Essential reading

  • Anonymous
  • unspecified
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Posted: Sat, 24/01/2009 - 14:29

Someone posted this link yesterday, but it was truncated. This is the correct link

http://www.parliament.uk/parliamentary_committees/treasury_committee/ban...

The IOMG written submissions are in memos 36-69. The page number is in fact 85 (as the Word document displays for me), not 80 as stated.

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The full text of the Memorandum

  • mr plod
  • 13/10/08 31/05/09
  • a depositor
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  • Sat, 24/01/2009 - 16:22

As I found it difficult to locate the referred Memorandum, I've taken the opportunity to cut and paste it in full. (If it is a copyright breach, ng please delete it :)).

.............

Memorandum from Isle of Man Government
The UK Treasury Committee is seeking to identify lessons that can be learned from the banking crisis. To that end, it has invited written evidence on four key areas. The Evidence from the Isle of Man Government which focuses on Sections 1.8 and 3.5 of the Committee’s examinations is set out below.
Executive Summary
The Isle of Man Government:
• asserts that it is a well regulated economy and applies international standards to the highest level.
• contends that the usual communication channels between the Isle of Man Financial Supervision Commission and the UK’s FSA were not followed in advance of or during the Kaupthing insolvency.
• has in place a deposit protection scheme in line with affordable best practice.
• is keen to contribute to a debate as to how international consumer protection may be strengthened recognising that expectations may have changed.
• welcomes the opportunity to provide evidence, both in writing and orally, to demonstrate that the Isle of Man promotes transparency in the provision of financial services and plays an active part in combating international crime.

About the Isle of Man Government

Background to the Isle of Man, its Economy and Political System

  1. The Island is a self-governing British Crown Dependency with its own parliament, government and laws. The UK government, on behalf of the Crown, is ultimately responsible for its international relations and the Queen, as ‘Lord of Mann’, is the Head of State and is represented on the Island by the Lieutenant Governor. The Island has a special and limited relationship with the EU, under an agreement (‘Protocol 3’) negotiated when the UK joined Europe in 1972, allowing free trade in agricultural and manufactured products between the Isle of Man and EU members. Apart from matters relating to this agreement, including Customs, the Island is not bound by EU legislation and it pays nothing to, and receives nothing from, EU funds.

  2. The Isle of Man has had one of Europe’s fastest growing economies in recent years, led by the international financial services industry. Over the last 25 years, the Island has developed into a flourishing and internationally respected offshore business centre providing significant business introduction into the UK and, in particular, the City of London. Business is attracted by professional expertise, supportive government, world-class telecoms infrastructure and sound financial regulation, as well as by a competitive tax regime. New growth areas include e-commerce, film industry, international shipping, aircraft registry and space and satellite business, while traditional sectors like tourism are still important.

  3. Growth in the Island’s economy has been matched by investment in the Island’s public services, funded by direct and indirect taxation. The Island is self-financing.

  4. Economic sectors include: financial services (36% of GDP), construction (7%), manufacturing (7%), professional and scientific services (21%), tourism (5%), and farming/fishing (1%). The Island has a working population of 44,000 and an unemployment rate of 1.5%. Inflation is currently 4.7%. The Isle of Man produces its own notes and coins with the same value as UK Sterling, for local use only.

  5. For the 2007-2008 taxation year overall Government net spending was £543 million. This funding was used to provide a variety of services to Isle of Man residents, many in excess of those provided in jurisdictions such as the UK. For example:-

• the basic pension plus supplements for a married couple, with the wife qualifying on her husband’s contribution, is £217.58, some £72.53 per week higher than the basic pensions of £145.05 per week in the UK.

• free eyesight tests and dental examinations are provided under the Health Service.

• all tuition fees for Island students accepted into Higher Education courses at UK universities are paid by the Isle of Man Government without any required student contribution, while UK students are responsible for their own tuition fees.

• free public transportation is provided for those over 60 years and pupils travelling to and from state schools.

• during the past decade significant investment has been made in new infrastructure throughout the Isle of Man. In recent years over £500 million have been committed for such projects as a new acute care hospital, an energy-from-waste facility, new sewerage treatment works, improved schools, a new prison and two new water treatment plants.

• the provision of affordable housing for Island residents has been a high priority and some £200 million has been made available for housing schemes that will see more than 1,000 additional homes built before 2010. A further £85 million has been allotted to repair and refurbish public sector housing and £44 million in grants and loans has been provided to construct homes for first-time buyers.

