PORT OF SPAIN, Trinidad, The Trinidad and Tobago government said Wednesday it had published two orders allowing for the increase in deposit insurance coverage to be simultaneously matched by a prudent adjustment to the deposit insurance premium.
Finance Minister Colm Imbert said that he signed both the Central Bank (Deposit Insurance) Order, 2024 and the Central Bank (Deposit Insurance Coverage Limited) Order, 2024, which were both published on August 2 August 29
“Significantly, both Orders will take legal effect on October October 1 are based on careful consideration of funding reviews and assessments, international best practice and consultations with the Central Bank of Trinidad and Tobago and financial sector stakeholders,” Imbert said, adding, “This adjustment is considered to be in the public interest and is intended to provide a further level of protection for persons who deposit their savings in financial institutions.”
Imbert said that the Central Bank (Deposit Insurance Coverage Limited) Order, 2024 increases deposit insurance coverage from TT $125,000 to TT $200,000 (One TT dollar = US$0.16 cents).
He said that the increase in coverage will benefit all depositors and help align coverage levels with the International Monetary Fund’s (IMF) recommended ratios of 1-2 times gross domestic product (GDP) per capita.
“The existing coverage limit, as a ratio of GDP per capita, equates to 0.89. Therefore, increasing the coverage limit to TT $200,000 will increase the ratio to 1.42,” he said.
Imbert said that the Order will also compensate for inflationary pressures, which have cumulatively impacted depositors’ real purchasing power.
“Notably, the Retail Price Index was impacted by 49 percent over the period 2015 to 2022, resulting in a deficit of TT$61,250 per maximum eligible covered deposit at the sustained coverage level,” Imbert said, adding the Order would maintain and surpass alignment with best practice, that is, the International Association of Deposit Insurers’ recommended coverage ratios of 90-95 percent for the number of accounts and 20-30 percent on the value of accounts.
Imbert said that the change in coverage level increases protection from 94 to 96 percent on all eligible deposit accounts and increases the aggregate value of insured deposits from 23 to 33 percent held at licensed financial institutions.
Imbert said that the Central Bank (Deposit Insurance) Order, 2024 increases the premium levied on financial institutions from 0.2 to 0.3 percent over two years, with the first increase taking effect from October October 1that is from 0.2 percent to 0.25 percent and the subsequent increase from 0.25 percent to 0.3 percent taking effect from October October 1
“The cumulative effect of both Orders is that the increase in deposit insurance coverage will be simultaneously matched by a prudent adjustment to the deposit insurance premium levied to ensure the sustainability and effectiveness of the deposit insurance Fund,” Imbert said, adding that it is also intended to adequately fund the deposit insurance reserves and strengthen the resilience of the Fund against potential risks and uncertainties.
Imbert said that, given that the increase in premium levied from 0.2 to 0.3 percent will be introduced via a phased approach over two years, “there will be adequate provision for financial sector stakeholders to adjust.”