It is too early to say exactly what impact the reforms to banking unveiled by UK Chancellor Jeremy Hunt will have on the island.
The package announced by Mr Hunt proposes to reform rules which were introduced after the 2008 financial crisis to protect savers and taxpayers from the negative impact of investment banking.
Rules governing how senior finance executives are hired, monitored and sanctioned will be overhauled and there are plans for new new rules around combining investments together into tradeable units.
Speaking this morning, Dr Allinson said the Financial Supervision Authority has been aware of possible changes since the review was announced last February and that Mr Hunt’s announcement had offered more clarity around what those changes would be.
However, he added that the implications of these changes for the Isle of Man will ‘very much depend on the detail that will come out through consultation’.
He said: ‘At this stage, noting the announcements, the next step will be for the government and the FSA to engage with the banks which are part of UK groups to understand any potential change to their business models, or structures, that may arise.
‘It is too early to know what those changes may be and thus whether they will be positive or negative for customers and the island as a whole.’
Daphne Caine (Garff) asked Dr Allinson what role the Treasury has had to date in talks with the FSA and whether the island would follow suit in changing the levels of customer security in the future.
Quoting from his UK counterpart, Dr Allinson said that the purpose of the reforms is to boost output while ensuring proper customer protections are in place.
He added: ‘We have a range of financial institutions on the Isle of Man and the FSA are in close conversation with those to understand those changes. But the statement made in Edinburgh on Friday was the start of those proposals and we shall be looking at the details as they become available over the next 12 months.’
Jason Moorhouse (Arbory, Castletown and Malew) asked if the Manx government was speaking to Westminster over the changes.
While Dr Allinson said the Treasury and the FSA would be monitoring the consultations, he didn’t give much by way of assurance that there would be much input from the Isle of Man.
Speaker Juan Watterson also sought to clarify that the FSA’s role wouldn’t be changing due to the changes, particularly around the depositors’ compensation scheme.
Dr Allinson replied: ‘Ring fencing was brought in after the 2008 financial crisis to try to confine the activities of banking institutions that had a retail and banking arm together and was brought in really to try to protect the long term legitimacy of them aims.
‘That was some time ago, it has been reviewed and the UK is now looking at changing those regulations and when you look at some of the documents, there are a whole range of options for this, none of which would substantially jeopardise peoples’ deposits in banks on the Isle of Man or the UK.
‘As Mr Speaker pointed out, the deposit guarantee and protection scheme is still established and will still be established, what this really is looking at is the scope of banking operations both in the UK and internationally and seeing if those changes that were brought in after 2008 are still valid, if they achieved what they were aimed in to do or whether as we developed more a dynamic, ambitious and technologically enabled financial sector, we should change those regulations.’