  1. The provision of extensive public services and infrastructure within a legislative framework that does not permit a budget deficit, has earned the Isle of Man a coveted AAA credit rating from both Standard and Poor’s and Moody’s credit rating agencies for the past 8 years.

  2. The Isle of Man is an international financial centre but because of its relatively low levels of income taxation, it has on occasions, been described as a “tax haven.” Such labels are misleading, and may suggest to some a stereotype of secrecy and weak financial regulation. In recent years the Isle of Man has proved to the world that it does not conform to this stereotype.

  3. The Island is not a secret or closed jurisdiction; it has no bank secrecy laws. A number of external and independent assessments of financial regulation have confirmed that the Island co-operates fully in the pursuit of international financial crime, and that its defences against money laundering comply with the highest global standards.

  4. The Manx government’s policy is to be both internationally responsible and economically competitive. At the heart of its taxation strategy is a determination to comply with current international standards on information exchange whilst endeavouring to promote good quality business in a low tax environment.

  5. A number of international organisations have assessed the Isle of Man’s practices against global standards to ensure that the Isle of Man does not present a weak link in the financial system generally.

  6. The International Monetary Fund (“IMF”) has endorsed the Isle of Man’s compliance with international standards in such areas as banking, insurance, securities, anti-money laundering and combating the financing of terrorism. The IMF’s Report in 2003, stated that the regulatory and supervisory system of the Isle of Man complied well with the assessed international standards and commended the Isle of Man for the attention it had given to upgrading the financial, regulatory and supervisory system to meet international supervisory and regulation standards.

  7. A further inspection was undertaken by the IMF in September 2008 and early indications confirm positive findings.

  8. The Island is a member of the International Organisation of Securities Commissions (IOSCO), the main body responsible for the setting of international standards in the securities sector. It is also a member of the Offshore Group of Banking Supervisors.

  9. The Financial Action Task Force (“FATF”) has carried out its own review of the Island’s defences against money-laundering. Its positive report concluded that the Island is a co-operating jurisdiction with measures in place which are close to full adherence with FATF recommendations.

  10. The Financial Stability Forum (“FSF”) also considered the effect which offshore centres generally can have on global financial stability. The Isle of Man was placed in the top group of centres reviewed.

