AN ANNOUNCEMENT yesterday that the Policy Council had agreed to ‘a measured course of action which will maintain confidence in the local banking sector and address the concerns of local depositors’ will be followed by an immediate question from islanders: What, by doing nothing?
For while other territories are either increasing the protection given to investors or making it unlimited, Guernsey is taking no such steps to follow suit. This contrasts strongly with Jersey, where its chief minister pledged to take whatever steps were necessary to implement a savings protection scheme providing total security for residents.
And it is likely to reinforce the criticisms voiced on Thursday by the Institute of Directors annual conference that there is inadequate cooperation between the two Bailiwicks, especially on matters of substance.
In a day of change, Jersey said it was delaying announcing the details of its own scheme pending discussions with Guernsey, initially leading to speculation that a joint Channel Islands system might be announced. It later emerged, however, that far from there being a CI package, Guernsey was adopting a course counter to Jersey and not taking steps to safeguard savings in local banks.
That is likely to lead to criticism of the council at a time when there is widespread concern about the security of banks and people are opening accounts with Irish institutions to take advantage of that country’s guarantee of a 100% refund in the event of a collapse.
In comparison, Guernsey’s ‘measured course of action’ looks like far too little, far too late.
Yet the whole point of a protection scheme is that it will, at some stage, be called into action. What then?
Deposits here total £128bn so the issue is who underwrites that potential liability and how they fund it.
Even if only 5% of deposits qualified for a ‘locals only’ protection scheme backed by the States, that would still represent a potential liability for every taxpayer of more than £110,000.
While that is a rough worst case possibility, it indicates why the council simply cannot make knee-jerk gestures that would potentially burden generations of islanders, particularly without adequate debate or legislative process.
Nevertheless, this is still work that should have begun years ago.
No room for knee-jerk protection
AN ANNOUNCEMENT yesterday that the Policy Council had agreed to ‘a measured course of action which will maintain confidence in the local banking sector and address the concerns of local depositors’ will be followed by an immediate question from islanders: What, by doing nothing?
For while other territories are either increasing the protection given to investors or making it unlimited, Guernsey is taking no such steps to follow suit. This contrasts strongly with Jersey, where its chief minister pledged to take whatever steps were necessary to implement a savings protection scheme providing total security for residents.
And it is likely to reinforce the criticisms voiced on Thursday by the Institute of Directors annual conference that there is inadequate cooperation between the two Bailiwicks, especially on matters of substance.
In a day of change, Jersey said it was delaying announcing the details of its own scheme pending discussions with Guernsey, initially leading to speculation that a joint Channel Islands system might be announced. It later emerged, however, that far from there being a CI package, Guernsey was adopting a course counter to Jersey and not taking steps to safeguard savings in local banks.
That is likely to lead to criticism of the council at a time when there is widespread concern about the security of banks and people are opening accounts with Irish institutions to take advantage of that country’s guarantee of a 100% refund in the event of a collapse.
In comparison, Guernsey’s ‘measured course of action’ looks like far too little, far too late.
Yet the whole point of a protection scheme is that it will, at some stage, be called into action. What then?
Deposits here total £128bn so the issue is who underwrites that potential liability and how they fund it.
Even if only 5% of deposits qualified for a ‘locals only’ protection scheme backed by the States, that would still represent a potential liability for every taxpayer of more than £110,000.
While that is a rough worst case possibility, it indicates why the council simply cannot make knee-jerk gestures that would potentially burden generations of islanders, particularly without adequate debate or legislative process.
Nevertheless, this is still work that should have begun years ago.
Article posted on 4th October, 2008 - 9.52am