LEGEND has it that the traditional Jerseyman kept his cash under the mattress or in a tin buried in the garden.

But he has been far too astute for that for a long time. He has wanted his money to grow. An appreciation of history, however, might explain why, for many years, there was residual suspicion of banks. In the late 19th century many Island banks failed, taking savings and formerly thriving businesses with them.

If faith in the security of banks has once again been undermined, it is because of what is happening in the wider world rather than here in Jersey. We have so far been spared the calamities that have struck organisations ranging from Northern Rock to Lehman Brothers. And now there is a reason for Islanders to believe that money on deposit is safe and sound.

After intensive high-level discussion, Chief Minister Frank Walker has announced that, subject to States approval, every penny of Jersey residents’ savings held in Island banks would be guaranteed – although no specific compensation scheme will be formulated in advance of a bank going under.

In terms of the confidence that it will undoubtedly engender, Senator Walker’s pledge is certainly welcome in principle, though in practice we should worry about funding if the worst came to the worst. The plan appears to rely on any failing bank’s remaining assets as a first port of call, and then on States borrowing, which would be repaid if the bank were rescued. The final source of cash would be the Strategic Reserve, a pool of some £600 million – which does not sound like a lot of money in comparison with the £10.5 billion Islanders have in Jersey banks.

But the plain fact is that the Senator and his advisers do not expect any of this to happen. This is because of the nature of banks with a presence in the Island. It has long been policy to accept only those that are among the world’s top 500 institutions. Moreover, the bulk of Islanders’ savings are held in an even sounder category – the top 100 banks.

As we can now see, there is no such beast as an absolutely sure thing in the financial world, but the architects of the new 100 per cent compensation plan are pinning most of their hopes on the belief that it will never have to pay out.