A FAST-TRACKED depositor protection scheme was yesterday approved by the States.

It takes immediate effect and will compensate retail customers up to £50,000 each if a local bank fails.

Treasury minister Charles Parkinson, who chaired the working party set up at the start of October, said his team’s work had been made easier by the consultation with local banks the Guernsey Financial Services Commission had already started in the summer.

He said that with pressure now being put on the Crown Dependencies, particularly by UK Chancellor Alistair Darling in his pre-Budget statement on Monday, people expected the Crown Dependencies to take care of their own retail depositors.

Deputy Parkinson told the States that the total claim on the scheme would be capped at £100m. and the first £20m. would be covered by a States-appointed captive insurance company into which the banks would pay an annual levy.

‘This scheme has the support of the senior executive of the Association of Guernsey Banks and has come in after thorough consultation with every bank in the island,’ said Deputy Parkinson.

But an attempt by Deputy Rhoderick Matthews to make the banks responsible for the initial £100,000 start-up costs, too, was defeated.

He said that should not to be borne by the taxpayer – the money could be better spent elsewhere. He said the banks between them could easily repay the money over a four-year period.

Commerce and Employment has responsibility for the operation of the scheme and its minister said the proposal with which the working party had come up was innovative and well suited to Guernsey’s economy.

Deputy Carla McNulty Bauer said it was vital any scheme was well balanced between the needs of supporting the banking industry and those of depositors.

Deputy David De Lisle said he would have preferred a £100,000 guarantee, but he accepted that under the circumstances and the very rapid movement towards and introduction of the depositor protection scheme, the States would now have to go to £50,000.

But he found it surprising that it had taken the meltdown of the banking industry for a well-respected financial centre to bring forward a scheme.

Deputies Mike Collins, Mike O’Hara and John Gollop all wanted to see charities’ savings covered by the scheme, which will not protect trusts and companies.

‘There is without doubt a subtle difference here and I think charities should be treated like depositors,’ said Deputy O’Hara.

Deputy Gollop said that not all charities had the benefit of professionals looking after their funds and were as vulnerable as individual savers.

But Deputy Parkinson said arguing that trustees of small charities could not differentiate between banks was wrong.

Housing minister Dave Jones was impressed by the speed with which the scheme had come to the House.

‘I think we are ahead of Ireland and Jersey.

‘They made promises, but we are ahead of them.’

Chief Minister Lyndon Trott said it was imperative that the island remained competitive with its Depositor Compensation Scheme.