate funds within the BDIC,” the WCCU report noted.
The WCCU suggested that local credit unions establish a target equity ration of two per cent for the deposit insurance fund.
Or, “The BDIC could require credit unions to pay non-withdrawable and non-interest bearing monies on deposits in the fund in an amount equal to a percentage of the institution’s insurable deposits.”