The Isle of Man Government’s comments on specifics areas of the Committee’s inquiry
Turning now to the Isle of Man Government’s comments on specifics areas of the Committee’s inquiry
Securing financial stability
1.8 Possible improvements to the architecture of international financial regulation and maintenance of global financial stability.
1.8.1 It is the contention of the Isle of Man Government that the financial regulations in the Isle of Man and the protocols that exist between the Island and the UK regulatory authorities are appropriate to manage financial stability, if applied consistently. These are well documented and have been subject to scrutiny by numerous national and international bodies e.g. Treasury Select Committee, IMF, OECD, etc.
1.8.2 It is the contention of the Isle of Man Government that there was a significant shortfall in communication between the regulatory authorities in respect of the action which the UK was planning to take in relation to Kaupthing Singer & Friedlander Limited (“KS&FL”) a UK incorporated company authorised by the FSA to take deposits. This meant that the Island had no opportunity to make or join in contingency arrangements for the safety of retail depositors’ funds held locally.
1.8.3 This has had a significant detrimental impact on the reputation of the Isle of Man, a Dependency of the British Crown, because as a consequence of the actions of the UK, Kaupthing Singer & Friedlander (Isle of Man) Limited (“KS&F(IOM)L”), a licensed banking institution in the Isle of Man could not meet the repayment demands made on it by its depositors. Many of these depositors are UK expatriates or people living in the UK who are retail depositors and for legitimate reasons found themselves banking in the Isle of Man with what had until recently been a UK banking group i.e. Singer & Friedlander.
1.8.4 Apart from being licensed by the Isle of Man Government’s Financial Supervision Commission (“FSC”), KS&F(IOM)L was also authorised by the FSA to conduct certain activities in relation to UK Regulated Mortgage Contracts – including administering, advising, arranging and lending.
Why does the Isle of Man contend this?
1.8.5 The FSC signed a Memorandum of Understanding (“MOU”) with the FSA in September 2003. Such memoranda, while not having any legal or contractual standing, are designed to facilitate assistance and co-operation between regulators. The regulatory relationship between the FSC and the FSA (and its predecessor for banking supervision in the UK, the Bank of England) has functioned effectively for over 25 years (when the Isle of Man was one of the first smaller jurisdictions to establish a dedicated body responsible for the regulation of its financial services industry).
1.8.6 Except for the recent events relating to the Kaupthing case, the FSC has had a good working relationship with the FSA particularly in relation to all banks and other credit institutions that are domiciled in the UK and that represent significant liquidity and /or credit exposures for Isle of Man banks. This is especially the case where the UK and Isle of Man banks are both part of the same banking or financial services group. It is accepted that in the majority of these cases, but not all, the FSA is responsible for the consolidated supervision of the whole group because it is the Home Regulator. A good recent example of a case where regulatory cooperation between the FSC and FSA worked effectively is in relation to the situation experienced by Bradford & Bingley plc.
1.8.7 The FSC sought to discharge its functions responsibly in relation to Kaupthing Bank hf and these circumstances are set out in the information which follows.. The presence of this banking group in the Isle of Man goes back almost 38 years when in April 1971 the Singer & Friedlander Group, a banking group in the UK, incorporated the existing bank (KS&F(IOM)L) under the name Singer & Friedlander (Isle of Man) Limited. In August 2005 the FSA had permitted the Singer & Friedlander Group to be acquired by Kaupthing Bank hf. This parent / subsidiary relationship existed until January 2007 when ownership of KS&F(IOM)L changed from it being a subsidiary of KS&FL to a sister of KS&FL and owned directly by Kaupthing Bank hf; the word “Kaupthing” being introduced into the company name, with the London bank, at that stage. During 2007, Kaupthing Group commenced to upstream deposits taken by KS&F(IOM)L to Iceland where previously it had been to KS&FL in the UK.
1.8.8 In December 2007, the FSA and the FSC permitted the Derbyshire Building Society to sell its Isle of Man banking subsidiary to KS&F(IOM)L.
1.8.9 During 2008, the two Icelandic banks (Landsbanki and Kaupthing), marketed aggressively, by offering high interest rates in the UK for retail deposits from UK consumers, via their internet product offerings (“Icesave” and “Kaupthing Edge”, respectively).
1.8.10 The business relationship between KS&F(IOM)L and KS&FL was not removed because of the change in upstreaming by KS&F(IOM)L to Kaupthing Bank hf. KS&FL continued to participate in some significant lending opportunities together with KS&F(IOM)L as well as the latter using KS&FL for certain settlement transactions. In February 2008, the FSC visited the FSA to discuss regulatory issues concerning the market conditions and a specific session related to Kaupthing. It was evident therefore that both the FSA and the FSC believed there were common issues to discuss.
1.8.11 At the end of March 2008, when the FSC became sufficiently concerned with the deteriorating economic situation in Iceland, it initiated discussions with the Board of KS&F(IOM)L. The priority was to eliminate KS&F(IOM)L’s exposure to Iceland.
1.8.12 The Board of KS&F(IOM)L offered to substitute the bank’s exposure to its parent in Iceland by withdrawing deposits from Kaupthing Bank hf and redirecting those deposits to KS&FL in the UK. A liquidity facility of £185 million was left in place between KS&F(IOM)L and Kaupthing Bank hf which gave KS&F(IOM)L the opportunity to call for short term liquidity if it was needed.
1.8.13 Before permitting KS&F(IOM)L to place a significant amount (48% as at 30 September 2008 - after netting off the “liquidity” exposure to Kaupthing Bank hf) of its total assets with KS&FL, the FSC believed it prudent to discuss this and confirm two important matters with the FSA:
• The maximum exposure that it permitted KS&FL to have to related parties (including Kaupthing Bank hf); and,
• The liquidity requirements placed upon it in relation to deposits made with it that had a maturity date of up to one month.
1.8.14 The FSA informed the FSC that the maximum exposure that the FSA permitted KS&FL to have with all related parties was 25% of Large Exposure Capital Base in aggregate. The FSA confirmed that this included interbank placings with a maturity of less than 12 months (which is noteworthy because such exposures, which can be significant, are sometimes exempted.) Within this limit the FSC was given to understand that there was to be no net exposure between KS&FL and Kaupthing Bank hf. The FSA also stated that most of the related party exposures comprised exposures to related parties situated within the UK. This was supported by the fact that when the FSC spoke to KS&F(IOM)L and the FSA regarding the margin on £185 million of additional collateral (that was being put in place between KS&F(IOM)L and KS&FL to give some independent security for a placing by KS&F(IOM)L with KS&FL), some difficulty was experienced because the margin was regarded as part of the 25% related party limit.
1.8.15 Secondly, the FSA informed the FSC that KS&FL had to have liquidity available within 30 days equivalent to 95% of liabilities maturing within 30 days (a mismatch of no more than 5% out to 30 days). In the maturity band sight to 8 days, no mismatch was permitted. The FSA stated that certain behavioural adjustments were permitted to the retail deposit book (except at the time for deposits accepted via the Kaupthing Edge internet product offering). No behavioural adjustments were permitted to the contractual maturity date for wholesale / interbank deposits taken by KS&FL.
1.8.16 The FSC had therefore satisfied itself that:
• The exposure to the parent bank would be eliminated (except that a line of liquidity was available to draw upon from the parent if needed and which netted off in the event of insolvency);
• The 60% of total assets of KS&F(IOM)L that were represented by claims on Kaupthing Group in October 2008 (after netting off the “liquidity” exposure to Kaupthing Bank hf) were due from KS&FL, a UK bank where all related party exposures were limited to 25% of Large Exposure Capital Base and where there was no net exposure to Kaupthing Bank hf; and,
• KS&FL would have liquid assets to meet all maturing liabilities out to 8 days and were only permitted to have a maximum mismatch of 5% out to one month.
1.8.17 As explained above, the FSA would have been aware of the business model adopted by KSF(IOM)L and of the importance which the Isle of Man regulator attached to these prudential limits for the containment of risk.
Up until the demise of KS&F(IOM)L the FSC had no major concern about the way in which the local bank was managed or about its asset quality.

