Proposal to improve protection for vulnerable depositors in the event of a local bank insolvency

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2015-09-13 23

The Department of Economic Development is consulting on a proposal to change the order in which recovered money is repaid in the event of a local bank becoming insolvent.

The move would give ‘preferred creditor’ status to eligible deposits as defined and covered by the Island’s Depositors’ Compensation Scheme (DCS), ranking them ahead of other creditors in the liquidation process.

This change would mean that vulnerable depositors and, if claim was made to the DCS, the public purse would be reimbursed earlier. For example, when Kaupthing Singer & Friedlander failed, the DCS pay-outs were funded initially by the Government, these would have been repaid earlier (reducing the financing costs) if preferred creditor status was in place.
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