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IMF issues long-awaited report cards on Jersey, Isle of Man

International Monetary Fund officials today issued their long-awaited assessment of the financial health of the Isle of Man and Jersey, following visits to the Crown Dependencies last September and No

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International Monetary Fund (IMF) officials today issued their long-awaited assessment of the financial health of the Isle of Man and Jersey, following visits to the two Crown Dependencies last September and November.

Both islands were described as having financial sector regulation and supervision of a “high” or “ generally high” standard, but IMF officials cited some areas on both islands which they said warranted attention.

The two Financial System Stability Assessment (FSSA) updates are available online at the IMF’s website, www.imf.org.

Among the IMF’s findings were:

• Financial sector regulation and supervision on the Isle of Man are “generally of a high standard, and supervisory efforts are concentrated in those areas most relevant to the activities of financial institutions on the IOM”.

• “The regular review of the soundness of parent financial institutions” on the Isle of Man “is critical, and will require continued close cooperation with home supervisors. Regulations on exposures to related parties and liquidity need to take more into account risks from exposure to parent institutions.”

• Contingency plans on the Isle of Man, and its depositor compensation scheme, “need to be refined”.

• Jersey’s financial sector regulation and supervision “are of a high standard, and processes and resourcing have been significantly enhanced since a 2003 assessment under the Offshore Financial Centre  programme”.

• The financial crisis has highlighted the “vulnerability” of Jersey’s banks to events in major financial centres. And while Jersey supervisors “cannot feasibly analyse in depth the soundness of the financial groups to which their Jersey operations provide extensive funding, it should be able to detect and react to intensified risks stemming from parental institutions”.

• While Jersey officials are making contingency plans, a key element of which will be cooperation with home supervisors, “experience elsewhere suggests the usefulness of a dedicated bank insolvency regime”.

• Jersey’s planned introduction of a bank depositor compensation scheme “would require careful study”. Also, “all depositors must receive clear information on who is responsible for safeguarding their claims and the scheme’s coverage, if any.”

In a joint statement, Jersey’s chief minister Terry Le Sueur, and commission chairman Colin Powell said the report was “an excellent outcome” and added: “we are delighted that [the IMF] has yet again demonstrated Jersey’s high degree of compliance with international standards. 

“Jersey remains committed to maintaining and enhancing its adherence to international standards and welcomes the recommendations made within the FSSA.  These recommendations will assist Jersey in further strengthening its regulatory, supervisory and AML/CFT arrangements and in developing its capacity to deal with financial sector shocks.”

Isle of Man chief minister Tony Brown said the IMF report on that jurisdiction was “a comprehensive, independent and expert endorsement of the quality of the Isle of Man’s financial services regime”.

“We in the Isle of Man have always worked hard to achieve a high level of compliance with international standards, and will continue to do so as the standards evolve,” he added.

In a statement, the Isle of Man Treasury noted that the IMF had found the Manx banking system to have “a limited exposure to market shocks, with a ‘very sound’ level of capitalisation,” and that it called the island’s depositors’ compensation scheme “unusually extensive for a small, internationally-oriented jurisdiction”.    

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