Feedback sought on proposed changes to Depositors’ Compensation Scheme
The Isle of Man Financial Services Authority is inviting feedback on proposed changes to the Depositors’ Compensation Scheme (DCS).
The intention is to update the existing framework to make the DCS more effective, enhance the timeliness of payments, and maintain confidence and stability in the Island’s financial system.
The Authority has been working with the Treasury and the banking industry to review the Island’s DCS, which covers the payment of compensation to depositors when a regulated bank fails.
A public consultation has been published online today, Friday 24 November 2023, to seek views on a number of key measures.
Proposals include an increase to £50,000 (from £20,000) in the maximum compensation payments for companies, trusts and charities. This would bring payments in line with the level for individuals and sole traders, which is set to remain at £50,000.
The consultation also highlights plans to introduce a Single Customer View (SCV) mechanism, to enable smoother and faster pay-outs when the DCS is triggered.
SCV, which is in place in many other jurisdictions including Jersey and Guernsey, collates data about depositors’ bank account balances to allow for same-day calculations.
While there is currently no specific timeline in place for pay-outs to customers in respect of their protected deposits, the revised DCS framework would aim to meet the international standard for payments to be made within 7 to 14 days.
Paul McAuley, Technical Lead, Resolution and Depositor Compensation, said: ‘While bank failures are rare, the international banking environment has changed significantly over the last 12 months, with increased focus on depositor compensation and resolution strategies for banks of various sizes. These changes have underlined the importance of robust regulatory and supervisory standards.’
He added: ‘There continues to be excellent collaboration between the Authority, the Treasury and senior representatives from the Island’s banking industry. We have reviewed the current DCS and put forward changes aimed at speeding up payments, providing consistent levels of cover, and raising public awareness. Closely aligning our DCS with international standards will also help to safeguard the Island’s reputation as a well-regulated and responsible jurisdiction. The DCS is an important part of the Island’s financial landscape and I would encourage all interested parties to respond to the consultation.’
Written feedback should be emailed to Paul McAuley, Technical Lead, Resolution and Depositor Compensation, Financial Services Authority, PO Box 58, Finch Hill House, Bucks Road, Douglas, IM99 1DT, email: Paul.McAuley@iomfsa.im
The closing date for submissions is 21 January 2024. The Authority will then review the feedback and publish a consultation response document before setting out the next steps in the process.