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P.84/2009 Loan Agreement: Jersey Bank Depositors Compensation Board

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A decision made 16 December 2010 regarding: P.84/2009 Loan Agreement: Jersey Bank Depositors Compensation Board.

Decision Reference:    MD-E-2010-0207

Decision Summary Title :

Loan Agreement: Jersey Bank Depositors Compensation Board

 

Date of Decision Summary:

December 2010

Decision Summary Author:

 

Director, Finance Industry Development

 

Decision Summary:

Public or Exempt?

 

Public

Type of Report:

Oral or Written?

Written

 

 

Person Giving

Oral Report:

n/a

Written Report

Title :

Loan Agreement: Jersey Bank Depositors Compensation Board

 

Date of Written Report:

December 2010

Written Report Author:

Director, Finance Industry Development

 

Written Report :

Public or Exempt?

 

Public

Subject:  

 

Loan Agreement: Jersey Bank Depositors Compensation Board (“the Board”).

Decision(s):

 

The Minister agreed to sign a Loan Agreement (attached as SD1) and three associated Security Interest Agreements (attached as SD2-4) (collectively “the Agreements”) on behalf of the Board.

 

Reason(s) for Decision:

 

In order for the Board to be able to pay compensation quickly to depositors, the States agreed in P84/2009 that provision should be made for the States to lend liquidity funding from the Strategic Reserve to the Board in the unlikely event of a Jersey bank failure.  The Agreements provide the legal framework for such lending.   

 

The Minister is carrying out the functions of the Board until such time as the Board assume their functions under the Banking Business (Depositors Compensation) (Jersey) Regulations 2009.  The Minister will therefore sign the Agreements on behalf of the Board.

 

Resource Implications:

 

The Minister is signing the Agreements for and on behalf of the Board.  The financial and manpower implications for the States of Jersey are set out in the corresponding Ministerial Decision and report by the Treasury & Resources Department, which received independent legal advice in relation to the Agreements. 

Action required:

 

The Minister to sign the Agreements on behalf of the Board.

 

Signature:

 

 

Position:

 

Economic Development Minister

 

Date Signed:

 

 

Date of Decision (If different from Date Signed):

 

 

P.84/2009 Loan Agreement: Jersey Bank Depositors Compensation Board

Loan Agreement: Jersey Bank Depositors Compensation Board

 

 

THE ISSUE

 

  1. The Loan Agreement (attached as SD1) and three associated Security Interest Agreements (attached as SD2-4) (collectively “the Agreements”) provide the framework for the States of Jersey to lend liquidity funding to the Jersey Bank Depositors Compensation Board (“the Board”) to enable it to pay out compensation to depositors quickly in the unlikely event of a Jersey bank failure.

 

  1. The Minister is carrying out the functions of the Board until such time as the Board assume their functions under the Banking Business (Depositors Compensation) (Jersey) Regulations 2009. 

 

  1. It is recommended that the Minister for Economic Development signs the Agreements for and on behalf of the Board.

 

  1. It is envisaged that the Agreements will be signed by the Treasury & Resources Minister for and on behalf of the States of Jersey.

 

  1. The financial or manpower implications for the States of Jersey have been considered by the Treasury & Resources Department, having received independent legal advice, and are set out in the corresponding Ministerial Decision and report by the Treasury & Resources Department.

 

 

BACKGROUND

 

  1. The Board is a statutory body established under the Banking Business (Depositors Compensation) (Jersey) Regulations 2009 (“the Regulations”) to pay compensation to depositors in the unlikely event of a Jersey bank failure.

 

  1. In order for the Board to be able to pay compensation to depositors as intended, the States of Jersey agreed that provision should be made for the States to lend liquidity funding from the Strategic Reserve to the Board in the unlikely event of a Jersey bank failure.

 

  1. By Proposition 84/2009, the States agreed:

 

“(a) to vary that [the Strategic Reserve] policy to enable the Strategic Reserve Fund to also be used, if necessary, for the purposes of providing funding for the Bank Depositors Compensation Scheme to be established under the Banking Business (Depositors Compensation) (Jersey) Regulations 200-; and

 

(b) that monies from the Strategic Reserve Fund, up to a maximum combined total not exceeding £100 million, should be made available if required to meet the States contribution to the Bank Depositors Compensation Scheme and/or to meet any temporary cash flow funding requirements of the Scheme”.

 

  1. The Agreements provide the legal framework for the States of Jersey to lend up to £100 million liquidity funding to the Board if required.

 

  1. The Economic Development Department (on behalf of the Board) and the Treasury & Resources Department (on behalf of the States of Jersey) received independent legal advice in relation to the Agreements and are satisfied with respect to the respective parties’ rights and obligations.

 

 

RECOMMENDATION 

 

  1. It is recommended that the Minister signs the Agreements for and on behalf of the Board.

 

 

 

 

 

Director, Finance Industry Development

 

1

 

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