$12.1b in savings insured

by SHAWN CUMBERBATCH

shawncumberbatch@nationnews.com

INSURANCE COVERAGE of deposits in accounts at commercial banks and leading finance companies in Barbados has increased as efforts to bring credit unions on board continues.

The Barbados Deposit Insurance Corporation (BDIC) is reporting that insurable deposits held by its ten member institutions was $12.1 billion at the end of last year, a $810 million increase (7.2 per cent) when compared with the $11.3 billion balance at the end of 2023.

BDIC also reports in its 2024 annual report that the Deposit Insurance Fund financed by its members and the Central Bank of Barbados increased by 10.98 million (11.25 per cent) to end 2024 at $108.7 million.

Under the Barbados Deposit Insurance Act of 2006, every deposit held at member institutions and payable in the currency of Barbados are covered. Depositors are guaranteed protection of their deposits up to the maximum insured limit of $25 000 and is applicable.

Not eligible

Joint accounts and trust accounts are treated as separate deposit categories for the purpose of applying the limit, but deposit insurance coverage does not apply to foreign currency deposits, letters of credit, standby letters of credit or instruments of a similar nature.

Interbank deposits and deposits from affiliates are also not eligible for coverage under the act.

The organisation’s current members are six commercial banks (CIBC FirstCaribbean International Bank (Barbados) Ltd, First Citizens Bank (Barbados) Limited, RBC Royal Bank (Barbados) Limited, Republic Bank (Barbados) Limited, Sagicor Bank (Barbados) Limited, Scotiabank (Barbados) Limited) and four finance companies (Ansa Merchant Bank (Barbados) Limited, Capita Financial Services Inc., RF Merchant Bank & Trust (Barbados) Limited and SigniaGlobe Financial Group Inc.)

In its 2024 annual report, the BDIC said that “deposits held in commercial banks continued to be in the 90 percent range for 2024 with balances at December 31 recording allocation rates of 94 per cent and six per cent respectively for commercial banks and non-bank deposit taking institutions (DTIs).

“It is, however, noteworthy that whilst year end deposit balances reflected increased positions for all sectors, the impact for non-bank DTIs was particularly significant as the increase levels achieved had reversed the reduction experienced in the prior year 2023.”

This resulted in total deposits of $747 million at non-bank DTIs on December 31, 2024 “thus realigning the sector’s deposit profile with levels held two years prior”.

The BDIC also reported that “the total deposit base at deposit-taking financial entities increased to $13.5 billion by year end December 2024, thus, recording a 1.2 per cent year-onyear increase of $1.1 billion”.

It added: “The increased deposit position was largely recorded in domestic deposits which closed the year at $12.2 billion, reflecting a 7.5 per cent increase year-on-year. “Sector liquidity however recorded a slightly weakened position yearon- year, as the level of liquid assets fell by $240 million (5.4 per cent). With higher short-term liabilities for the same period, the net impact was a slightly weakened liquidity position.”

Onboarding of credit unions

There are plans to bring credit unions under the BDIC umbrella so that the savings of members of these cooperatives have insurance coverage.

BDIC chairman Rawle Knight gave an update on this, stating: “The year 2025 will see continued effort and focus on the onboarding of credit unions as part of the [BDIC] board’s mandate.

“We are making good progress in this regard as we work closely with a crossregulatory team of stakeholders which includes the Financial Services Commission, the Central Bank of Barbados, the Credit Union League, the Barbados Bankers’ Association Inc and The Ministry of Finance.

“The board acknowledges that this matter has been on the table for many years, however, I can assure concerned parties that successful closure of the issues remains our priority.”

This means that credit unions, like commercial banks and finance companies, will ultimately have to make contributions to the Deposit Insurance Fund.

The BDIC explained that as mandated by the Deposit Insurance Act, “every member institution shall pay a given percentage of their deposit balances as insurance premiums, one half of which is payable on or before the 15th of February each year and the

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balance on or before July 15 of the same year”.

It continued: “Additionally, . . . new member institutions shall also pay an initial contribution based on a percentage of the insurable deposits held during the first 12 months of operation.

“The member contribution . . . is matched by the Central Bank and paid into the Deposit Insurance Fund. There were no new members added in the [2024] financial year, nor were there any claims made on the fund.

“Total fund assets reflect growth trends from premium income boosted by interest and related investment income.”

The BDIC report also commented on the asset composition and growth at DTIs, noting that the sector “reported a record high position of $16.8 billion in December 2024, reflecting a nearly seven per cent year-on-year increase of $1.1 billion”.

“This noteworthy performance was propelled primarily by a year-on-year increase of $962 million in loans and advances, representing a 13.4 per cent growth rate over 2023,” it reported.

“Understandably, the dominant asset classes for the sector continued to be loans and advances, transferable deposits and securities other than shares.”

The organisation said that these three asset categories “continued to constitute the lion’s share (more than 86 per cent at December 2024), of the total assets of the sector”.

“With the favourable uptake in loans and advances in quarter four of 2024, the sector recorded an increased loans-to-assets ratio of 48.5 per cent at December year end, closing the year with an impressive 2.5 per cent year-on-year increased loans-to-assets ratio,” BDIC stated.

“Reduced positions were, however, reported for transferable deposits and securities and other equity which reflected declines of a 16.2 per cent and 3.8 per cent respectively, as deposits were moved to support the increased and more economically advantageous lending activities”.