DEPOSITORS would not be protected if a ‘Bank on Dave’ type operation was set up in the island.
Treasury Minister Eddie Teare was questioned in the House of Keys by Kate Beecroft (Lib Van, Douglas South) over whether the formation and opening of a community bank would be permitted here under current regulations.
Minibus retailer David Fishwick found fame when he launched an independent lending scheme in Burnley, Lancashire, which trades under the slogan Bank on Dave. A Channel 4 series Bank of Dave followed his progress.
Replying to Mrs Beecroft, Mr Teare said: ‘The member is asking about the ability for someone to form a company similar to the “Bank on Dave” model, which was the focus of a recent television programme.
‘The “Bank on Dave” model is not what we would commonly regard as a “bank” in terms of its licensing, operation or regulation – it is in essence a peer to peer lending company.’
He said neither in the UK nor in the island are peer to peer lending companies subject to regulatory oversight. In the island, however, they would be required to be registered with the Office of Fair Trading as a money lender and they would be subject to anti-money laundering and countering of financial terrorism legislation.
Mr Teare said that a Bank on Dave operation would not be licensed or regulated by the island’s financial services watchdog, the Financial Supervision Commission – and there would be no protection for investors under the Depositors’ Compensation Scheme.
He explained: ‘If anyone wished to set up a “Bank on Dave” type company, the FSC regulations would not be applicable. The use of the word “bank”, however, may not be permitted in the island as this could indicate holding out as being a bank without a deposit taking licence.
‘I would stress to anyone considering this type of venture that a peer to peer lending company would not be licensed by the FSC, it would not be regulated by the FSC and, perhaps most importantly, anyone providing money under a peer to peer model would not be protected by regulatory capital requirements, or by the depositors’ compensation scheme.’
John Houghton (Douglas North) suggested that government bonds should be introduced.
Mr Teare replied this was actively under consideration as one option for refinancing the outstanding £35 million MEA bank loan.
Laurence Skelly (Rushen) said new initiatives to rebalance bank deposits were needed. Mr Teare said bank deposits were down but not by a substantial amount. ‘I would be very nervous indeed in government setting up a bank.’