Do we need deposit insurance?

By Aaron Humes: The Deposit Insurance Bill, 2019, survived second reading in the House of Representatives despite a significant attack from Senator for the Business Community, Mark Lizarraga.

The Bill proposes the creation of a Deposit Insurance Corporation and Deposit Insurance Fund to protect insured deposits against the risk of loss within an insured limit ($20,000), and other matters.

But Senator Lizarraga called it a “tax on savings” and stated that the fund would fail to cover even the most vulnerable domestic bank – the National Bank of Belize, which has failed on several indicators since its establishment. Government Senator Aldo Salazar disputed this, maintaining that the Fund is available to repay savings holders in the event of a bank failure, ensuring they get back at least part or all of their savings, which has been denied previously.

Furthermore, there is already insurance established through statutory requirements for liquidity and the Central Bank is the established supervisor.

Following the failures of the Atlantic International Bank Limited and Choice Bank Limited, the latter caught up in scandal and the former folding under pressure, according to Senator Stephen Duncan and Attorney General Michael Peyrefitte, it was considered necessary to protect the domestic banks from similar failure and help savings holders hang on to their funds.

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