Bank Deposit Protection in Offshore Britain: The Jersey Model

Philip Morris

During the autumn of 2008 global financial turmoil spilled over into the British Isles offshore jurisdictions of Guernsey and the Isle of Man, resulting in the collapse of two local subsidiaries of Icelandic international banking groups. The losses experienced by depositors, damage to investor confidence in both jurisdictions as offshore banking centres and lack of a deposit protection scheme in Guernsey has thrown into sharp focus standards of investor protection in British offshore finance centres. Guernsey, Jersey's Channel Islands neighbour and offshore finance centre competitor, rapidly established its own deposit protection scheme, effectively leaving Jersey with little option but to follow suit. This article outlines the nature of the Jersey jurisdiction, the background to the emergence of its recently enacted deposit protection scheme and critically evaluates its key substantive features. It concludes that the Jersey structure is a rushed legislative reaction dominated by finance centre competitiveness and reputational concerns. In particular it may not prove effective in guaranteeing rapid compensation distribution or shoring up confidence in the banking sector in the aftermath of a bank collapse.

Law and Financial Markets Review, Vol. 4, No. 2, Mar 2010: 194-202.

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