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Amendment of draft Banking Business (Depositors Compensation) (Jersey) Regulations 200-

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A decision made (05/10/2009) regarding: Amendment of draft Banking Business (Depositors Compensation) (Jersey) Regulations 200-.

Decision Reference:   MD-E-2009-0180 

Decision Summary Title :

Amendment of draft Banking Business (Depositors Compensation) (Jersey) Regulations 200-

Date of Decision Summary:

1 October 2009

Decision Summary Author:

Finance Industry Development Executive

Decision Summary:

Public or Exempt?

Public

Type of Report:

Oral or Written?

Written

Person Giving

Oral Report:

n/a

Written Report

Title :

Amendment of draft Banking Business (Depositors Compensation) (Jersey) Regulations 200-

Date of Written Report:

1 October 2009

Written Report Author:

Finance Industry Development Executive

Written Report :

Public or Exempt?

Public

Subject:  

Amendment of draft Banking Business (Depositors Compensation) (Jersey) Regulations 200-.

Decision(s):

The Minister for Economic Development (“the Minister”) approved the lodging of regulations to amend the draft Banking Business (Depositors Compensation) (Jersey) Regulations 200- (“the DCS Regs”).

Reason(s) for Decision:

The amendment to the DCS Regs will extend protection under the proposed Deposit Compensation Scheme to individual members holding accounts with Community Savings & Credit Limited in the unlikely event that the firm’s Jersey bankers should become bankrupt.

Resource Implications:

The financial implications associated with this decision are discussed in the accompanying Report.  There are no additional manpower considerations.

Action required:

The regulations amending the DCS Regs to be lodged au Greffe without delay so as to enable these to be debated by the States alongside the DCS Regs on 20 October 2009.

Signature:  Senator A.J.H.Maclean 

Position: Economic Development Minister 
 

Date Signed: 

Date of Decision (If different from Date Signed): 
 

Amendment of draft Banking Business (Depositors Compensation) (Jersey) Regulations 200-

MINISTER FOR ECONOMIC DEVELOPMENT (“the Minister”)  

Amendment of draft Banking Business (Depositors Compensation) (Jersey) Regulations 200-  
 

1. ISSUE AND RECOMMENDATION  

  1. The amendment to the draft Banking Business (Depositors Compensation) (Jersey) Regulations 200- (“the Amendment”) will extend protection under the proposed Deposit Compensation Scheme to individual members holding accounts with Community Savings & Credit in the unlikely event that the firm’s Jersey bankers should become bankrupt.

 

  1. It is recommended that the Minister approves the Amendment and that it be lodged au Greffe without delay so as to allow it to be debated by the States on 20 October 2009.

 
 

  1. BACKGROUND

 

The proposed DCS 

  1. The draft Banking Business (Depositors Compensation) (Jersey) Regulations 200- (“the draft DCS Regs”) will be debated by the States on 20 October 2009.  If passed, the draft DCS Regs will introduce a Depositors Compensation Scheme (“DCS”) to Jersey, providing immediate protection of up to £50,000 per retail depositor per Jersey banking group. 

 

  1. As currently drafted, the draft DCS Regs provide up to £50,000 protection for retail depositors (i.e. individuals holding deposits in their own names) only.  There are very limited exceptions for deposits held by: (i) parents for the benefit of their children; (ii) executors/administrators; and (iii) charities.  

 

Community Savings & Credit  

  1. Community Savings and Credit (“CS&C”) is a self-help savings and loan co-operative whose purpose is to encourage members to save regularly, to make low interest loans available to members and to provide them with free financial advice.  Members save on a regular basis and the collective savings are put on deposit with Jersey-registered banks to provide the working capital from which loans can be made to members. Any profit is returned to members.

 

  1. The total savings of any one member are currently restricted to £10,000, although it is understood that there are plans to increase this limit to £50,000. 

 

The Amendment  

  1. The Amendment will amend the draft DCS Regs so as to extend protection to the members of CS&C.  Thus, should a Jersey bank that holds deposits made by CS&C become insolvent, each affected member of CS&C will be entitled to compensation up to a maximum of £50,000 per member.  As long as CS&C continues to limit the deposits it takes from each member to an amount equal to or below £50,000, this would mean that CS&C members’ would receive 100% protection for their deposits with the firm.

 

  1. It is considered that, in light of the nature of the business carried on by CS&C, this is a fairer outcome than if protection were to be extended so as to offer only a single compensation payment to CS&C limited to £50,000.

 

  1. It should be noted that the Amendment does not provide protection for members in the event that CS&C itself should fail.  This option was considered but to extend protection in this way would have the undesirable effect of exposing CS&C to liability to pay a levy if the DCS were to be activated by the failure of a Jersey-registered bank.  In the unlikely event that CS&C were to fail, its members would of course be entitled to share in the recoveries made in the liquidation of the firm in proportion to their respective losses.

 
 

  1. RECOMMENDATION

 

  1. It is recommended that the Minister approves the Amendment and that it be lodged au Greffe without delay so as to allow it to be debated by the States on 20 October 2009.

 
 
 
 

FINANCE INDUSTRY DEVELOPMENT EXECUTIVE

1 October 2009

 

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