From John Harris, director general, Jersey Financial Services Commission.
FOLLOWING further misleading comments by Jersey Home Loans relating to the Island’s ‘Top 500’ policy (JEP, 30 October), it is perhaps useful to try to inform readers how the headline ‘Top 500’ policy works in practice when licensing banks.

In fact, ‘Top 500’ is shorthand for a much more detailed set of licensing criteria which takes into account a number of factors over and above the pure size of the bank making the application. While licences are not granted to banks that are not in the Top 500 by size, the fact that a bank is in the Top 500 is no guarantee that it would receive a banking licence in Jersey.

This ‘Top 500’ status is merely a first step towards a more detailed review of the suitability of a bank to operate in the Island. Other factors that are taken into account are numerous, including management experience, track record, international capability, ratings and ownership structure.

An important consideration, and something which has served the Island very well in the turbulent recent times, has been the extent to which the parent of the bank branch or subsidiary proposed is supervised by its home jurisdiction and most importantly whether that home jurisdiction has the financial capability and resources to ‘save’ the bank in times of extreme market stress.

Overall, the policy is designed to protect and enhance the Island’s reputation and reduce the risk to the public. Analysis of those banks which hold the majority of deposits in Jersey shows that these actually fall within the Top 50 banks in the world by market size. That is a measure of the capital resources available within the bank, but an analysis would also show that these banks are those that home governments have stepped in to assist in current market turbulence, something which the Jersey authorities regard as vindicating its selective bank licensing stance.

While some Top 500 banks have failed, none has been a bank licensed in Jersey. Over the years the policy has served the Island well. To name a few examples, Jersey did not have BCCI, Northern Rock or the Icelandic banks. Our view is that this is certainly not a time to change the policy.
The full policy can be found at the commission’s website at www.jerseyfsc.org.
14-18 Castle Street,
St Helier.