STATEMENT BY PREMIER AND MINISTER OF FINANCE HONOURABLE ANDREW A. FAHIE
DURING THE FIFTH SITTING OF THE SECOND SESSION OF THE FOURTH HOUSE OF ASSEMBLY
Thursday, 20th February, 2020
Establishment of the Virgin Islands Deposit Insurance Corporation – Consultancy
Mister Speaker, I take this opportunity to inform this Honourable House of the Deposit Insurance Policy that your Government intends to implement in 2020.
The implementation of this policy will bring long-overdue protection and relief to all Virgin Islanders and residents. It will breathe life into legislation that was passed in this House of Assembly and which has been laying in a state of suspended animation for almost four years.
The Virgin Islands Deposit Insurance Act, 2016 sought to establish the Virgin Islands Deposit Insurance Corporation and a Deposit Insurance Fund for the purpose of providing protection to depositors, especially those who some may describe as small and unsophisticated, as they are not in a position to assess the risks of the institution in which they may put their hard-earned savings.
The full establishment of the Corporation and Fund would meet international requirements and address the recommendations found in the Michael Foot Report of 2009 and the International Monetary Fund, Financial Sector Assessment Program (FSAP) in 2010.
A deposit insurance scheme would assist in achieving and maintaining confidence in the stability of deposit-taking institutions, and in reducing the probability of contagious deposit runs on these institutions, which could jeopardise the health of the financial system as a whole if such an instance were to occur.
Establishment of such a scheme would provide your Government, in conjunction with the Supervisory and Regulatory authorities, with a more formal mechanism for dealing with problem financial institutions, with a view to protecting depositors and their funds.
The scheme will, therefore, replace discretion with an established legal regime, thus allowing for a faster, and more consistent administrative process. This policy will allow the Government and the relevant authorities to have an avenue to pursue recourse for citizens in certain circumstances, where otherwise they would have had no options.
Our Territory boasts of a relatively stable banking sector.
Not too long ago in 2007-08, the world was shaken by the global financial crisis. Currently, there are five the banks operating in the BVI as a subsidiary or a branch. This leaves the Territory banking institution more susceptible to external forces in such a crisis.
Since the passage of the Act, the Ministry of Finance has been tasked with the development of subsidiary legislation and resolution powers to support the Act.
Mister Speaker, identifying individuals who possess the expertise in this specialised field have proven to be elusive, and as a result, the Ministry of Finance has been having difficulties sourcing such a specialist that can address the legal requirements required to develop a framework of establishing a DIC.
Through persistence and dedication to task, your Government was able to enter into a Consultancy Contract with Ms. Vilma Rosa Leon-York to provide the necessary legal and resolution framework for a cutting edge Deposit Insurance Corporation known as DIC.
Ms. Leon-York is a practitioner and an advisor in both the legal and resolution framework fields for over fifteen years, providing technical assistance globally and comes to us highly recommended. She has provided technical assistance on the establishment and/or reforming of deposit insurance schemes and resolution frameworks, and on the management of financial system related events.
The work is expected to take approximately 928 hours or 24 weeks to complete over a one-year period. Simultaneously, your Government will be instituting the Board which will commence the other logistical works required for the proper operation of the Corporation and its Board.
I take this opportunity to inform this Honourable House that it is your Government’s intention for the Virgin Islands Deposit Insurance Corporation to be implemented before 1 January, 2021. This would give the financial institutions sufficient time to make the necessary preparations and for full compliance with the referenced legislation.
The records would show that banks operating in the BVI have been quite profitable over the years and at the same time not offering any protection to depositors. We are operating in a global environment and if the BVI is to remain competitive, our banking institutions must keep pace.
We have been operating by faith and through the rigorous oversight by the Financial Services Commission to secure our deposits.
May I say that such ideology and practice are no longer sufficient in the 21st Century.
Deposit Insurance is not new to many of the banks operating in the BVI because they are required to offer such protection to their customers in other jurisdictions in which they operate.
Such protection must therefore be offered to the people and businesses of the BVI.
Mister Speaker, I would be following this progress closely, and I shall report to this Honourable House on our achievements towards the establishment of the Virgin Islands Deposit Insurance Corporation as we proceed.
Mister Speaker, I thank you.