Offshore centres must ensure their compensation schemes are understood by depositors and should also consider whether an Ombudsman scheme is justified.
The recommendations come as part of Michael Foot’s Review of British offshore financial centres, commissioned against a backdrop of worldwide economic and financial melt-down and the collapse of Icelandic banks which impacted on Guernsey and the Isle of Man.
Foot says a key lesson learnt from the failure of Kaupthing Singer and Friedlander (Isle of Man) was compensation schemes for retail depositors need to be able to pay out quickly in the event of bank failure.
Offshore centres also need to assess the effects of any liability cap on protection schemes, as there could be a varying impact on depositors with different sized banks.
Any jurisdiction wishing to have a liability cap must now consider if it can be adequately explained to depositors. They must also assess if a deposit protection scheme for all depositors is required or just one offered to local residents.
Foot also asked offshore centres to consider whether an Ombudsman complaints scheme along the lines of the UK model, currently only offered by the Isle of Man, may be justified.
The review also makes a number of key recommendations in areas including economic planning, tax transparency, financial sector regulation and tackling financial crime.
Foot suggests these could provide benchmark standards for British offshore centres and they should publish regular reports outlining their progress in meeting the requirements.
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Square Mile’s series of informal interviews
Fallout from Haywood suspension
Launching later in 2019
£80bn funds under calculation