1.8.18 On 8 October 2008 KS&FL was placed into administration on application by the FSA. The relevant Order of Court provides that the Court file shall not be available for public inspection without the Court’s leave. The UK Tripartite Committee / UK authorities made arrangements for a number of UK accounts (badged “Kaupthing Edge” accounts) to be transferred to ING Bank. The FSC has been informed that the funds backing the transfer of these deposits came directly from HM Treasury and/or the UK Financial Services Compensation Scheme.

1.8.19 Whilst the Isle of Man has been unable to verify matters because of a lack of information as can be seen later, if the limits referred to above were being properly observed it is unclear why KS&FL needed to be placed into administration without prior regulatory dialogue, given the disastrous effect which such a move was bound to have on asset values.

1.8.20 The UK Government has agreed to represent the Isle of Man’s interests in ongoing discussions with Iceland, including on the enforcement of a guarantee given by Kaupthing Bank hf. However, it has been pointed out that under the terms of international loans granted or to be granted to Iceland, the country will be bound to treat all creditors pari passu and the UK Treasury has subsequently informed the Isle of Man Government that the parental guarantee is a “creditors issue” which should be pursued directly with the Resolution Committee of Kaupthing hf.

1.8.21 As mentioned above, a high degree of co-operation normally exists between the FSA and the FSC, supported by a MOU. This notwithstanding there was no prior indication to the FSC by the FSA that KS&FL was to be placed into administration and that KS&F(IOM)L’s claim on KS&FL would be affected. Such regulatory co-operation and dialogue is to be expected in critical situations, and as had happened in dealing with other situations previously. In the Isle of Man’s view there was a breakdown of regulatory co-operation in this instance.

1.8.22 Prior to the placing into administration of KS&FL, arrangements (backed by UK Treasury and Bank of England/ UK Financial Services Compensation Scheme Ltd funding) were apparently made in advance to ensure that retail depositors with KS&FL (that is in effect all UK situs accounts belonging to individuals) would receive back 100% of their deposits. No opportunity was given to the Isle of Man to see whether KS&F(IOM)L’s retail depositors could participate in these or other safety arrangements, even though the FSA knew of KS&F(IOM)L’s high reliance on KS&FL.

1.8.23 The basis on which the application was made for the UK administration Order for KS&FL was not explained at the time though some details have come to light in subsequent Select Committee reporting. The underlying Court documents cannot be disclosed without the Court’s leave. The FSC has requested access to them from the FSA but this has not yet been granted.

1.8.24 At the meeting of Creditors of KS&FL held in London on 1 December 2008, it is evident from the votes cast, that the UK authorities (in the form of the UK Financial Services Compensation Scheme Ltd) did not vote for the Liquidator Provisionally of KS&F(IOM)L to join the Creditors Committee – despite the fact that he is in effect representing the interests of the over 10,000 depositors who banked with the group through KS&F(IOM)L and has an indicative claim of £600 million against KS&FL. The FSC understand that this makes the Liquidator Provisionally of KS&F(IOM)L the largest creditor of KS&FL apart from the UK Financial Services Compensation Scheme Ltd.

