Posted on

Financial institutions should provide deposit protection


Editor: As a matter for discussion, one asks is it not high time that we here in SVG had some form of DEPOSIT PROTECTION for depositors, savers and investors in SVG.

Am I alone in calling for “deposit protection” for savers, investors and depositors in all financial institutions in SVG? Is it not high time we have some form of deposit protection scheme here?{{more}} Can someone please say what is stopping us from having a “government-backed Financial Services Compensation Scheme” for the investments and deposits that we are making here in SVG!

As a starting point here is some historic information for the UK:

Every UK REGULATED account gets £85,000 protection.

“All UK regulated current or savings accounts and cash ISAs in banks, building societies and credit unions are covered by the government-backed Financial Services Compensation Scheme (FSCS). So if the bank fails, you’d get back up to £85,000 per person per financial institution; the majority should get it within seven days. Approx: $340,000.

Not all UK savings are UK regulated.

Most banks, including foreign-owned ones like Spain’s Santander, are UK regulated. Yet a few EU-owned banks opt for a ‘passport scheme’ where you rely on protection primarily from their HOME government.

This includes ING Direct, Anglo-Irish, Triodos, Bank of Cyprus.

The amount is protected double in joint accounts.

Cash in joint accounts counts as half each, so together you’ve £170,000 protection.

Approx protection: $680,000

If you have an individual account with the same bank, half the joint savings count for your total exposure and any amount over £85,000 isn’t protected.

NOTE: An institution is NOT the same as a bank.

The protection is per institution and not account, so four accounts with one bank still only get £85,000. The definition of ‘institution’ depends on a bank’s licence and giant banking conglomerates make it complex to know.

E.g. Halifax and Bank of Scotland (sister banks) accounts are only covered up to £85,000 combined. RBS and NatWest are also sisters, but the £85,000 limits are SEPARATE.

Thus spread savings to keep them safe. (UK experience)

For perfect safety, save no more than £83,000 per institution (the extra £2,000 gives room for interest). Spreading can be worth it, even if you’ve under £85,000; if your bank went bust, the money may be inaccessible while you get it back. Using two accounts mitigates the risk.”

However, compare and contrast our lamentable situation here in SVG and one immediately observes that we are in a “waste land” in respect of deposit protection; but why is that so? And further, why does it continue to be so even after the recent BAICO/CLICO and the Building and Loan experience? Why are we so badly treated by the institutions?