The UK’s Financial Services Compensation Scheme is considered more generous, longer-established and better funded than Jersey’s scheme.
However, Lloyds TSB said in a statement that "no deposits made with Bank of Scotland plc in Jersey would ever have been covered by the UK FSCS", since the UK scheme "does not cover deposits outside the European Economic Area or in the Channel Islands or the Isle of Man".
The transfer of the Bank of Scotland accounts – which is formally scheduled to take place on 10 January, and is explained on the Bank of Scotland International’s website – follows the acquisition of HBOS plc by Lloyds TSB Group plc in early 2009, creating Lloyds Banking Group, which in turn has resulted in a consolidation of the two banking groups’ offshore banking operations.
It also comes as British expatriates continue to complain about their inability to obtain and often even to keep onshore UK bank accounts, in spite of some efforts by the British Bankers’ Association to urge its members to be more accommodating. Concerns about the safety of offshore accounts arose after thousands of depositors were caught in the collapse of the Guernsey and Isle of Man branches of two Icelandic banks that failed in 2008.
The expats also complain that by being forced to bank offshore, since the first of this year they must accept a lower level of depositor compensation protection. As reported, Britain’s three crown dependencies elected to keep their level of protection at £50,000 for now, even as the minimum protection level in Europe rose on 1 January to €100,000 from €50,000, and in the UK to £85,000 from £50,000.
A spokesman for the Isle of Man’s Financial Supervision Commission stressed that even though the island’s compensation level is remaining at £50,000, expats with accounts there would not suffer "any dilution in cover in respect of the proposed transfer" of Bank of Scotland Isle of Man accounts to Lloyds TSB, because, as the bank noted in its statement, the FSCS scheme never did cover Isle of Man deposits.
This was the case even when the deposits were held by branches of UK banks in these places, the FSC spokesman said, quoting from a statement on the FSCS’s website.
A hearing on the so-called scheme of transfer covering the Bank of Scotland International accounts is scheduled for Thursday at Jersey’s Royal Court, when objections by customers and other interested parties will be considered.
Mark Ashbey, a British expatriate who was among those left out-of-pocket when the Guernsey branch of Iceland’s Landsbanki collapsed, and who has since become something of an activist on offshore banking issues, said he had understood that deposits held in the Jersey branch of the Bank of Scotland had been covered by the UK’s depositors’ compensation scheme, and would remain so until the changeover on the 10th of January.
Lloyds TSB International’s main office is in the Isle of Man, although it has branches in Jersey, according to its website.
Not ‘like for like’ accounts
In addition to offering a depositors’ compensation scheme less generous than that on offer in the UK and Europe, Ashbey said that the Lloyds TSB accounts that will replace the Bank of Scotland accounts were "not like-for-like" compared to the ones they replace.
“In particular, the Lloyds TSB ‘Premier International Account’ imposes onerous conditions such as a high minimum balance, and a monthly penalty fee is levied if the balance falls below the imposed minimum,” he said.
“It is therefore far from flexible and quite incompatible with the Bank of Scotland ‘Flexible Plus Current Account’.”
Ashbey noted that there has been confusion within Lloyds TSB with respect to its offshore accounts for some time, as its consolidation of the two operations has been taking place, and said there did seem to be some confusion about whether Bank of Scotland Jersey and Isle of Man branch deposits were in fact covered by the UK FSCS.
Flexible Plus account removed
Lloyds TSB confirmed that it has "removed" the Bank of Scotland Flexible Plus Account from its product range, following a review, and that it had written to the affected customers notifying them of the change. It did not give a specific reason for the decision.
"The group will continue to offer the Lloyds TSB Premier International Account, which provides a number of additional benefits that the Bank of Scotland accounts didn’t, including worldwide family travel insurance and a 24/7 concierge service," the bank added.
"The Premier International Account carries a £20 monthly fee if the balance falls beneath £2,500. However, based on current balances, half of all Bank of Scotland Flexible Plus Current Account holders will be eligible for fee-free banking and the remaining half will have the option to pay £20 per month."
Lloyds urged depositors concerned about Jersey’s depositors’ compensation scheme to study the details, which are available on the States of Jersey website, or by request from its staff. The plan offers protection for eligible deposits up to a maximum of £50,000 per depositor per Jersey Banking Group, meaning that consolidated balances held with Bank of Scotland plc, Jersey and Lloyds TSB Offshore Ltd, Jersey branch would be covered as a single deposit.
The maximum total amount of compensation is capped at £100,000 in any five-year period.