KSFIOM DAG 25 Feb 12: Plans to ring-fence funds for the DCS shelved by Tynwald

Category: DAG Public News

Consideration of a proposal to establish a Depositors' Compensation Scheme (DCS) Fund, which would have provided an earmarked reserve of £100 million to enable prompt payment to depositors in the case of another Isle of Man bank failure, and on a similar basis to other jurisdictions such as the UK, was deferred to an unspecified date at this month's sitting of Tynwald, following lobbying by a number of MHKs apparently opposed to the proposal.

The compensation scheme therefore remains unfunded. Bank levies and government funding are sought only when a bank fails, with the inevitable delay in compensating depositors while funds are approved and collected (following the collapse of Kaupthing Singer & Friedlander in October 2008, depositors were left waiting for 3 months for a first 'early' payment of up to £1000, increased to £10,000 a month later; the DCS itself finally paid out almost a year after the collapse and 4 months after it was formally triggered).

Moreover, the maximum compensation payable (£50,000 per individual depositor) has not been increased in line with that in the UK (£85,000) or elsewhere in Europe (100,000 euros) and, as is clearly explained on the Financial Supervision Commission's website, there is no guaranteed minimum compensation.  Indeed, the Tynwald Select Committee on the collapse of KSFIOM concluded in its Final Report issued in July 2011 that “In the event there was another bank failure while KSF (IoM) is still ‘live’ or in the future any systemic or major bank in default, it is highly unlikely that there would be sufficient funds to compensate depositors to the full value of the threshold limits.”

This latest development is yet another sign of the unwillingness of the Isle of Man to provide adequate protection for its depositors in line with best European practice.

KSFIOM DAG Strategy Team

 

 

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