Financial Services Ombudsman and Deposit Protection Consultation Documents

​Interested parties are being invited to comment on a consultation document issued by the Commission which recommends the establishment of a deposit protection scheme in Guernsey. Currently, depositors in Guernsey do not have access to such a scheme and, in the event of the failure of a licensed Guernsey bank, they are exposed to the potential loss of their deposits. The introduction of a scheme would give depositors certainty of protection up to a specified maximum level of deposits. The consultation process will seek to find a consensus as to which categories of depositors should be eligible for protection and which should be excluded. A decision also has to be taken as to whether deposits should be paid in full or whether depositors should bear a portion of the loss themselves. The Commission is suggesting that the maximum level of protected deposits should be in line with the level of cover in the UK and that which is being proposed in Jersey.

 

The Commission is proposing that a scheme should be established which would only be triggered in the event of a bank failure. It is further proposing that the funding of the benefits would be achieved through a levy on all banks at the time of the failure. The methodology of how that levy might be calculated and the options available are discussed in the consultation paper.

 

The Commission also welcomes the issue by the States of Guernsey Advisory and Finance Committee of a consultation document proposing the establishment of a financial services ombudsman scheme.

 

It is proposed that the ombudsman scheme should cover all business regulated by the Commission, together with a range of other financial activities, including lending and pensions business and, potentially, consumer credit. The consultation document envisages that the scheme will be administered by a specially constituted body run by a Chief Ombudsman. It is further suggested that the scheme administrator will have a Board mainly comprised of persons with financial services expertise who will act as a panel of experts; some Board members from other walks of life are expected to be appointed in order to provide a breadth of experience. The consultation paper recommends that the Chief Ombudsman should be able to make compensation awards of up to £100,000 and that eligible complainants will include private individuals and other vulnerable persons such as small businesses.

 

The Director General of the Commission, Peter Neville, said "Customers of financial services firms based in the Bailiwick of Guernsey deserve the same support as customers in other well regulated jurisdictions. The Commission believes that these initiatives will help to provide customers with additional safeguards. The Commission will continue to regulate firms in the same way as before, and we will continue to expect firms to look after their customers. However, there is a need for an organisation which is able to deal with complaints better than we can under our present powers. As far as the deposit protection scheme is concerned, the best time to introduce a compensation scheme is at a time of stability in the financial system. I encourage everyone who has an interest in customer protection to read the consultation documents and let us have their comments."