What are the key features of the Depositors Compensation Scheme (DCS)?
The Jersey Bank Depositors Compensation Scheme (DCS) was approved by the States Assembly on Friday 6 November 2009.
- it provides protection of up to £50,000 per person, per Jersey banking group, for local and international depositors, in line with international standards
- in the unlikely event of a Jersey bank failing, 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 maximum liability of the DCS will be capped at £100 million in any 5 year period, in line with the Guernsey scheme
Banks covered by the Depositors Compensation Scheme
How will the DCS be funded?
The DCS will be funded primarily through levies on Jersey banks, based on the proportion of protected deposits each bank holds. However, in order to ensure that the DCS is not unacceptably more costly than in other jurisdictions, these levies are capped for each banking group over a 5 year period and the States would make up any shortfall.
In the event that the full £100 million liability of the DCS was called upon, banks would contribute about two thirds of funding with the States contributing about one third, which, in nearly all circumstances, would eventually be repaid from the recoveries from the failed bank.
Why is Jersey’s DCS not pre-funded?
Post-funding is considered to be the most effective way of meeting the funding needs of a DCS in Jersey. Although there are advantages and drawbacks to both models, a pre-funded DCS would not be appropriate or proportionate in Jersey. The States' guarantee to provide liquidity to the DCS to enable it to pay out compensation quickly means that compensation payments could be made to depositors just as quickly as if pre-funding were in place.
Who runs the DCS?
The DCS will be operated by the Jersey Bank Depositors Compensation Board. The Board is an incorporated body and independent of Ministers and the States.
Jersey Bank Depositors Compensation Board
Why was a DCS not introduced previously? Should I be worried that a DCS is felt to be necessary now?
In Jersey, we remain confident in the strength of our banking system. We have always believed that the best protection for depositors lies in our sound regulatory position. However, the current global financial crisis, and in particular reports of isolated bank failures in other jurisdictions, has led to a call for a DCS from some depositors. It was therefore felt appropriate to introduce a permanent, standalone DCS in Jersey.