Important changes are being made to the Deposit Insurance Act that will mean better protection for depositors’ funds in some financial institutions.

The Jamaica Deposit Insurance Corporation (JDIC), is mandated to manage the Jamaica Deposit Insurance Scheme (JDIS) which protects depositors from loss, up to a limit of $600,000, in the event of bank insolvency.

Antoinette McKain, chief executive officer of the JDIC told the Business Observer that amendments to the Act are in keeping with “best practise initiatives” in other jurisdictions and best policy decisions in the interest of the public.

“We have recently had the approval of the Legislation Committee of the Cabinet of a number of amendments to the Deposit Insurance Act to both improve and increase the Corporation’s operational impact and to be better able to meet the commercial expectations of depositors. We expect these to be passed into law shortly,” McKain told the Business Observer.

While the dollar amount of the protection has not been increased, the regulations should mean better protection for investors in different types of investments and institutions.

The proposed changes will see coverage being extended to every person on a trust or nominee account. As the law stands, only the trustee or the nominee named on the bank account would benefit from the coverage of $600,000. The amendment will ensure that every beneficiary of the trust or nominee account is now covered. Therefore, if there are three persons on the account, each would be covered to the maximum $600,000, instead of what now obtains where only the trustee or nominee is covered.

The nominee is the person in whose name the account opened and who is the depositor on the records of the bank.

Joint accounts will also be affected by the amendments.

“In relation to joint accounts the law now stipulates that the joint account is to be automatically split in equal shares for payments to be made. With an amendment to the Act the JDIC will recognise the records of the bank, which would reflect the interest of each joint holder as they had intended it at the time the account was opened,” McKain added. “JDIC will pay out on joint accounts based on those records,” she said.

The JDIC will also protect investors for deposits held separately in different banks in the case of mergers and acquisitions. That is, depositors will receive insurance protection for deposits held in each bank, even if the banks merge and become a single entity. McKain said in such a case, the deposits will be treated as separate for two years for the purpose of deposit insurance entitlement and payment.

“In that two year period depositors can take steps to maximise their future entitlement to deposit insurance by placing some of their funds in another bank,” she said.

The amendments will also improve the speed at which the funds are paid out to depositors in the event of a bank’s failure. Among the amendments, the JDIC will be able to utilise another bank to pay out to depositors in the event that the depositor’s bank failed. Depositors will be therefore able to access payment at the branch of a bank that is likely to be closest to where they live.

In the case of bank failure, there will also be a specifically determined date on which the accrual of interest will cease and the conversion rate for foreign currency deposit accounts will be done to ensure that payments can be computed more efficiently. The date will be coincident with the closure of the failed bank, McKain said.

“It is expected also that JDIC will be given the power to lend in circumstances to further its objects under the Deposit Insurance Act and allow for the JDIC to participate in the least costly methods of protecting depositors,” she said. “It should be noted that all the proposed amendments are already internationally accepted practices and norms of most other deposit agencies.”