Banking Business (Depositors Compensation) (Jersey) Regulations 2009: Amendment: Law Drafting Instructions

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A decision made 6 February 2013:

Decision Reference: MD –E–2013-0024

Decision Summary Title:

Law drafting instructions for an amendment to the Banking Business (Depositors Compensation) (Jersey) Regulations 2009

Date of Decision Summary:

5 February 2013

Decision Summary Author:

Director, Finance Industry Development

Decision Summary:

Public or Exempt?

Director, Finance Industry Development

Type of Report:

Oral or Written?

Written

Person Giving

Oral Report:

N/A

Written Report

Title:

Law drafting instructions for an amendment to the Banking Business (Depositors Compensation) (Jersey) Regulations 2009

Date of Written Report:

5 February 2013

Written Report Author:

Director, Finance Industry Development

Written Report :

Public or Exempt?

Public

Subject:

Law drafting instructions for an amendment to the Banking Business (Depositors Compensation) (Jersey) Regulations 2009 (“the DCS Regulations”).

Decision(s)

The Minister approved draft law drafting instructions for an amendment to the DCS Regulations and directed these to be sent to the Law Draftsman’s Office.

Reason(s) for Decision:

The law drafting instructions will make a number of important amendments to the DCS Regulations to make improvements to the coverage and administration of the Jersey Bank Depositors Compensation Scheme.

Resource Implications:

There are no additional financial or manpower implications for the States of Jersey.

Action required:

The law drafting instructions to be sent to the Law Draftsman’s Office.

Signature:

Senator AJH Maclean

Position:

Minister for Economic Development

Date Signed:

Date of Decision:

Banking Business (Depositors Compensation) (Jersey) Regulations 2009: Amendment: Law Drafting Instructions

MINISTER FOR ECONOMIC DEVELOPMENT (“the Minister”)

Law drafting instructions for an amendment to the Banking Business

(Depositors Compensation) (Jersey) Regulations 2009

1. ISSUE AND RECOMMENDATION

1.1. An amendment to the Banking Business (Depositors Compensation) (Jersey) Regulations 2009 (“DCS Regulations”) is needed to make improvements to the coverage and administration of the Jersey Bank Depositors Compensation Scheme (“DCS”). Draft law drafting instructions have been prepared for such an amendment.

1.2. It is recommended that the Minister approves the draft law drafting instructions and directs that these to be sent to the Law Draftsman’s Office.

BACKGROUND

2.1. The draft law drafting instructions are for an amendment to the DCS Regulations to make improvements to the coverage and administration of the DCS.

2.2. In the light of ever more demanding international standards, the amendments are aimed at ensuring that the DCS would achieve the best result for depositors and, in particular, would pay compensation to depositors as quickly as possible in the unlikely event of a Jersey bank failure.

2.3. In brief, the draft law drafting instructions include provision for:

Changing the trigger mechanism of the DCS to allow greater flexibility in achieving the best outcome for depositors;
Extension of protection to include some small Jersey company deposits;
Introduction of Straight Through Payout "STP" (relying on bank data without the need for an application to be received) in appropriate cases;
Moving to a ‘net payout’ basis such that where compensation has been rateably reduced, recoveries can be applied to 'top up' compensation up to the limit;
Replacing the single interim payout with the flexibility to allow multiple instalments of compensation to be paid as recoveries become available;
Automatic subrogation of eligible depositors' rights to the DCS Board (in order to allow STP to work effectively);
Wider powers to enable the DCS to process compensation more quickly, including the power to set a preferred format for the provision of deposit data from banks and the ability to mandate this; and the power to enter bank premises prior to a bankruptcy to prepare deposit data;
Increased flexibility through the introduction of powers to vary certain limitations of the DCS by Ministerial Order;
Annual reporting of deposit data by banks to the DCS Board;
Clarification of the definition of 'deposit' so that some depositors are not unduly excluded from being 'eligible depositors';
Consolidation of two sets of Regulations into one by importing the provisions of the DCS Triennial Regulations (relating to offences and data protection) into the DCS Regulations;
Amending the Companies Law to apply DCS priority (which currently applies in a désastre or creditor’s winding up) in a just and equitable winding up of a bank;
Other minor miscellaneous clarifications, corrections and amendments.

RECOMMENDATION

3.1. It is recommended that the Minister approves the draft law drafting instructions and directs that these to be sent to the Law Draftsman’s Office.

DIRECTOR, FINANCE INDUSTRY DEVELOPMENT