Like almost every other Barbadian, I used to be unquestioningly confident about our banking system. But in 2018, Barbados banks voted against depositors’ interests. My bank voted for the Government to confiscate some of my retirement savings, and hold the remainder hostage – not allowing me to access all of it until the year 2033. Therefore, they gave me every reason to distrust them.
This year, Credit Suisse, the Swiss bank that lent us money with unfavourable terms, was failing. Fortunately, their depositors were insured to 100,000 Swiss Francs (BD$225,000). In the UK, the insured amount is 85,000 British pounds (BD$215,000). In Canada, it is CAD$100,000 (BD$150,000). In Europe, it is $100,000 Euros (BD$220,000). In the US, it is US$250,000 (BD$500,000).
Despite my distrust of Barbados’ banks – which they have entirely earned, I asked them if my deposits were insured. They proudly said they were – and showed me a certificate from the Barbados Deposit Insurance Corporation (BDIC), that stated that deposits are insured to the maximum amount by law.
If you have never been tricked by banks before, then that response would likely satisfy you. But haven been bitten, I asked how much of my deposits were insured. Their answer was BD$25,000. No, I did not leave out a zero. It is $25,000 per individual depositor per institution.
What that means is that if you received $200,000 for selling your house, and the bank failed before you could use that amount to build or purchase a new one, you may only get back $25,000.
You may try spreading your risk by opening accounts in several financial institutions. But you may get tricked again since some financial institutions are allowed to receive deposits without having any part of it insured with BDIC – like all credit unions, and business accounts (including Church accounts) at banks.
What that means is that if you put that $200,000 in a credit union or in a business account in a bank, and the credit union or bank failed, you may get back nothing since none of your deposits are insured.
To reduce your risks, our options seem to be: (i) deposit your funds in a bank outside of Barbados that provides better insurance, or (ii) deposit a maximum of $25,000 in several Barbados financial institutions with deposit insurance.
The BDIC provides the following list of insured financial institutions that operate in Barbados: Republic Bank, Scotiabank, First Citizens Bank, CIBC FirstCaribbean International Bank, RBC Royal Bank, Sagicor Bank, ANSA Merchant Bank, SigniaGlobe Financial Group, Capita Financial Services, and RF Merchant Bank & Trust.
We are promoting ourselves as a well-regulated financial services jurisdiction, and are encouraging visitors to reside and work in Barbados as part of the Welcome Stamp program. Why would we not first increase the amount of deposit insurance, and expand it to include business accounts to protect the visitors’ money? Why would we not ensure that financial institutions that may take visitors’ deposits be required to insure those deposits?
I suggest that the deposit insurance be increased to at least $100,000 for all depositors – including individuals, businesses and churches. If the banks threaten to increase fees to maintain their profits, then depositors should be offered two levels of deposit insurance, $25,000 and $100,000, and be informed of the fees of both – to allow them to decide whether they want to pay the increased fees.
In the US, deposits are insured with the Federal Deposit Insurance Corporation (FDIC). Between 2008 and 2013, there were 489 US bank failures with US$501 billion in deposits. In 2021 and 2022, there were no US bank failures. So far in 2023, three US banks have failed with US$368 billion in deposits (Source: FDIC). We do not know if the contagion will spread to Barbados banks.
Two things appear certain. One is that no bank or bank regulator will tell the public if the bank is going to fail. The other is that questions about Credit Unions’ deposits being uninsured, and the relatively low deposit insurance amount in banks, will likely be met with excuses and intentions to eventually do something – sometime over the rainbow.
Grenville Phillips II is a Doctor of Engineering and a Charteredy Structural Engineer. He can be reached at NextParty246@gmail.com