MOST people are easily able to make sense of the warning that is issued with the majority of investment products.

This warning alerts investors to the regrettable truth that, depending on market conditions, investments can shrink as well as grow.

Fewer people, however, consider another regrettable truth – that the total collapse of a financial institution could result in their savings not merely shrinking but evaporating. Most of the time, such calamities are rare, but with organisations on the scale of Lehman Brothers in the USA and HBOS in the UK failing or having to be rescued, these are clearly dangerous times.

With this in mind, it is clear why Citizens Advice Bureau manager Francis Le Gresley, who witnesses far more than his fair share of personal financial disaster, believes that there should be more safeguards to protect savers from adverse events far beyond their control.

Such safeguards already exist in the UK in the shape of the Financial Services Compensation Scheme, which, in essence, guarantees the first £35,000 of savers’ funds in the event of an institutional collapse. Unfortunately, this offers no protection to Channel Islanders.

Prevention, of course, is always preferable to a cure – which is why we would all do well to take notice of advice offered by Martyn Scriven, the secretary of the Jersey Bankers Association, who says that Islanders should be ‘sensible’ when they decide where to deposit money. In practice, this means opting for stable, reputable organisations rather than those offering alluringly high rates of interest.

We should also take notice of other advice offered by Mr Scriven and echoed by Mark Summer, director of banking at the Jersey Financial Services Commission. Both have pointed out that because we have accepted only the top 500 banks as participants in our finance industry the chances of any of them failing is small.

Meanwhile, yet another regrettable truth should be mentioned. Deposit protection schemes are without doubt commendable initiatives, particularly from the point of view of the small saver, but someone has to pay for them. If a scheme were mooted for Jersey, there could be much debate over the proportion of costs to be picked up by government, financial institutions and consumers.