Summary and Commentary: On the Depositor Protection (Amendment) Act 2020

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The Depositors Protection (Amendment) Act 2020 (the “Act”) came into force on 1 September 2020. The Act was enacted to amend the Depositors Protection Act 1999 (the “Main Act”) ,

The Principal Act established the Deposit Insurance Fund (the “Fund”) for the purpose of protecting Bahamian dollar depositors.

The stated purposes of the law are:

  1. Streamline the role and functions of the Deposit Insurance Corporation;
  2. Provide enhanced protections for depositors and related purposes.

1. DEPOSIT INSURANCE FUNDS

1.1. Articles 3 to 7 of the Law amend, repeal and insert provisions relating to Part II of the Principal Law which deals with the establishment, membership and financing of the Deposit Guarantee Fund (the “Fund”).

1.2. Section 3 inserts a new subsection 3(3) into the Principal Act to provide for the composition of the deposit insurance fund, providing that the fund will henceforth be composed of-

  1. “initial contributions, special contributions and premiums paid by member institutions;
  2. sums payable by the Central Bank under this law;
  3. the sums voted by Parliament for the application of this law;
  4. sums borrowed by the Company for the purposes of this law;
  5. amounts realized from investment proceeds;
  6. sums which may arise from the expenses or operations of the Fund; and
  7. liquidator dividends consisting of income from the orderly winding-up process or the sale of the assets of a failing member institution.”.

1.3. Notably, Section 4 of the Act inserts a new Section 3A into the Principal Act to clarify the purposes of the company, namely (a) to provide insurance against the loss of some or all of the deposits; (b) promote and otherwise contribute to the stability of the Bahamian financial system. The new Section 3(A)(2) provides that the Company shall have ancillary power to do in The Bahamas or elsewhere, anything necessary to facilitate, or is incidental or conducive to the accomplishment of its objects and the exercise of its functions. under this law. “.

1.4. Section 5 repeals and replaces Section 4 of the Principal Act, in particular the proposed replacement of Section 4 now makes membership of the Fund compulsory for every credit union registered under the Credit Unions Act 2015 Credit of the Bahamas (No. 9 of 2015).

1.5. Section 6 of the Act amends the Principal Act and deletes and replaces a number of sections, including new section 5(6) which provides for an increase in the annual premiums payable by members of the Fund by one twentieth of one percent to one tenth. one percent of insured deposits.

1.6. Article 7 of the Law makes an important amendment to Article 6 of the Principal Law in that it aims, among other things, to reduce, over a period prescribed by the Law, the time limit within which the Company must carry out payments to depositors. Whereas the current Article 6(8) of the Principal Law states that “payments to depositors of closed institutions shall begin no later than six months after the closure of the member institution” Section 7(9) of the Act proposes that section 6(8) and (9) be deleted and replaced by a new section 6(8) which provides that the time limit applicable for payments on insured deposits where a member institution:

  1. the banking license is revoked by the Central Bank;
  2. registration as a credit union is canceled by the Central Bank;
  3. the deposit insurance policy is terminated following the establishment of an insurable deposit; will be:
    1. until December 31, 2022, twenty cases days later;
    2. from January 1, 2023 to December 31, 2025, ten working days later;
    3. from January 1, 2026 to December 31, 2030, Seven business days later.

2. DEPOSIT INSURANCE CORPORATION (THE “CORPORATION”)

2.1. Sections 8 to 18 of the Act amend, repeal and insert provisions relating to Part III of the main Act which deals specifically with the company. These sections make changes to the configuration, procedure and operation of the Company, the most notable of these changes are detailed below.

2.2. Article 8 of the law modifies article 7 of the principal law in order, in particular:

  1. Give the Company the power to acquire, hold and alienate movable and immovable property of any kind and to enter into contracts and do all things necessary for the performance of its functions; and to
  2. authorize the Minister to lend funds to the Corporation out of the Consolidated Fund.

2.3. Section 9 provides for a Board of Directors of the Society which shall be responsible for the policy, management and affairs of the Society.

2.4. The Act also requires the Company to establish a code of conduct as well as a list of proposed circumstances in which directors must disclose their conflicts of interest to the Company.

2.5. Section 15 of the Act amends Section 15 of the Principal Act by deleting and replacing paragraph 15(e) to (i) authorize the deduction from the Fund of sums due to a depositor, only up to the amount of the loan or payment as due or past due, and (ii) to offset deposits given as security.

2.6. Section 16 of the Act repeals and replaces Section 16 of the Principal Act by further providing a modified procedure to be followed by the company for the purpose of making deposit insurance payments to depositors.

2.7. The law also removes the requirement imposed by Article 18 of the main law that when an institution closes “all deposit accounts of the institution are immediately frozen”, the remaining requirement is “when an institution is closed, interest on the deposits ceases to accrue immediately, whether or not”. not the deposit maturity date was beyond the closing date.

2.8. Article 18 of the Law provides detailed requirements for the annual audit of the accounts of the Company, the requirements include:

  • the statement of accounts of the Company is audited each year by independent external auditors appointed by the Board with the approval of the Minister;
  • that the Minister table the Corporation’s annual report and statement of accounts in Parliament; and
  • for the Company to publish on its website the reports and the statement of accounts submitted to the Minister under paragraph.

3. SPECIFIC POWERS OF THE CORPORATION

3.1. Sections 19 to 24 of the Act amend, repeal and insert provisions relating to Part IV of the Principal Act which specifically deals with the special powers of the company.

3.2. Section 19 of the Act repeals and replaces Section 21 of the Principal Act and essentially proposes to condense all of the special powers of the Society into that section. Specifically, the section as amended by section 19 of the Act provides that the Inspector of Banks and Trust Companies or any other person appointed by the Central Bank may examine member institutions on behalf of the company to allow the company to assess, among other things, the reliability of depositors’ registrations.

3.3. Sections 22 through 24 and Section 26 of Part IV of the Principal Act are repealed by statute, including, but not limited to, corporate resolution powers and “Part IV offences” listed in article 26 of the principal law.

4. MISCELLANEOUS

4.1. Sections 25 to 28 of the Act amend, repeal and insert provisions relating to Part V of the Principal Act which deals with Miscellaneous Provisions.

4.2. These items, among others,

I. Amend the requirements for finding an offense against a director, officer, servant, employee (including a former director, officer, servant or employee) of a Member Institution;

ii. Arrange for the Company to establish Articles and Regulations on the recommendation of the Central Bank – the section provides guidance regarding the purposes for which the Company may establish Articles and Regulations;

iii. Provide much more specific and extensive confidentiality obligations to be imposed on directors, officers, employees or agents of the Corporation with respect to confidential information obtained in the performance of their duties or in the performance of their duties.

5. NEW APPENDIX – CONSTITUTION AND FUNCTIONS OF THE COUNCIL

5.1. Article 28 of the law inserts a new schedule in the main law detailing the constitution and functions of the board of directors of the company.

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