The Deposit Insurance Bill was unanimously passed in the National Assembly during a late-night sitting on Friday, paving the way for the establishment of a Deposit Insurance Fund that will act as a source of finance to reimburse small depositors in the event that a financial institution collapses.

Though there were minor concerns, the Opposition People’s Progressive Party (PPP) Members of Parliament threw their support behind the Government-sponsored bill, saying that it was a timely intervention.

In opening the debate, Minister of Finance Winston Jordan said with more than two-thirds of member countries under the International Monetary Fund (IMF) having experienced the insolvency of at least one bank, it is only imperative that Guyana put the necessary systems in place to safeguard the hard-earned financial resources of its people.

He took the National Assembly back to January 2009 when Trinidad and Tobago’s largest conglomerate at the time, Colonial Life Insurance Company (CLICO) collapsed, leaving thousands of Guyanese out in the cold. Had such a Deposit Insurance Fund been in place, the impact would not have been so devastating, the Finance Minister argued.

“Had the scheme been in place 14 years ago, almost all of the depositors of the globe trust would have been reimbursed by now. It is a failure of the system, but it is this government that is seeking to correct that in the event that such an unlikely event occurs down the road,” he said.

To date, over 50 per cent of the countries around the world have moved to set up Deposit Insurance Schemes, having considered instability banks face at times. Once the Deposit Insurance Bill is assented to by President David Granger, a Deposit Insurance Fund and Deposit Insurance Corporation will be established. The fund will allow depositors to receive a maximum of $2M in reimbursement within 30 days of a financial institutions’ insolvency.
PPP Member of Parliament, Joseph Hamilton, was the first among those sitting on the Opposition benches to endorse the bill.

“In my respective view, I feel that this piece of legislation is useful, it is necessary, it is timely and I believe that with this piece of legislation, the citizens who bank their hard- earn cash in banks will [for the first time] feel safe and can feel safe in the event there is some situation with a banking institution,” Hamilton told the House.
His colleagues, Nigel Dharamlall and Anil Nandlall also offered their party’s support for the legislation but expressed minor concerns.

Dharamlall questioned the motive behind the bill, and contended the mechanism is being put in place in light of worsening situations on the economic front. But Minister of Business, Dominic Gaskin, told the House that the PPP has a history of over exaggerating situations to create hysteria among the masses. Minister Gaskin told the House that the Deposit Insurance Bill complements the Bank of Guyana Amendment Bill which was also passed in the House this week.

The explanatory memorandum of the bill notes that Deposit Insurance Bill is one of the components of the financial sector safety net, alongside supervision and emergency liquidity assistance. It said that the Bill seeks to address the “inherent instability of maturity transformation in the banking sector, that is, the financing of long-term assets through the issuance of demand or short-dated deposits, which makes banks vulnerable to depositor runs and to contagion from less-sound institutions.

The advent of deposit insurance has proven to prevent major banking crises the world over and plays a central role in maintaining financial stability”.