1.8.25 The Statutory Instrument, The Kaupthing Singer & Friedlander Ltd Transfer of Certain Rights and Liabilities Order 2008 (the ”SI”), made by HM Treasury under emergency powers created by the Banking (Special Provisions) Act 2008 effectively provides for the immediate transfer of retail depositors to ING Direct N.V. It also imposes an overriding objective on the administrator to effect ING transfers as a priority over all other administrative actions.

Paragraph 27 of the SI, under the heading of “Moratorium on payment to related companies” states that:

  1. “Kaupthing (KS&FL) shall not make any payment, dispose of any property or modify or release any right or liability to or for the benefit of a related party without the prior consent of the Treasury, and any such purported payment, disposal, modification or release shall be void.

  2. No related party shall exercise any right of set-off or combination of accounts in respect of any debt owing by Kaupthing (KS&FL) without the consent of the Treasury, and any such purported exercise shall be void.”

1.8.26 KS&F(IOM)L is a related party as defined. It will be seen that the effect of the paragraph in this SI creates an exceptional variance to the usual process of administration.

1.8.27 During December 2008, the FSC had sight of the Estimated and Redacted Summary of Statement of Affairs for Kaupthing Singer & Friedlander Limited (KS&FL) (in Administration) as at 8 October 2008. This indicates some
£3,025 million of loans and advances are due from “Intercompany” (related) parties, including £2,300 million from Kaupthing Bank hf. It appears from a note to that Statement that there is a net amount due from Kaupthing Bank hf of £900 million. This net amount would be 150% of what the FSC calculate may have been KS&FL’s Large Exposure Capital Base. The Statement is less helpful than one would expect because it does not quantify the sums due to related parties. The aggregate for related party exposures reported on the Statement are also significantly greater than the £531million (before netting off amounts due to group) reported in Note 41 to KS&FL’s audited financial statements for the year ended 31 December 2007.

1.8.28 Moreover, as explained above, KS&F(IOM)L funds were placed with KS&FL on the understanding that any exposure of KS&FL to the remainder of the Kaupthing Bank hf Group would be contained within the prescribed UK regulatory policies / restrictions applying to it in relation to related party lending and liquidity mismatches. It would appear from the Estimated and Redacted Summary Statement of Affairs that these policies / restrictions were either not applied or were subsequently relaxed significantly or were breached in a significant manner.

1.8.29 Furthermore, the UK freezing Order made by HM Treasury against Landsbanki assets (Landsbanki Freezing Order 2008) was publicly construed by many as a freeze of Icelandic assets generally. This perception, even though the generality was wrong, exacerbated an already tight liquidity position for Kaupthing Bank hf Group as a whole.

1.8.30 In conclusion the Isle of Man contends that a solvent bank in the Isle of Man has been made insolvent by the actions of the UK authorities, when the UK was attempting to protect its own position against Iceland. Had the existing regimes and protocols been adhered to then the situation, if not avoided, could have been managed with significantly less impact on the Isle of Man.
3.0 Protecting the Consumer
3.5 The protection of UK citizens investing funds in non-UK jurisdictions.

3.5.1 The Isle of Man Government and its regulatory authorities have designed and implemented comprehensive consumer protection regimes, based on international good practice, over many years. However, the IOM appreciates that the international financial community now wants to understand how the current market conditions have occurred and is happy to co-operate in that exercise.

3.5.2 The Isle of Man has a Financial Services Ombudsman Scheme which is a free, independent dispute resolution service for customers with a complaint against an Isle of Man financial firm such as a bank, insurance company or financial adviser which the firm has been unable to resolve. It became fully operational in January 2002. The role and powers of the Scheme are set down by law and the Ombudsmen are appointed by the Isle of Man Office of Fair Trading. It has powers to order payments up to £100,000 for cases where a consumer complaint is upheld.

3.5.3 The Isle of Man has a depositors’ compensation scheme (DCS). The DCS partially compensates depositors (wherever resident) if a bank in which they have deposited money fails. To pay compensation, a DCS fund is created (when needed) from contributions made by other banks in the Isle of Man and the Isle of Man Government. The DCS compensates people who have money in current and deposit accounts in the Isle of Man up to a limit of £50,000 per individual depositor and up to £20,000 for most other categories of depositor (companies, trusts etc). There is no "standing fund" of compensation (i.e. money is not collected in advance).

