Guernsey has no plans to match UK’s new £85K depositor protection limit
Wednesday 29th December 2010, 2:29PM GMT.
GUERNSEY must balance an appropriate and affordable level of compensation for retail depositors with maintaining the island’s competitive position, the Association of Guernsey Banks has said.
Chairman Steve Watts (pictured) responded after it was announced that Guernsey would not follow the UK in upping the maximum payout to retail depositors under the deposit compensation scheme.
From 1 January, the UK will increase the maximum payout from £50,000 to the equivalent of 100,000 euros – about £85,000.
‘This has been flagged for a long time and is as a consequence of the UK being within the EU,’ he said.
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Undoubtedly keeping the Guernsey Depositor Compensation Scheme at the up to £50,000 limit is very much in the interests of the Guernsey retail banks, after all they are the ones that will be funding it.
The depositors, by comparison, are now at a distinct disadvantage with the EU based countries having their guarantee level increased to £85,000; we must, however, take comfort from the fact that our appropriate competitors, Jersey and the Isle of Man have similar funding to ourselves.
Who are you trying to kid, Mr Watts? What we want in Guernsey is the same depositors’ conditions as our UK counterparts, as recommended by the EU, or at least the opportunity to transfer to the UK if you are unable to provide that level playing field.
To increase the level to £85,000 in Guernsey and increase the £100 million ceiling accordingly would still only take a relatively small percentage of the 10% of 117 billion pounds that Mr Watts quoted.
Allied to this the fact that Guernsey is supposedly very well regulated adds to the low risk factor that the banks would be taking on.
You cannot expect to stabilise the retail bank sector if you keep eroding the conditions of the retail depositors, money is becoming increasingly difficult to manage for most people, therefore you need to ensure that they are comparable, otherwise you can have no complaints when retail money is moved out of the Islands.
We are constantly reminded by public figures that we need to keep up to date with EU developments and this is one example of ‘best practice’ that Guernsey should adopt.
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Sheila Nicoll, director of conduct policy at the FSA, said that the need to maintain customer confidence in the banking system is one of the key lessons from the financial crisis.
Internal Market and Services Commissioner Michel Barnier said:”European consumers deserve better. They need reassurance that their savings, investments or insurance policies are protected no matter where in Europe they are based.”
Guernsey appears to think that their ordinary small depositors are disposable and are of little importance in their grand financial plan. After all they only form around 10% of the deposits in Guernsey and it would be of little consequence if they just disappeared. Which is of course what many of them are doing and will continue to do in order to get better security for their deposits. Landsbanki Guernsey was a lesson to be learnt, but how soon they forget.
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As retail depositors are obviously contemptible and not worthy of respect in the government and offshore banking’s eyes, why not close down the offshore branches and open them as branches of UK domiciled banks? It is peverse and illogical for the UK banks to say we cannot open an account with them because of the ‘know your customer directive’ yet have all our details on file with their offshore branch. And since the inception of online banking all you need to do, if you are of criminal intent, is to provide false documentation via the internet and post. The bank need never see the actual customer from ‘cradle to grave’.
Mr. Watts you may be laughing at us but you and your industry are the contemptible ones who we are all sneering at!
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Why does Guernsey bother with a DCS at all? People keep saying that retail depositors are really unimportant to Guernsey and make up only a small percentage of the funds deposited with the islands banks. Anyway, no DCS of any size or structure would convince me to deposit any further funds in Guernsey. Once bitten, twice shy!
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Can anyone name a single retail bank operating in Guernsey that is not a subsidiary of one of the “too big to fail” banks?
The fact that the Guernsey DPS offers less protection than the EU schemes is not because the local industry treats local depositors with contempt, but rather because the reality of the situation is twofold:
a) our banking industry is simply about deposit taking (some retail, mainly institutional) with none of the risky activities undertaken by the onshore banks – so there is very little, if any, risk generated from within the local banks themselves.
b) since the demise of LBG, none of the retail banks in the Island are at risk of parental collapse because their parents would be supported by the UK.
So the risk of a local bank collapsing is so remote that it really is not worth setting up (and more importantly, funding) a gold-plated scheme just to reassure people who don’t understand how the local banking system works. The local retail banking system does not generate enough income to justify that kind of commitment. But that does not mean that local retail banking is unsafe.
It is like a pedestrian seeing a motorcyclist wearing a crash helmet and then going out and buying a helmet themselves for when they are walking to the shops. In theory the pedestrian is now safer with the helmet, but they were not unsafe to begin with.
