Bank collapse highlights depositor protection

Thursday 18th September 2008, 2:29PM BST.

GLOBAL financial turmoil has put depositor protection back in the spotlight – but a local scheme is still some way off. The Guernsey Financial Services Commission issued a consultation paper on 5 August seeking views on proposals to amend several key areas of regulatory policy including consumer protection.

Calls for a local guarantee system have increased this week in the aftermath of the collapse of US investment bank Lehman Brothers and continued market turmoil which yesterday saw Lloyds TSB announce it was in merger talks with HBOS Halifax-Bank of Scotland after a run on the latter’s shares.

‘The proposed scheme would seek to provide depositors with quick access to funds in the event of a bank collapse, with compensation of £35,000 available for each individual retail depositor with each separate bank or group of banks. Hence the public in Guernsey would be eligible for compensation,’ said GFSC director general Peter Neville (pictured).

The commission is now in the process of reviewing industry and public responses.

View more: Financial Services Commission news, Gfsc news, Peter Neville news.

1
James Davis

September 19, 2008 at 1:55 pm

Hi – I refer to the third paragraph of your article which says that compensation of £35,000 would be available to depositors from each seperate bank or group of Banks. I am not quite sure what this means. Clearly if the Bank is a “stand alone Bank” then one would be enitled to the £35,000. Howerver I am not quite sure what happens if a depositor has investments in say three different Banks which are part of a Group.
Does this mean that they would still get £35,000
from each of the Banks, or does it mean that because say the three Banks in which they have investstments are part of a Group, then they would only receive £35,000 because the Banks are part of a Group .

I would appreciate clarity on this matter

Many thanks

James

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2
Simon Tostevin

September 19, 2008 at 5:04 pm

Hopefully this additional comment from the GFSC’s Peter Neville will answer your question James:

‘Under our proposals, the £35,000 would be for each authorised bank – i.e. for each bank that holds a separate licence in Guernsey issued by the Commission. So if a group held two separate banking licences in Guernsey, then coverage would be for £35,000 each. I should stress that the details of any scheme have yet to be finalised.’

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