Jersey: Law of Offshore
Banks are registered in Jersey under the Banking Business (Jersey) Law, 1991 and the associated Banking Business (General Provisions) (Jersey) Order, 1991 which is administered by the Jersey Financial Services Commission. Applications for new banks or branches (more usual) are carefully vetted both from a prudential point of view and commercially.
The Banking Law has three main objectives:
- To protect depositors
- To protect the reputation of Jersey as an International banking centre
- To protect the best economic interests of Jersey.
It contains capital adequacy rules which are stiffer than the Basle requirements. The Commission's information requirements are contained in Article 25 of the 1991 Law and include submission of annual audited accounts.
Under Article 31 of the Law, all registered banks are required to keep copies of their current audited accounts available for inspection by any person. In the case of branches, this means the Group's published accounts and for Jersey incorporated subsidiaries, it means their own audited accounts.
In November 2009, Jersey’s States Assembly approved legislation to establish a Depositors Compensation Scheme (DCS) in the island with immediate effect.
The key features of the DCS are that:
- It provides protection of up to GBP50,000 per person, per Jersey banking group, for local and international depositors in line with international standards;
- An interim payment of up to GBP5,000 will be made within seven working days and the balance of compensation within three months;
- The GBP50,000 limit will apply per person, so a GBP100,000 deposit held in a joint account by two people would be completely covered;
- The DCS will be operated by an independent Board that will be appointed by the States as soon as possible;
- The maximum liability of the DCS will be capped at GBP100m in any five-year period, in line with the Guernsey scheme; and
- The majority of the cost of the compensation will be borne by the banking industry, with the States making up any shortfall. In most cases, the DCS would be funded solely by levies on the banking industry with any States contribution being fully repaid from the liquidation proceeds.
The DCS was designed according to the findings of expert economic analysis of the Jersey banking sector by Oxera, and, according to Jersey's government, the scheme is "robust, competitive and credible."
Welcoming the introduction of the DCS, the Minister for Economic Development, Senator Alan Maclean, said:
“We have always believed that the best protection for depositors lies in the strength of Jersey's banks, all of which are in the top 500 banking groups in the world; and in our sound regulatory position, which is designed to prevent the bank failure occurring in the first place.”
“However, it is important to be able to provide depositors with the additional reassurance that this statutory Depositors Compensation Scheme will give. This scheme provides an appropriate level of protection for depositors and meets the latest international standards.”
Certain changes to the Banking Business (General Provisions) (Jersey) Order 2002 (the GPO) and the Codes of Practice for Deposit-taking Business (the Banking Codes) were proposed that would require disclosures regarding Depositor Compensation Schemes (DCSs), following the recent introduction of a DCS in Jersey. Changes were also proposed to the GPO and Banking Codes to reflect the requirements in the Proposed Order.
The Companies (Jersey) Law 1991 was amended in 2010 to introduce registeration and supervision of the work of auditors of market traded companies (“Recognized Auditors”). Oversight of Recognized Auditors commenced in April 2011.