Two new pieces of banking regulation are set to increase investor protection and the flow of money t...
Two new pieces of banking regulation are set to increase investor protection and the flow of money to Jersey. However, proposals made by the EU regarding savings tax could have a negative impact on the island.
The Banking Depositors Compensation Scheme will protect an investor's deposit in case the bank becomes bankrupt.
For example, if a person invests £20,000 in a bank deposit and the bank goes bankrupt the investor would be guaranteed to receive £15,000 back. However, the exact details of how much an investor will receive is yet to be finalised. It is still in its consultation stage and is due to be passed in the first half of next year. However, it is certain that the new law will be similar to the UK and Isle of Man schemes.
Phil Austin, chief executive of Jersey Finance, explained the law will ensure Jersey remains highly regulated and meets international standards. It will give investors extra security of knowing their money is protected.
The Jersey banking ombudsman, who attempts to provide further investor protection, is set to be introduced next year. It is currently at consultation stage, but it will be independent from the Jersey Financial Services Commission and be a point of contact for consumer complaints.
Currently, if consumers have complaints regarding their banks they have no independent body that can advise them what to do. They can only write to the bank itself or try to contact someone in government.
The role of the banking ombudsman is to take an independent view and see if the person should be entitled to compensation.
Both the Banking Depositors Scheme and the banking ombudsman initiatives came about as a result of recommendations in the Edwards Report.
Austin said: 'Both schemes will show Jersey is a well-regulated jurisdiction and hopefully attract new money in the area.'
However, proposals made in the EU Savings Tax Directives may have a negative impact on the island's financial services industry. The proposals promote the automatic exchange of information about the interest people earn on savings between countries in the EU.
For example, it would be possible for French authorities to receive information on the interest earned on an account of a French national living in the UK.
Although the proposal only concerns member countries of the EU, the UK is presently keen for the Channel Islands to join in if this law becomes effective. A discussion is being held in the new year to see if this is feasible.
However, Austin warns that if the Channel Islands are the only country that join in who are not part of the EU it would not be a level playing field.
Austin said: 'Those offshore countries that do enter this agreement may be at a disadvantage and investors may go to jurisdictions not in the scheme. It is has the potential to affect money coming into Jersey.'
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