News Release: Hamilton, Bermuda – Minister of Finance Curtis Dickinson provided an overview of the implementation of a Deposit Insurance Scheme in Bermuda and the establishment of the Bermuda Deposit Insurance Corporation, which is responsible for managing the Scheme.
Minister Dickinson said: “Deposit insurance is a guarantee to eligible depositors in a local financial institution that they will be compensated up to a maximum specified amount should that institution fail, thereby providing them with some protection against losing all of their money deposited.
“Unlike many other jurisdictions that have consumer protections in place against such a failure, Bermuda did not, prior to the establishment of the Deposit Insurance Act in 2011.
“Instead, Bermuda historically had to rely almost exclusively on the Bermuda Monetary Authority to regulate and supervise local financial institutions to ensure that they conduct their business in a prudent manner.
“The global financial crisis of 2008 affected many businesses and people in Bermuda, whether directly or indirectly. Because of that, businesses and people began to pay more attention to the systems that were in place that could protect them in the event of the failure of a financial institution.
“In the aftermath of those events, the Deposit Insurance Scheme was established and it now plays an important role in providing an enhanced financial safety net to small retail depositors in Bermuda.
“The Deposit Insurance Scheme has three principal objectives:
- To protect small depositors, as they are more likely to have all or most of their financial assets in the form of bank deposits and are therefore more likely to lose all of their money in the event of a bank failure;
- To promote stability in Bermuda’s financial system and economy by providing prompt reimbursement or access to insured depositors’ funds in the event of a failure of a member financial institution; and
- To enhance Bermuda’s attractiveness as a world-class financial jurisdiction as countries look to regulation and insurance as a way of gauging the stability and security of the financial environment in any given country.
“The protection provided by the Scheme is limited to Bermuda Dollar deposits and provides compensation up to a maximum of $25,000 [twenty-five thousand dollars] in total for each eligible depositor at each member financial institution.
“The Scheme applies to the local operations only of qualifying Scheme members.
“I also note very importantly that the Deposit Insurance Scheme is in its early stages of establishment and it is not expected that the Scheme will provide an effective resolution option for at least another 15-20 years as the Deposit Insurance Fund is accumulating through premiums paid and earned investment income.
“I am especially grateful to the 4 licensed banks, HSBC Bermuda, The Bank of N.T. Butterfield, Clarien Bank and Bermuda Commercial Bank who have contributed to the Scheme since it commenced operations in 2016.
“I also welcome the BIU Members’ Credit Union who are presently being integrated into the Scheme.
“In closing, I would like to take this opportunity to thank the Board of the BDIC, the member firms of the Bermuda Bankers Association and the many others, who have contributed, through several years of hard and steady work, to bring to fruition this important and valuable Scheme which contributes towards creating an enhanced financial safety net in Bermuda.”