Manx residents can still access the government’s depositors’ compensation scheme, provided a bank is incorporated in the island.

The assurance was given by Financial Services Authority chairman Lillian Boyle and chief executive Karen Badgerow as they gave evidence to the Tynwald economic policy review committee.

Ms Badgerow told the committee that access to the compensation scheme, a fund of last resort that protects an individual’s savings up to a total of £50,000, was dependent on the structure of the bank used.

She added: ’If it is a locally incorporated bank then customers would have access to the depositors’ compensation scheme in the island.’

Ms Badgerow was responding to a question from committee chairman Chris Robertshaw MHK, who said the issue had ’preoccupied this committee for years’ following the closure of Lehman Brothers at the start of the 2008 financial crash.

He said following a long and ’difficult’ period for banks, they appear to be stabilising and ’finding their place’.

Ring-fencing has split banks into deposit-taking institutions and investment banks, in an effort to avoid the need for government intervention, such as occurred at Northern Rock and RBS when their investment banking arms nearly resulted in millions losing their savings.

In the UK, larger banks have been required to ring-fence their deposit-taking operations from January 2019.

Mr Robertshaw asked: ’Is it the case, and correct me if I’m wrong, that our leading banks sit outside the UK ring fencing principle that high street banks are now separate from the big international banks and that we sit outside for capital asset ratio reasons?

’Does that mean that our local citizen deposits, are they not more exposed than would be the case if they were inside the ring-fencing in the UK?’

Ms Badgerow responded that the Isle of Man, along with Jersey and Guernsey, have moved outside the retail bank sector.

She added: ’The UK is considered less risky while we’re sat in a more commercial operation so I think that’s where the concerns have given rise, because of the restructuring of the banks.

’But an incorporated bank, and subsidiaries, in the Isle of Man, would have access to the depositors’ compensation scheme here.

Lillian Boyle had previously told the committee that the FSA is effectively doing the work of two regulators.

She said: ’Historically regulators have not had the consumer protection role at the forefront of their work.

’The UK’s regulator, the Financial Conduct Authority, is very much seen as having a consumer role. But the UK also has a credit regulator whereas we do both.’