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Terry,
I think its once bitten, twice shy, and if you can get guaranteed better cover for your deposits repayable within seven days, the logical step is to move in that direction and be safe rather than sorry.
You say,
b) since the demise of LBG, none of the retail banks in the Island are at risk of parental collapse because their parents would be supported by the UK.
You say,
b) since the demise of LBG, none of the retail banks in the Island are at risk of parental collapse because their parents would be supported by the UK.
Read more: You say none of the retail banks in the island are at risk of parental collapse, because their parents would be supported by the UK, but my understanding was that now the UK Government attitude was that should the banks get themselves in the same fix as last time, taxpayers money would not be used to bail them out again. ( I stand to be corrected), but those covered by their DCS would be ok up to £85,000 per individual or £170,000 per joint account, per separate bank.
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Apologies about the post above it appears to have repeated paragraphs, thay weren’t there when I posted
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The way in which the Guernsey FSA has treated the LG depositors has been reprehensible. I fear that others will learn from it. It will be back to the tomato fields soon for Mr. Trott.
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Of course the UK government wants to distance itself from any suggestion that it will underwrite the major banks. But if Barclays were to go bust, you can bet your house on the fact that they would step in and support it, regardless of what they have said before. The consequences of not doing so are too great, and the effect on retail depositors has nothing to do with it.
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Hang on a minute,
Steve Watts says “Guernsey would not follow the UK”. Just who is in charge here? It’s outrageous. The Sates of Guernsey and the GFSC are supposed to set policy, not Steve Watts. Guernsey did not have a Depositors Compensation Scheme (DCS) for years because of bank resistance. Pre-funding of the DCS has been abandoned because of resistance by the banks. Now Steve Watts is telling people what level of guarantee they can have. Guernsey is more and more looking like a fiefdom run by the banking industry with a sham government that just does the banks bidding.
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I read with interest the article in the International Advisor on the disparity that has now been created by the Channel Islands and the Isle of Man in sticking with a £50,000 Depositor Compensation Scheme, as opposed to the new £85,000 limit which will come into force today.
http://www.international-adviser.com/article/some-but-not-all-depositor-compensation-scheme-protection-levels-to-rise-in-new-year-1
Two interesting points are raised with this article:
Gibraltar, quite often talked about in financial circles as an offshore jurisdiction similar to the Channel Islands, with a population of less than 30,000 people, far less than both Guernsey & Jersey, has decided to raise its limit to £85,000.
How quickly, through the internet, Guernsey’s decision to remain at £50,000 reverberates throughout the world and portrays a negative image of Guernsey’s attitude towards any potential new retail accounts being set up from outside the Islands!
Yes, the retail banking sector may only represent some 10% of Guernsey Finance, but in terms of raising much-needed revenue for the Government to run the island, it plays a significant part.
For instance, Landsbanki Guernsey paid £49,937 in tax and in addition, the States of Guernsey are waiting to receive a further £157,666 pounds for Income tax as Non-preferential creditors.
Much needed, strong political leadership is required to ensure the Bailiwick retail depositors are not pushed to one side by both the financial sector and government and that they get a fair crack of the whip in encouraging them to continue banking here in the Islands.
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As sure as night follows day you can always rely on the ex-Landsbanki Depositors for a Pavlovian reaction to the words “Depositor Compensation Scheme”, they can’t stop themselves from posting an opinion (usually based on uncertain “facts”).
If I were an ex-Landsbanki Depositor (I am not, my assets are held with “proper” financial institutions) I would prefer to expend my energies on lobbying in the hope of retrieving the missing percentage of my funds.
Whilst I am sympathetic to those who have lost money, trotting out the same old complaints/observations time and time again is not helping your cause.
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Peter D
The Depositors Compensation Scheme should be of interest to every Guernsey Depositor. The Landsbanki Guernsey Depositors were let down by an inefficient Guernsey Financial services Commission during 2008 and the LGDAG have now taken an interest in a Guernsey Depositors Compensation Scheme that is gradually becoming a farce, with the right hand not knowing what the left is doing. Read Eric Graham’s last post on the other forum on this subject to see exactly what is happening.
As for lobbying Guernsey Deputies and believe you me they have been lobbied, we now realise that they are for the most part dominated by their Chief Minister and Policy Council who refuse to instigate a fully independent inquiry to ascertain the truth ( I exclude the Promontory repprt , as it was not independent), unlike every other jurisdiction who have held full open inquiries.
How can we do anything else but, as you put it, trott out the same arguments, because they are the truth and we still fail to get any answers to them from Guernsey’s Government. They have never, in over two years, answered any of the constructive questions put to them.
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