THE funds set aside as a safety net to reimburse depositors in the event of a bank failure has grown to a record of more than $40 billion with expectations that it could reach $45 billion by March next year.

The revelation and the projection were unveiled in the recently released Economic and Social Survey of Jamaica 2023 (ESSJ 2023) — an annual publication of the Planning Institute of Jamaica.

Figures published in the ESSJ 2023 show that up to the end of December last year, the aptly named Deposit Insurance Fund (DIF), set up as an insurance for depositors funds in banks and managed by the Jamaica Deposit Insurance Corporation (JDIC), reflected a balance of $41.3 billion. That is 21.6 per cent more than it was at the end of the prior year.

However, turning to projections running in line with the fiscal year that began on April 1 and is scheduled to end on March 31 next year, the ESSJ 2023 figures show the JDIC is expecting a net surplus of $4.34 billion and its deposit insurance fund balance to surpass $45 billion.

Primarily made up of annual premiums collected from commercial banks, merchant banks and building societies, as well as sums earned from investing those premiums, the fund was set up as part of the Deposit Insurance Scheme (DIS), pursuant to the passing of the Deposit Insurance Act in 1998. Its main objective is to protect depositors of deposit-taking institutions (DTIs) regulated by the Bank of Jamaica (BOJ), insuring them against loss up to the current prescribed maximum limit of 1.2 million per depositor, per DTI and ownership category (registered as either individual/single ownership, joint, business, trust or nominee accounts).

“At this coverage limit, 96.5 per cent of the total number of deposit accounts in the banking system is covered with the average balance held in a deposit account as at December 31, 2023 being $345, 080,” data contained in the ESSJ 2023 outlined.

The total deposits held in deposit-taking institutions regulated by the Bank of Jamaica was $1.85 trillion at the end of December. It grew to $1.86 trillion at the end of March.

“The DIF balance represented 7.4 per cent of the total estimated insured deposits in the banking system relative to JDIC’s lower limit of its target reserve ratio of 8.0 per cent to 10.0 per cent — an increase of 1.0 percentage point when compared with December 2022,” the data further indicated, while noting that there was more than 5.17 million insurable deposit accounts in the system at December 31, 2023.

Made up of some eight commercial banks, two building societies, and one merchant bank, membership in the DIS during 2023 remain unchanged at 11 institutions. This, as plans remain ongoing to widen the institution’s coverage net to include players in the more-than-20-member credit union industry. The entity also continues to work with bodies such as the Financial Services Commission to see how best it can provide protection for customers of investment firms, insurance companies and pension funds.

Total assets held by DTIs at the end of December last year went up by approximately 2.1 per cent to total $2.7 trillion. Of this amount, $2.5 trillion was accounted for by the commercial banks and $199 billion for building societies

The JDIC, now moving to add newer protection schemes to minimise the potential occurrence and impact of financial crises, said the implementation of ongoing enhancements to the financial system regulatory framework will significantly help to boost its soundness and public confidence.

As part of the added measures, the JDIC said it will further “enhance the frameworks and structures to improve data protection as it monitor developments in digital financial solution products and services offered by DTIs and non-DTIs along with emerging sector trends to ensure appropriate policy responses.”

The reform measures should see the addition of liquidity, capital adequacy, macro prudential regulations, crises management and effective resolution frameworks for financial institutions. Implementation of these and other globally compliant reforms is among the entity’s programmed activities for this fiscal year.

“Additionally, the JDIC will be pursuing the implementation of guidelines for standard record-keeping requirements for all policyholders,” Public Bodies Estimates of Revenue and Expenditure data further noted.