3.5.4 The Isle of Man also has a scheme to compensate investors in authorised collective investment schemes: Isle of Man’s Authorised Collective Investment Schemes’ Compensation Scheme ("ACISCS"). The ACISCS partially compensates an investor if an authorised collective investment scheme in which they have invested fails to pay when money is due. Compensation may be due if a manager or trustee of an authorised collective investment scheme fails to repay an investor when required by the terms of the scheme. Compensation payable is calculated as 100% of the first £ 30,000 and 90% of the next £ 20,000 with a maximum compensation of £48,000. Compensation is paid out of levies collected from other authorised scheme managers and trustees ("authorised persons") in the Isle of Man. There is no "standing fund" of compensation (i.e. money is not collected in advance).

3.5.5 For life assurance companies, the Isle of Man's Life Assurance (Compensation of Policyholders) Regulations 1991 ensure that, in the event of a life assurance company being unable to meet its liabilities to its policyholders, up to 90% of the liability to the protected policyholder will be met. Unlike many other policyholder protection schemes, the Island's scheme operates globally, providing protection to policyholders no matter where they reside. The scheme would be funded by a levy on the funds of the other life assurance companies.

3.5.6 All authorised institutions are required to provide details of the various compensations schemes within their literature to ensure that depositors / investors are familiar and cognisant of the protection regimes in place.
The Isle of Government prides itself both on its quality of financial regulation and on the responsible stance it takes to consumer protection. It contends that UK citizens can invest in the Isle of Man with confidence.

January 2009


memorandum from IOM G

  • banna
  • 15/10/08 01/03/10
  • a depositor
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  • Sun, 25/01/2009 - 17:28

I am sure the FSC has written evidence of the role of the FSA in the depositing of the £550m in London. If the facts are as reported then the FSA is largely responsible for our money being trapped in London. If we do not get it back I think we should be considering legal action against the FSA at some stage..


It is quite clear from this

  • nivit
  • 19/10/08 31/05/09
  • a depositor
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  • Sun, 25/01/2009 - 13:14

It is quite clear from this written evidence that the IoM believes it has been the victim of the UK governments actions. Unfortunately for us KSF IoM is in the IoM jurisdiction and HM gov has no direct legal responsibility towards us. I am all for supporting the IoM Government but only if they give us a firm undertaking that our deposits will be returned in full if not whats in it for us.

One thing I did notice is that section 1.8.8
In December 2007, the FSA and the FSC permitted the Derbyshire Building Society to sell its Isle of Man banking subsidiary to KS&F(IOM)L.
To my mind this implies that the FSA in some way considered this sale this however contradicts the information I received from the treasury under the freedom of information act.
Thank you for your enquiry dated 25 November 2008 requesting information under
the Freedom of Information Act 2000.
Did the FSA approve the sale of Derbyshire Offshore by the Derbyshire Building
Society to Kaupthing,Singer and Fiedlander IoM[Isle of Man].
3. I can confirm that the Treasury holds information falling within the description of
your request.
4. Derbyshire Offshore (the trading name for Derbyshire Building Society's Isle of
Man subsidiary) was established in the Isle of Man in 1990 and was regulated by the
Isle of Man Financial Supervision Commission. The transfer of Derbyshire Offshore
to Kaupthing, Singer and Friedlander Is'le of Man was a commercial decision for the
firms concerned and a matter for the Isle of Man authorities including the financial
regulator, Isle of Man's Financial Supervision Commission. Accordingly, the UK's
Financial Services Authority was not required to and did not approve the sale.
5. If you have any queries about this letter, please contact me. It will be helpful to us
if you remember to quote the reference number above in any future communications.

well surprise surprise someone's telling porkies.


Former CEO of S&F UK - critical of FSA

  • manx-person
  • 17/10/08 31/05/09
  • not a depositor
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  • Sun, 25/01/2009 - 07:23

Also cited in this report is comment from a former Chief Executive Officer of S&F it makes interesting reading also.

Memorandum from Tony Shearer

From July 2003 to December 2004 I was Finance Director and Chief Operating Officer of Singer & Friedlander Group plc. On 1st January 2005 I became Chief Executive of Singer & Friedlander and thus headed the negotiations that resulted in Singer & Friedlander being sold to Kaupthing, the Icelandic bank, in 2005.

In late 2003 Kaupthing acquired an interest of about 9.5% in Singer & Friedlander, which was then a listed company. In the spring of 2004 Kaupthing acquired a further 10% holding in Singer & Friedlander. Also in 2004 another Icelandic bank, Landsbanki, acquired a 10% interest in Singer & Friedlander, so at that stage two Icelandic banks owned a total of 29.5% in Singer & Friedlander.

