00:00Finance Minister Kom Inbert has signed two orders which he says will ensure the
00:04sustainability and effectiveness of the deposit insurance fund and strengthen
00:09its resilience against risks and uncertainties. The first order signed on
00:14August 28th will take effect from October 1st 2024 and increases
00:19insurance coverage from TT $125,000 to $200,000. In a statement issued on
00:27Wednesday, Inbert said the move was made in the public interest and came after
00:32careful consideration of funding reviews and assessments, international best
00:36practice and consultations with the Central Bank. He says it will provide a
00:41further level of protection for persons who deposit their savings in financial
00:46institutions. Economist Dr. Valmiki Arjun agrees. What the DIC is doing is
00:52increasing the insurance coverage for depositors from $125,000 to $200,000
00:59which means that in the very unlikely event of a bank failure and I want to
01:05stress a very unlikely event of a bank failure locally, depositors would be
01:11entitled to immediately get back up to $200,000 of their deposits. The present
01:17level of coverage as a ratio of GDP per capita is 0.89 and this move will
01:24adjust it to 1.42 in alignment with the IMF's recommended ratios for coverage of
01:30one to two times GDP per capita. It is important to stress that bank failures
01:37in this country are very unlikely to happen because banks are tightly
01:42regulated and are very highly capitalized so the risk of banks going
01:46under locally are slim to none. A larger portion of depositors funds are
01:51essentially protected and by protecting more of depositors funds it is going to
01:56increase consumer confidence in the banking system. Depositors will feel more
02:00secure knowing that a larger portion of their funds are protected and as a
02:04result of feeling more secure individuals might be more inclined to
02:08save more which would increase the pool of domestic funds available for
02:13It is also expected the statement says to compensate for inflationary pressures
02:17which have impacted the purchasing power of depositors. From the bank's
02:21perspective they will have to pay more and that's where the second order signed
02:26by Minister Inbird comes in. It increases the premium levied on financial
02:31institutions from 0.2 to 0.3 percent over a two-year period. It will take
02:37effect in a tarred manner with the first increase taking effect from October 1st
02:412024 and goes from 0.2 percent to 0.25 percent and the subsequent increase from
02:480.25 percent to 0.3 percent will take effect from October 1st 2025. While this
02:57does represent an increased cost for banks it appears to be a
03:03small increase a small amount and one would hope that banks would be willing
03:08to absorb this cost and not pass it on to consumers in the form of higher
03:13charges especially since this this premium is increasing in a phased manner
03:17and banks also have higher liquidity since the minimum reserve requirement
03:22was recently lowered. The change in the coverage level increases protection
03:26from 94% to 96% on all eligible number of deposit accounts. The Bankers
03:34Association of TNT did not offer any response on this new development up to
03:40news time. Arvishi Tamwari, Rupanarayan, TV6 News.
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