Antoinette McKain, new CEO of the Jamaica Deposit Insurance Corporation, as depicted in the agency's annual report for the year 2005/06. - Contributed

The Deposit Insurance Fund, built from premiums payable by banks and other takers of deposits, has grown to $3.1 billion, according to new chief executive of the Jamaica Deposit Insurance Company, Antoinette McKain.

In its first year of operation, the fund stood at $183.5 million.

The fund was created as buffer for savers in the event of the failure of an institution in which their funds are reposited.

As of July 1, the cap on payouts from the fund will increase to $600,000, double its current position. The cap was last revised up from $200,000 in 2001.

McKain said, however, that the greater degree of protection should not be a substitute for bank clients policing their savings.

Minimise wholesale financial crisis

"Deposit insurance is intended to minimise the potential of a wholesale financial crisis on a depositor, but this cap only represents a fraction of the full deposit, meaning depositors will have to pay due diligence to their deposits," she warned.

Some 15 deposit-taking institutions pay premiums equivalent to 0.15 per cent of their deposits into the fund.

The increase in the cap has not affected the premium rate payable by the 15 institutions covered under the deposit scheme. Combined, they hold some $370 billion.

The deposit scheme is financed by the premiums payable by the institutions regulated by the Bank of Jamaica, including banks, building societies, merchant banks and trust companies - 15 in total.

The credit unions - of which there are about 43 in Jamaica - are also to be brought into the scheme once the regulatory framework for the sector is agreed and finalised by the central bank.

business@gleanerjm.com