This Is Guernsey

A MEMBER of the Policy Council has said he is pleased that a depositors’ protection scheme will be brought before next month’s States meeting.

Housing minister Dave Jones (pictured), who backs an industry-funded method, said he was satisfied that it would be discussed sooner rather than later.

‘I’m happy that the Treasury minister and the group that’s looking at it, together with the Financial Services Commission, are doing all they can to make sure we have a protection scheme in place as soon as practically possible,’ he said.

He said that the island would not be making false promises as it would be bank-backed unlike in Ireland or Jersey, which will be funded by taxpayers’ money.

Deputy Jones had said earlier that Treasury minister Charles Parkinson, who chairs the technical group formed by the council to come up with a scheme, had a difficult job on his hands to persuade banks to support it.

This week the group decided that the compensation scheme would match that of the UK’s with a ceiling of £50,000.

‘There are a large number of banks in Guernsey that don’t have retail customers and are solely deposit takers,’ he said.

‘It’s not a black and white world and some banks feel that contributing to a scheme that they play no part in is unfair. It’s something that needs to be resolved and Deputy Parkinson, along with his technical party, are working at getting to grips with this very sort of issue.’

Deputy Jones’s words come just a few days after a leading figure in the financial services sector, who asked for anonymity, warned that a scheme funded by banks would be an unattractive proposition for them and could lead to several switching jurisdictions by utilising banking licences held in other offshore centres.

Since Landsbanki Guernsey went into administration two weeks ago, calls have been mounting for the States to implement a scheme without delay.

It is believed that it would come in too late to help customers of Landsbanki.

But Deputy Jones said what the States must not do was rush into making rash promises.

Jersey’s outgoing chief minister Frank Walker promised full protection for its residents’ deposits should they face any loss if a bank with a branch or subsidiary in the island was not supported by its home country.

‘In my view we certainly can’t have a States-funded scheme because our economy just isn’t big enough,’ said Deputy Jones.

‘It’s creative accounting for governments to say that depositors will be protected when their economies simply aren’t big enough to give that guarantee.

‘They are working on the provision that none of the banks will go belly up and that no claims will be made against them. Any sensible government thinks before it acts.’

Article posted on 25th October, 2008 - 9.29am