RAISING the amount customers could claim back if a local bank collapsed risks creating bad “optics” by sending large sums to wealthy depositors outside Jersey, the Treasury Minister has warned.
Deputy Elaine Millar told a Scrutiny panel reviewing the Island’s £50,000 deposit compensation scheme limit that, while the scheme rightly covers customers wherever they live, she was concerned about public perception if the cap was increased to match the UK’s £85,000 – or the £110,000 being proposed there.
Currently, if a Jersey bank were to fail, customers would be repaid up to £50,000 each, funded by a government loan of up to £100 million, with any further cost met by banks.
The limit has not changed since 2009, and Scrutineer Deputy Monty Tadier argued that inflation had eroded its value, adding that public submissions to his panel’s review “absolutely” supported a rise.
Customers are entitled to compensation regardless of where they live.
While Deputy Millar said this was “as it should be”, she raised concerns about the “optics” and financial impact of large amounts being sent off-Island to wealthy non-local customers, particularly if the limit were to rise.
She said: “The problem is many of these people who are not in Jersey will have very significant deposits where £50,000 is a drop in the ocean. But we will be in a position, under the scheme, of sending cheques to very wealthy people outside the Island.”
Deputy Tadier asked: “Is there a problem with that?”
“If it means it prejudices local interest [by creating government funding issues or potentially leading to raised taxes], then yes,” the Minister replied.
“I guess what I’m trying to get to is the optics of it,” she later added.
Deputy Millar went on to warn that locals with deposits slightly above the current limit might feel “aggrieved” seeing offshore millionaires receive payouts while they did not get their full sum back immediately – even if the rest of their money was later recovered.
Deputy Tadier added that someone who had lost £3 million, for example, would feel even more “aggrieved”.