In early 2005 the Chairman of Kaupthing, Sigurdur Einarsson, and I met and he asked me how I would feel if Kaupthing bid for Singer & Friedlander. After consulting my board I told Mr. Einarssson that whilst we did not seek such a bid it was our duty to our shareholders to consider it provided it was in cash (we did not want an offer in Kaupthing shares) and was for a large enough sum of money.

Discussions continued over the next few months and on 1st April 2005 we had to announce that we were in discussions with Kaupthing that might eventually lead to an Offer by Kaupthing for Singer & Friedlander. Such an offer was announced on 28th April 2005 and went unconditional in August 2005.

The main issue for me once it was clear that Kaupthing would offer a sufficiently large amount of cash, was whether the Financial Services Authority and other regulators would approve the change of control to Kaupthing. My short experience of Kaupthing and its management lead me to believe that they were not fit and proper people to control a UK bank. This view was shared by most, if not all, of the other members of the Singer & Friedlander board. I was concerned that if the board recommended a bid from Kaupthing and the FSA rejected them as not fit and proper, then we would all look stupid. Accordingly I called the FSA and passed on my views to them. Other of my colleagues (including the chairman, the chairman of the Audit Committee, the Finance Director and the Head of the Bank) went to see the FSA and made similar comments to them, and I accompanied some of them.
In the event the FSA rushed through the approval of the change of control, and the Offer went unconditional.

    I believe that the FSA had sufficient information about Kaupthing that they should never have approved the change of control, and if they were to do so they should have made extensive further enquiries. Also, that if as a result of those enquires they did approve the change of control, then they should have kept a very close regulatory eye on what had become Kaupthing Singer & Friedlander. They should have been alerted further by the fact that both the Heads of Risk and Compliance of Kaupthing Singer & Friedlander were both subsequently dismissed for voicing their concerns about the way that the company was being managed and specifically about its attitude to risk.

I should point out that in about March 2005 Mr Einarsson had offered me the role of Executive Chairman of Singer & Friedlander after the takeover. However before the Offer went to shareholders I decided to resign from Singer & Friedlander after a short transition period on the basis that I was not prepared to be responsible to the FSA for a company that was owned by Kaupthing and where the strategy and  day to day management would be heavily influenced or controlled by the Icelanders involved. I told Mr Einarsson of these reasons, and, on 30th November 2005, left Singer & Friedlander.

In April or possibly March 2008 I saw Mr Sants on television before a House of Commons Committee. He said that Northern Rock was the only instance of regulatory failure at the FSA. I wrote to him on 8th April 2008 suggesting that this was not the case, and that he arrange for somebody to review the files relating to Kaupthing and its acquisition of Singer & Friedlander. I received a rather pompous reply dated 13th May from a Ms Dunn. I wrote again to Mr Sants on 27th May but never received a response.

December 2008

Further memorandum from Tony Shearer

The Banking Crisis - The work of the FSA: Lessons

  1. There is no one lesson, nor one cause of the failures, nor one group of people to blame. That would be too easy, and if it had been only one, then the failures would not have been so great. Almost all the groups involved are to blame. But one person should have had over-sight over ALL the participants.
  2. Those involved in Banking (and Financial Services) have not been thinking properly about the pricing of risk, and the big issues of risks/rewards and long-term achievable returns for shareholders:

