Guernsey: Guernsey Set For Depositors’ Compensation Scheme To £50,000
Last Updated: 27 October 2008

Guernsey has taken the next step towards introducing a Depositors’ Compensation Scheme with a compensation ceiling of £50,000.

Yesterday 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 £50,000, as is currently the case in the UK.

"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.

The scheme will come into effect as soon as it is agreed by the Island’s parliament but would not be retrospective. The group will meet again next week and a report will be considered by parliament on 27 November.

Guernsey has been investigating the possibility of establishing such a scheme for some time and the technical group has made rapid progress since being formed on 7 October following Landsbanki Guernsey being placed in administration. The current situation regarding Landsbanki Guernsey depositors is as follows:

  • Guernsey does not currently have a Depositor Compensation Scheme and any future scheme would not be retrospective. In addition, UK depositors in Landsbanki Guernsey are not covered by the UK compensation scheme.


  • The administrator has announced an interim payment of 30p in the pound and made clear that the prospects for further repayments are good;

  • Treasury and Resources Minister 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 (GFSC) 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;

  • The GFSC acted promptly in recognising the difficulties being experienced at Landsbanki Guernsey. The early decision to place the bank into administration and freezing its assets has undoubtedly secured a better position for depositors.

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.

"The first thing is that Guernsey has built up its standing as a leading international finance centre over many years and is based not just on its banking industry but in providing the widest range of financial services and products also including: captive insurance; investment funds; investment management; and fiduciary and trust services.

"In addition, it is important to take into account the nature of Guernsey’s banking industry. There are 47 banks operating in Guernsey and these can be split into three broad categories: the clearing banks; deposit takers; and other banks.

"Together these banks hold £128bn 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, £17.8bn, with approximately £4bn 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.

"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."

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