This Is Guernsey

By Tom Edwards

A DEPOSIT-guarantee system could one day exist in Guernsey. The Association of Guernsey Banks is to discuss the possibility with the Guernsey Financial Services Commission.

It could mean that savers’ funds are protected in the event of an institution failing. At the moment, there is no such scheme. AGB committee member Alan Bougourd (pictured) rejected any suggestion that there had been any ‘heel dragging’ from the banking community on the matter.

‘This is a priority matter that we’re giving our utmost attention to,’ he said. ‘We’re aware that it’s an issue which is causing people to question why we don’t have a depositors’ protection scheme in Guernsey.

‘We’ll keep up with the consultation. We’re not holding up the process.’

Mr Bougourd said a consultation paper was due from the GFSC and the AGB was looking forward to it with interest.

‘We will give the paper due consideration and will be fully involved in discussions, but it’s not appropriate to say any more until that process is over.’

He would not be drawn on whether the talks could one day lead to the creation of a multi-billion-pound emergency fund.

Last week, Bank of England boss Mervyn King told MPs that banks should pay up front to build such a fund that would help compensate depositors quickly if an institution failed.

His comments come as many banks struggle to rebuild their balance sheets in the wake of the credit crunch and Northern Rock’s collapse in the autumn.

In Guernsey, GFSC director-general Peter Neville has spoken candidly about the need for a depositors’ guarantee system.

He said he had been in favour of one since joining the commission but that it was clear there was no support for it from the industry or government.

A consultation paper is expected to be published this summer.

Article posted on 28th July, 2008 - 2.30pm