THE £600 million rainy day fund will be used ‘as the backstop’ to repay Island savers if banks go bust, the Chief Minister announced this morning as bank shares plummeted.
He said that the strategic reserve would be used to bail out banks if all other measures failed. Senator Frank Walker announced the details of the deposit protection scheme this morning and insisted that such a worst-case scenario was very unlikely in Jersey.
He said that the announcement should steady the nerves of savers across Europe who were today looking for reassurance as the international banking crisis deepened further. The value of shares in RBS lost around 40 per cent of their value today, while those in other banks including HBOS also fell considerably.
Senator Walker said that before the rainy day fund was dipped into, the Island could be forced to borrow and make the banks repay the loans. It is not clear at this point whether the money would be available on the world money markets or how a bank that had gone down would meet such obligations.