Deposit protection is a mandatory part of the business of retail banking. When banks take deposits from savers and lend out funds to borrowers, default risk subsists. The business model and license of financial institutions allows them to lend out more money than they hold in liquid assets. A mismatch between assets and liabilities then comes at the expense of the bank and ultimately its customers. As a consequence, public confidence in the risk mitigation and solution-oriented ability of the bank and its regulator, as well as the stability of the financial system should be maintained. This is for one part done by the applicable resolution procedures, and for another part via adequate depositor protection.

Both the developed world and developing countries value the potential of deposit protection. However, since local customs and purchasing power parity are domestic concerns, international uniformity of deposit protection schemes is difficult. To streamline an equal playing field, developing countries that collaborate in a union or federal understanding may adopt an identical framework. The Bahamas defined its own protective framework for failing banks and although comprehensive, depositor protection only applies to Bahamian dollar deposits. All other currencies, whether these belong to personal accounts of residents and international corporate assets, are excluded from coverage.

The Deposit Insurance Corporation of the Bahamas administers the Deposit Insurance Fund. It is applicable to licensed and thus supervised financial institutions holding accounts in Bahamian dollars. Central Bank conformed licenses allow bank and trust companies to take deposits and make loans to their customers. Distinct and inconvenient events occur where licensed and supervised financial institutions have a non-resident designation and refrain from taking on deposits in Bahamian dollars. The fund then does not cover the account balances of creditors when such financial institutions fail or are likely to fail. This is a concerning matter when banks are placed under external and statutory administration by the Central Bank to impose a swift resolution for the troubled bank. An example is the uncertainty that follows Lucayas Bank since the end of October 2021.

Answering the question whether the Bahamian Deposit Insurance Fund protects all account holders is therefore straightforward. The fund originates from the 1999 Protection of Depositors Act. The Act was emended in 2020 and refers to the protection and support of Bahamian dollar deposits. The line of business and location of the accountholder is not relevant, it is the currency that determines the first line of approval or decline for an alleged secured deposit. This limitation ensures a fast and efficient procedure for repayment.