20th Anniversary

Celebrating 20 Years of Depositor Confidence: Remarks by the Chairman, Governor Ewart Williams

On the 17th September, 2006 the Deposit Insurance Corporation (DIC) celebrated its 20th Anniversary.

Govenor Ewart Williams, Chairman Deposit Insurance Corporation

As we pause to mark this milestone we can take pride in the fact that while our financial system has never been as diversified, as dynamic or as profitable as it is today, it has at the same time never been more stable. Those familiar with the genesis of the DIC would appreciate the sharp contrast between today's stability and the troubled conditions that prevailed at the time of its formation. They would also recognize the pivotal role which the Corporation has played in restoring and maintaining financial stability in the years following its inception.

The Corporation was established in the mid-1980s when a number of non-bank financial institutions faced acute liquidity and solvency problems. While the situation demanded and elicited an urgent short term response in terms of liquidity support, it also set in motion a wave of structural reforms in the financial sector that saw, in addition to the establishment of the DIC in 1986, a comprehensive updating of financial legislation to strengthen the regulatory framework and enhance supervisory powers.

The fledgling DIC faced the unprecedented challenge of managing the immediate closure of four problem institutions and would oversee the closure of four more, including the local affiliate of an international bank, by May 1993. Against the backdrop of a prolonged economic downturn, the failure of the financial institutions threatened to have contagion effects. The fact that further crisis was averted was due in large measure to the confidence inspired not just by the presence of the DIC, but by the ability of the Corporation to successfully discharge its mandate of liquidating the failed institutions and settling depositors' claims. This initial record of success by the DIC remains a source of public confidence in the institution and by extension in the financial system of Trinidad and Tobago.

New Directions
The DIC is now a mature institution whose activities have evolved to include risk management and portfolio analysis, not least in relation to its own Fund which now stands at $840 million or 9 percent of insured liabilities. The membership spans twenty three financial institutions comprising six commercial banks and 17 non-banking financial institutions licensed under the Financial Institutions Act, 1993.

In May, 2002, the DIC became one of the founding members of the International Association of Deposit Insurers (IADI) which was launched in Basel, Switzerland. Consequently, the Corporation now has a voice in matters pertaining to deposit insurance and in shaping policy and decision making in an international forum.

On the domestic front the Corporation has identified and is working to meet the need for greater public awareness of its role within the financial system, the workings of the Fund and the services offered by the Corporation. With financial innovation has come a proliferation of near-banking products and in this context, educating the public on the extent and limits of insurance coverage has evolved as a key priority for the Corporation in the period ahead.

Outlook
With the domestic financial industry now engaged in an important new round of legislative reforms a key challenge for the DIC will be to ensure that its own enabling legislation evolves in step with changes in the rest of the financial sector.

This will be a major focus in the coming months.  The Corporation also plans to accelerate technical work to reassess the optimal value of the Fund, and to inform possible changes in premium computation and in the level of depositor protection.

In July, 2005 the Corporation became a member of the newly established Regulatory Policy Council formed, among other things, to provide financial sector regulators with a forum for synthesizing views on cross-cutting issues and to coordinate financial services supervisory activities. Other members include the Financial Institutions Supervision Department of the Central Bank, the Ministry of Finance, the Trinidad and Tobago Stock Exchange, and the Trinidad and Tobago Securities Exchange Commission. The Council is chaired by the Governor of the Central Bank. Within this framework the DIC will be playing a key role in strengthening the supervision of the financial sector.

It is with great pride that the DIC celebrates 20 Years of Depositor Confidence. We are committed to maintaining this confidence in the years ahead.

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