CONTINUEThis site uses cookies. By continuing to browse this site you are agreeing to our use of cookies. Find out more.
  1. Front Page
  2. News By Topic
  3. Guernsey Set To Introduce Deposit Guarantee Scheme

Guernsey Set To Introduce Deposit Guarantee Scheme

by Phillip Morton, Investors

24 October 2008

Guernsey has taken the next step towards introducing a Depositors’ Compensation Scheme with a compensation ceiling of GBP50,000, Guernsey Finance has announced.

On Thursday, the technical group working on the introduction of a scheme met for the second time. This meeting was to consider an analysis of the deposit base of all banks in Guernsey, which is essential in assessing the potential costs of any scheme.

The group is chaired by Treasury and Resources Minister Charles Parkinson and includes representatives of the Commerce and Employment Department, the Guernsey Financial Services Commission (GFSC) and the Association of Guernsey Banks (AGB).

Deputy Parkinson said: “I believe that we have made significant progress towards introducing a Depositors’ Compensation Scheme with a compensation ceiling of GBP50,000, as is currently the case in the UK.”

He added: “We are considering schemes already in use in other small jurisdictions and also introducing some of our own thinking.”

It has been agreed that the proposed scheme should:

  • cover retail depositors, not companies and corporate deposits;
  • cover Guernsey residents and non-residents;
  • and that compensation would be due in respect of each licensed bank. Joint account holders would both be eligible.

Those with deposits in Landsbanki Guernsey are not covered by the Depositor Compensation Scheme nor covered under the UK compensations scheme, since administrators took over on October 7 and any Guernsey scheme would not be retrospective. However, the administrator has announced an interim payment of 30p in the pound and made clear that the prospects for further repayments are good.

Charles Parkinson has stressed that Landsbanki Guernsey’s assets exceed its liabilities and therefore while he cannot say for certain that depositors will get all of their money back this remains a strong possibility.

The Minister has expressed sympathy with the concern of depositors and highlighted that the States of Guernsey is doing everything it can both locally and internationally, including working at a high level with the UK Government, to ensure that the interests of Landsbanki depositors are represented in meetings with the Icelandic authorities.

The Guernsey Financial Services Commission has also written to the controllers of Landsbanki Guernsey’s parent bank – the Icelandic regulators – pressing for the bank to honour its commitments to meet the Guernsey bank’s liabilities, including depositor liabilities.

Peter Niven, Chief Executive of Guernsey Finance, said:

“It is too early to tell what lasting effects this issue will have on Guernsey’s reputation – that is something which we are watching very closely. What we can say is that Guernsey has come in for criticism from some quarters but its reputation is far from in tatters and this is particularly evident when you place everything in context.”

“Together these banks hold GBP128bn worth of deposits. The maximum amount in the retail sector (clearing and deposit taking banks) – and which would be covered by a Depositors’ Compensation Scheme – is approximately 14% of the total, GBP17.8bn, with approximately GBP4bn of this in the deposit taking banks. Therefore the bulk of deposits in Guernsey banks, 86% of the total, are wholesale deposits in the ‘other banks’. They would not be covered by a Depositors’ Compensation Scheme."

Niven concluded:

“What this demonstrates is that the vast majority of deposits in Guernsey banks are effectively ‘non-retail’ and are made up of inter-bank deposits, corporate deposits and deposits associated with other aspects of the finance industry. Despite the size of this sector however the collapse of a retail deposit taker is likely to have a much more significant effect on individual depositors and Guernsey’s international reputation among this sector of the Island’s client base.”

To see today's news, click here.


Tax-News Reviews

Cyprus Review

A review and forecast of Cyprus's international business, legal and investment climate.

Visit Cyprus Review »

Malta Review

A review and forecast of Malta's international business, legal and investment climate.

Visit Malta Review »

Jersey Review

A review and forecast of Jersey's international business, legal and investment climate.

Visit Jersey Review »

Budget Review

A review of the latest budget news and government financial statements from around the world.

Visit Budget Review »

Stay Updated

Please enter your email address to join the mailing list. View previous newsletters.

By subscribing to our newsletter service, you agree to our Terms and Conditions and Privacy Policy.

To manage your mailing list preferences, please click here »