Document Type

Case Study

Case Series

Blanket Guarantees

JEL Codes

G01, G28


After a period of sustained distress in the early 1990s, Jamaican financial institutions faced significant liquidity issues by 1996, evidenced by runs on banks by depositors. The government responded by creating the Financial Sector Adjustment Company (FINSAC) on January 29, 1997, to rehabilitate weak financial institutions and administer a blanket guarantee on financial sector liabilities. The blanket guarantee covered all deposit-taking financial institutions, life insurance policy providers, and pension funds registered under the Banking Act, Financial Institutions Act, and Insurance Act. Within eligible institutions, the blanket guarantee covered depositors’ funds in licensed deposit-taking institutions, pension funds managed by authorized institutions, and policyholders’ funds in insurance companies. The government funded the blanket guarantee through domestic borrowing and FINSAC-issued notes that were fully guaranteed by the government. In total, the blanket guarantee covered JMD 262.1 billion (USD 7 billion) in liabilities. Observers credited the guarantee with restoring public confidence, although Jamaica’s crisis was among the most expensive in recent history as a percentage of GDP. By mid 1998, FINSAC had spent JMD 73.5 billion (USD 1.9 billion) providing support to the financial sector, with JMD 68 billion going toward support for the banking sector, covering 1.5 million depositors. The Deposit Insurance Act of 1998 established a limited deposit insurance scheme to replace the blanket guarantee. This deposit insurance scheme came into effect on August 31, 1998, initially covering depositors in eligible institutions up to JMD 200,000 per account and gradually raising the limit to JMD 1.2 million as of 2020.

Date Revised