Amended IoM depositors compensation scheme

  • Anonymous
  • unspecified
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Posted: Fri, 24/10/2008 - 15:34

The latest amended compensation scheme regulations (23 Oct) states in par 12 that the scheme makes provision for the payment of 50,000GBP compensation per depositor until 22 October 2009, after which compensation is reduced to 20,000GBP. This is rather alarming - what happens if KSKIoM takes more than a year to be wound up?

The regulations can be downloaded at the following website:
http://www.gov.im/infocentre/ViewNews.gov?page=lib/news/cso/tynwaldappro...

For ease of reference the explanatory note published with the amended regulations is copied below:

A R Bell 22.10.08.
Minister for the Treasury
EXPLANATORY NOTE
(This Note is not part of the Regulations)
These Regulations amend the Compensation of Depositors Regulations 2008 (S.D. 828/08). The amendments are introduced by regulation 3. They restore the range of depositors entitled to compensation to the position under the Banking Business (Compensation of Depositors) Regulations 1991 (G.C. 47/91), which were in force prior to the 2008 Regulations, save that the compensation limit for each of these depositors is increased from 75% of the deposit up to a maximum of £15,000 to 100% up to a maximum of £20,000. The increased protection for depositors who are individuals beneficially entitled to the deposit remains at 100% up to a maximum of £50,000 (regulations 5 to 7).
The Scheme Manager must determine the maximum amount to be paid out in compensation to depositors in any financial year having regard (amongst other things) to the amount of the contributions levied and any funding due from the Treasury. Also reintroduced is the provision from the 1991 Regulations that requires the Scheme Manager, when unable to pay out the full amount due to the claims exceeding the money available, to pay the same proportion to each depositor (regulation 7).
The maximum levy on each participant in the scheme in any one financial year is reduced from being the greater of £50,000 and a sum not exceeding £500,000 representing 0.125% the average deposits of the participant, to a similar formula using the amounts of £35,000 and £350,000 instead of £50,000 and £500,000 respectively (regulation 8).
5
A requirement is introduced for the Treasury to pay into the scheme a sum equivalent to the amount paid out as a result of the limit for individual depositors being £50,000 and not £20,000 (regulation 9).
Maxima are imposed in respect of the Treasury’s liability and the aggregate of the liabilities of participants under the scheme, namely £150,000,000 and £200,000,000 respectively.
A minor correction is made to the numbering of regulation 16 of the 2008 Regulations (regulation 10). In addition the definition of “deposit taker” is expanded to make it clear that it does not include a building society (regulation 4).
In addition provisions are added requiring the Scheme Manager, in the event of a recovery of sums from a defaulting participant, to distribute those sums between participants, the holders of eligible protected deposits and the Treasury on such basis as appears to it to be appropriate, and enabling the Scheme Manager to seek the directions of the High Court on any question relating to the operation of the scheme or the Fund (regulation 11).
The provisions giving a higher level of compensation to individuals and for the Treasury to fund the extra cost of so doing will cease to have effect a year after these Regulations are approved by Tynwald (regulation 12).

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Things wot have changed in Compensation Scheme

  • cold-dose
  • 11/10/08 31/05/09
  • unspecified
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  • Fri, 24/10/2008 - 16:58
  • There is an absolute upper limit on the total to be paid out, ever - if this is reached, bad luck: even if you haven't got your full £50,000 back. If another bank were to fail, it would quite possibly be effectively not guaranteed.

  • Building Society accounts are no longer guaranteed. Building Societies also do not fund payments into the scheme.

  • Only first £20,000 is paid by banks. Rest is paid by Isle of Man Government.

  • Limits on amounts contributed by banks have been decreased - maximum now £350,000.


Amended Compensation Rules

  • DXB
  • 12/10/08 31/05/09
  • unspecified
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  • Fri, 24/10/2008 - 17:02

Ouch!


Badly drafted?

  • cold-dose
  • 11/10/08 31/05/09
  • unspecified
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  • Fri, 24/10/2008 - 16:53

I would have thought that they'd intend the payments to be based on the date the scheme was activated, but they haven't provided any 'saving' clause in there, so it's a bit unclear - it can be read either way.

The provided a saving for the BCCI fund to operate under the older regulations last time they amended them a couple of weeks back - perhaps this was put together a bit too quickly?


Even with the new scheme I

  • expatfrance1
  • 15/10/08 31/05/09
  • a depositor
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  • Fri, 24/10/2008 - 17:05

Even with the new scheme I think we could be looking at a long period of time to get payment.


Payment speed

  • cold-dose
  • 11/10/08 31/05/09
  • unspecified
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  • Fri, 24/10/2008 - 17:30

The new scheme doesn't really speed up the payments - pretty much the same as before this amendment.


Does the new scheme allow the

  • expatfrance1
  • 15/10/08 31/05/09
  • a depositor
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  • Fri, 24/10/2008 - 17:37

Does the new scheme allow the IOM to borrow money to pay out in leu of collecting the levies from the banks or would any borrowing just be for the IOM Governments contribution.

I for one am fed up with the offshore juristictions pandering to every whim of the financial institutions. Whilst I understand their economies depend on the banks they should also remember that no depositors, no banks.


In the News

  • mikeinfrance
  • 12/10/08 28/09/09
  • a depositor
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  • Fri, 24/10/2008 - 18:11

You seem not to have read the news that the IOM govt has agreed to put £150M into the scheme.

see: http://www.iomtoday.co.im/news/150-million-taxpayer39s-cash-for.4625544.jp


I have read the news. I am

  • expatfrance1
  • 15/10/08 31/05/09
  • a depositor
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  • Fri, 24/10/2008 - 18:21

I have read the news. I am also aware that when the changes to the DCS were first proposed, one of the proposed changes was that the IOM Government would also be able to fund the scheme through borrowing.

My original question was, does anyone know if this is still the case and if so would the borrowing just be used as a way of funding the £150 million from the Government or would it also be used to also fund the bit that the Banks have to provide.

If it is the former then we are likely to have to wait many years for full payment to be made (30 odd banks paying a maximum of £350,000 per year only gives about £10 million per year maximum)

If it is the latter then a possible senario could be that the Government contributes its £150 million and then borrows the remainder to allow a speedy payment. It can then recoup the money from the banks over a period of years to pay off the loan.

Oh well hopefully it will not come to that.