Depositor Compensation Scheme
Guernsey has a depositor
compensation scheme which protects deposits up
to £50,000 per person.
However, the total payouts from the scheme are capped at £100 million in any
five year period, so if the claims on the scheme exceed that amount then the "compensation paid to
depositors would be reduced so that the maximum total compensation in the period did not exceed £100 million."
DCS Information Leaflet
This means that even if your money is in a smaller bank it would be unlikely that you would receive the
"headline" compensation, and if two banks went under within five years of each other, the depositors in
the second one would receive nothing.
Total deposits held with the 48 Guernsey banks at the end of December 2008 stood at £157 billion, an average of
£3,271 million per bank. Guernsey
Financial Services Commission
|Took over Cheshire Building Society,
|Went into Administration
||6 Oct 2008
|Number of depositors
|Total depositors savings
|Returned to depositors so far
|Expected final return
|Expected final payout date
Despite a depositor compensation scheme having been recommended twice in the previous ten years
one wasn't introduced
until November 2008, six weeks after the Landsbanki Guernsey collapse, when a DCS was set up post-haste and was specifically written to be
non-retrospective and so not cover the depositors in Landsbanki Guernsey.
The Chief Minister of Guernsey was unambiguous from the start that the government would not assist Landsbanki Guernsey
depositors: "our position has been clear from the outset that we would not propose the use of taxpayers'
money to support any payout." Financial
When the Administrators of Landsbanki Guernsey later proposed to the Guernsey government that they either provide a
loan in order to get depositors at least some money back more quickly, or implement a "phantom" depositors
compensation scheme (like but separate from the recently introduced non-retrospective DCS), the Guernsey
government refused. Indeed, they didn't even bother to give the Administrators a formal written response.
The Chief Minister has continued to be insistent on Guernsey's stance, stating to the UK Treasury
Select Committee Banking Crisis enquiry that "taxpayers should not bear the risks of banks failing". Statement
to UK Treasury Select Committee, 3-Feb-09. Indeed, a Freedom of Information request by depositors to
the UK revealed that Guernsey had not even held any meetings with the UK to discuss the plight of Landsbanki
The savers in Landsbanki Guernsey are, failing uncertain legal proceedings in Iceland, thus totally dependent on whatever recoveries the
Liquidators will make from the assets of the bank for the return of their savings, which they have stated will be 91 pence in the pound.
State of Government Finances
The Guernsey government have been very clear that they don't believe in helping savers in failed banks in their jurisdiction, but even if they had a
change of heart in future, would they be able to?
Guernsey has a "black hole" in its finances
– the government is spending more than it is taking in
– and its politicians are in ongoing disagreement as to
whether the government should cut spending, raise taxes, or borrow (for the first time in its history).
recent review looking into government waste determined that the States have been "wasting taxpayers' money for years"
and, if imperative action is
not taken, Guernsey will be bankrupt.
The Edwards Report for the UK Parliament, Review of
Financial Regulation in the Crown Dependencies, November 1998, section S45:
"...such schemes are an element in good practice and the Jersey andGuernsey authorities should consider introducing them."
- Guernsey Financial Services Commission, Introducing a Deposit Protection
Scheme in Guernsey, January 2002: "...set up a Scheme by the end of 2002."
Tribal Helm report for the States of Guernsey, February 2009, section 1.3.3:
"The States is currently operating at a deficit and is being sustained only by the depletion of reserves. These reserves will be exhausted by 2011."
Please see www.SafeOffshoreAccounts.com for further references.