Calls in Michael Foot's interim review for a probe into offshore jurisdictions' compensation schemes have been backed by an action group, which argues current 'safety nets' are inadequate.
The Landsbanki Guernsey Depositors Action Group (LGDAG) says some current schemes are not designed to cope with "catastrophic" failure.
It says offshore centres should overhaul their legal structures to cope with a future event akin to the collapse of the Icelandic banks.
In his interim review, Foot says financial centres must reassess their current legal structures to ensure they have the legal framework and institutional infrastructure in place to deal with "major shocks".
LGDAG says existing schemes, such as Guernsey's Depositors Compensation Scheme (DCS), which has £100m available, "do not cover catastrophic failure".
It says if, for example, a large building society with around £200m in deposits collapsed, only half of depositors would be covered.
It argues Guernsey's DCS was "rushed in" and needs to be re-thought taking the size of possible collapses into account.
"Changes in legislation are limited and the island continues to let banking subsidiaries upstream funds," a spokesperson says. "Some would argue this practice was at the heart of the collapse of Landsbanki Guernsey."
LGDAG adds, if the Government had not bailed out RBS and other banks with subsidiaries offshore, Guernsey alone would have seen four failures and therefore its parent bank guarantees would have been useless.
"Further legislative change needs to be made, especially a parent guarantee. Implementation of an insurance scheme for banks would be a good idea to cover the event of a parent failure."
According to Foot's interim review, many nations' legal frameworks and infrastructures have proved inadequate, citing the collapse of Lehman Brothers and the main Icelandic banks as examples.
Foot says his team is in the process of discussing which tools financial centres have in place to deal with local failures.
Additionally, it is seeking to address any gaps it finds in centres' procedures and capability.
Foot says only "some" of the nine British Crown Dependencies and Overseas Territories have compensation schemes in place. But it points to Bermuda, Gibraltar and the Isle of Man as examples of centres that have made moves to shore up their capabilities in the event of a major failure.
"All will need to consider the funding implications of a major call on a compensation scheme and the range of tools available to deal with the local consequences of the major failure of a major firm in their jurisdictions," it concludes.
"Any financial centre considering setting up a deposit protection scheme carefully needs to consider the coverage of the scheme and the mechanism for funding it.
"The ability to fund a scheme in the event of a significant failure in their jurisdiction is a relevant question for all of the financial centres and, by extension given their relationship with the UK, to this country as well."
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