CHANNEL Islands Stock Exchange chief executive Tammy Menteshvili was spot on in her comments published yesterday that we are living in unprecedented times and that history is being rewritten. With share prices rallying yesterday on hopes of Lloyds TSB’s takeover of HBOS going ahead and the US Senate revisiting a rescue package for its economy, the world’s banking system has taken a step back from the abyss – if only temporarily.

On the basis that things can start steadily to get back to normal, it will only be when the history of the credit crunch and its aftermath is finally written that it will become clear how close to catastrophe the global financial system actually came.

Bigger institutions and national governments cooperated closely to limit the damage. In Britain, the nationalisation of Bradford and Bingley had one purpose – to prevent Northern Rock-like images of people queuing in a futile attempt to get their money back.

Just one defaulting bank, or even branch, could be enough to destroy what fragile confidence remains in the system and trigger thousands of people into believing that they would be safer with their money in the hand rather than in the bank.

And the consequences of that would be unthinkable as employees demanded to be paid in cash rather than run the risk of it being banked.

That fear is one reason why a number of deputies are calling for the swift introduction of a depositors’ protection scheme. While such a guarantee is long overdue – the current legislation is based on regulation weeding out the risk of default – the threat of a petition on the matter is unlikely to speed up matters because of the process involved in agreeing new legislation and seeking royal sanction.

And recent events also pose the question of just who is ultimately responsible for any guarantee.

Without government intervention, some institutions would already have defaulted and some deposits here are now covered by external protection systems. Since Guernsey currently has £128.1bn of investors’ money on deposit and its own reserves are just a fraction of that, there could never be a Guernsey bail-out. So any guarantees would have to come from the very institutions that are actually creating the current problems.

These are indeed unprecedented times.