Deposit Guarantee Scheme BVI

The British Virgin Islands (BVI) is a well-established and leading international financial center. Its legal system is based on common law, equitable principles, local legislation and statutory law. The financial industry is regulated by the Banks and Trust Companies Act and to a lesser extent the Business Companies Act. The local Insolvency Act and Insolvency Rules are in an international setting complemented by the UNCITRAL Model Law on Cross-Border Insolvency, while provisional liquidation is considered a remedy to assist with global restructuring.

Banks and other credit institutions in the Virgin Islands are well capitalized and supervised by the Financial Services Commission (FSC). The Financial Sector Assessment Program of the IMF however addressed the lack of bank deposit protection in the BVI. In 2016, the first steps were taken to establish a legal and resolution framework, the Virgin Islands Deposit Insurance Act and a Deposit Insurance Fund.

Deposit Guarantee Scheme (British Virgin Islands): The legal framework and subsidiary legislation for the implementation of the Deposit Insurance Fund is in progress. This means that deposit protection via traditional deposit guarantee schemes for bank account holders is currently nonexistent.

Objectives of Deposit Insurance: Deposit Guarantee Schemes promote the stability of the financial system and maintain public confidence in that stability. Bank deposit insurance in the BVI seeks to protect small, unsophisticated and vulnerable creditors of supervised financial institutions that experience financial distress. It is alleged that this group of creditors is not in a position to assess the risks involved.

Insurable Deposits: The Virgin Islands Deposit Insurance Act (No. 7 of 2016) defines an insurable deposit as a deposit received or held by a member institution from or on behalf of a depositors other than a deposit from another member institution, a statutory body, authority or government company.

Secured Deposit Limit: To be determined when the resolution framework and the VIDI Corporation are established.

Regulatory Intervention: Financial distress in a member institution may trigger regulatory intervention. This occurs when the institution does not act in the interest of and for the protection of creditors, when it is unable to pay its debts, when it fails to satisfy prudential criteria and minimum solvency standards, or when court proceedings for the winding up of the institution are started.

Payout Events: Payments of insured deposits are made out of the fund in the following circumstances: a) the banking license of the member is revoked by the FSC, b) a resolution procedure or winding up order against the member institution is passed, c) a member institution is unable to repay deposits when they are due, d) the policy of deposit insurance is cancelled, or e) financial assistance is required to avoid a member institution from failing.

Claim Submission Timeframe: Eligible creditors can file their claim with the fund within 18 months after the payout event is determined and announced by the Corporation. Payments from the fund are transferred to the account of the creditor at another member institution.

Financial Structure: All financial institutions that are licensed under the Banks and Trust Companies Act and take deposits that are insurable under the Deposit Insurance Act shall be deemed members of the corporation. Authorized start-up capital of $ 4 Million is provided by the Government and member institutions pay compulsory premiums to receive the policy and certificate of deposit insurance. Members also pay annual premiums to the fund based on the value of the insured deposits on its risk profile.

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