Depositors' compensation scheme approved

09 November 2009

Jersey’s States Assembly has approved legislation to establish a Depositors Compensation Scheme (DCS) in the Island. The scheme comes into force immediately, providing individual depositors with protection of up to £50,000 in the unlikely event that a Jersey bank should fail.

The key features of the DCS are that:

• it provides protection of up to £50,000 per person, per Jersey banking group, for local and international depositors in line with international standards 
• an interim payment of up to £5,000 will be made within 7 working days and the balance of compensation within 3 months
• the £50,000 limit will apply per person, so a £100,000 deposit held in a joint account by 2 people would be completely covered
• the DCS will be operated by a independent board that will appointed by the States as soon as possible
• the maximum liability of the DCS will be capped at £100 million in any 5 year period, in line with the Guernsey scheme
• the majority of the cost of the compensation will be borne by the banking industry, with the States making up any shortfall. In most cases, the DCS would be funded solely by levies on the banking industry with any States contribution being fully repaid from the liquidation proceeds

The DCS was designed according to the findings of expert economic analysis of the Jersey banking sector by Oxera and is robust, competitive and credible.

Welcoming the introduction of the DCS the Minister for Economic Development, Senator Alan Maclean, said: “We have always believed that the best protection for depositors lies in the strength of Jersey's banks, all of which are in the top 500 banking groups in the world; and in our sound regulatory position, which is designed to prevent the bank failure occurring in the first place.

“However, it is important to be able to provide depositors with the additional reassurance that this statutory Depositors Compensation Scheme will give. This scheme provides an appropriate level of protection for depositors and meets the latest international standards.”