a. Management is too concerned about creating profits, keeping up with the competition and satisfying the investment managers; that means:
i. Remuneration
ii. Job preservation is about creating over-performance; and very few would seem to have lost their jobs for the disasters of the last year;
b. Basel II was sensible and put emphasis on the capital base; but as usual it was taken over by the accountants and management consultants keen to earn fees. It became a licence for them to print money, a focus on processes and systems and box-ticking, and along with introducing International Financial Reporting Standards contributed to a collective loss of sight of the point;
c. Non-Executive Directors are often Executives at other businesses. Instinctively they tend to be “understanding” and supportive of the Executives. They bring to the businesses of which they are NEDs the perspective of Executives. They are not spending enough time, are not involved enough in the big strategic issues, and don’t understand banking risk and how the controls and reporting process impacts on those whose decisions have a material impact on the balance sheet and/or profit and loss account. They are aware of risk, but they do not relate rewards to risk (PWC seminars);
d. Shareholders were often greedy, focused on a level of unachievable short-term returns, and relative performance, and lost sight of the risks the business was running, and how very very difficult it is to manage the businesses that they were the owners of:
i. Institutions
ii. “private/small shareholders”
e. Regulators have little practical experience. Callum McCarthy knew that the big issue was a systemic failure of the banking system, but the FSA did not focus on that, at all.
f. Many Advisors are mainly interested in fees; many of them have benefited from creating the mess, and now they are benefiting from unscrambling the mess, and many are now advising Government etc:
i. Lawyers;
ii. Investment bankers;
iii. Accountants;
g. Head-hunters; even if they may not have helped recruit the wrong Executive Directors, they have certainly been complicit in recruiting the wrong NEDS;
h. Remuneration Consultants; they have driven the excess remuneration packages and the incorrectly targeted remuneration structures;
i. Government has not realised that the system was heading for disaster and that the FSA was not doing the job. They simply do not have people at Cabinet level who have proper experience of managing businesses, and nor are such people at senior levels in the Civil Service. Frankly they were out of their depth.
3. Big organisations and fast growing organisations are very difficult to control.
a. The bigger the organisation, the faster an organisation grows the less chance management knows what is happening;
b. So they need a lot of very good people and systems that have been developed and operated over a number of years. This doesn’t happen in one or two years; it takes 5 years to build proper systems and controls, with reliable people in the management chain. So beware of gig businesses and fast growing businesses (e.g. Royal Bank of Scotland, HBoS, Kaupthing).
c. The best managers might be 10% or even 20% better than me, but I doubt whether anybody is that good that they can manage a large business in many locations and in many different businesses, with many decisions being taken each of which could have a big impact on the balance sheet.
d. Banking and investment management businesses are different from most as so many decisions are taken without fixed products and charging structures, and it is only very exceptional people with very well established systems who can manage them (e.g. OMI).
4. Remuneration based on relative performance tends to mean that similar businesses will tend to follow similar strategies taking more and more risk, and thus are likely to fail together.
5. Short-term borrowing of any sort and long-term lending is an inherently unstable funding model. Don’t mix deposit taking with risk activities. Deposit-takers have carried far too much risk, not only in their lending, but also by mixing broking, investment banking etc businesses into their legal structures.
6. There is a lack of clarity involving Regulators in different countries. Don’t accept that other regulators will do their jobs properly or at all, so don’t rely on them. Don’t trust the EU!!
7. The FSA has focused on the wrong things and missed the big picture. It is governed and run by people with the wrong background, employs too many people, and few of the right experience or background. As far as Kaupthing is concerned, they failed to properly assess it and its management, ignored the public evidence, ignored the specific warnings, and when pressurised by Deutsche rushed through the clearance. After Kaupthing had taken over the FSA failed to monitor or supervise KS&F. Even when KS&F fired the Heads of Risk and Compliance (because they felt that KS&F was being operated as a private equity fund rather than a deposit-taker) the FSA did not support the Executives for trying to do the right thing. Did they increase their surveillance of KS&F?
8. It is unrealistic to expect Non-Executive Directors to cure the failures of management or to do by themselves the jobs that shareholders and regulators should have been doing (without support from either). They need to be appointed carefully, and to be confident and experienced people who have an independent mind. And there needs to be enough of them on the board so they are not isolated. And when they do the right thing they need support from both the FSA and shareholders.
9. As Darling was speaking in the House of Commons the banks were trading the new capital that he was introducing!

The Timetable
November 2003 Kaupthing purchases 9.5% of S&F.
3/12/2003 Sigurdur Einarsson and Hreidar Sigurdsson meet John Hodson at S&F.
24/2/2004 Kaupthing purchases 9.5% of S&F, taking their holding to 19.5%.
23/3/2004 John Hodson and I had lunch with Sigurdur and Hreidar at S&F’s offices.
14th to 15th April 2004 Paul Selway-Swift, John Hodson and Tony Shearer visit Iceland and:
-visit Kaupthing’s office;
-have lunch with Olafur Ragnar Grimsson, President (and Dorrit, his wife) of Iceland;
-meet Thordur Fridjonsson, president and CEO of the Icelandic Stock Exchange;
-meet Pall Gunnat Palsson, director-General of the Icelandic FSA;
-meet Halldor Asgrimsson, Minister of Foreign Affairs, and Prime Minister from/to 15/6/2004 to 2006.
Tony stayed an extra day and met their key Executives on 16th April 2004.
In 2004 Landsbanki purchases 10% of S&F.
7/2/2005 I met Sigurdur Einarsson and Armann Thorvaldsson who asked how Kaupthing would be perceived if it made an approach to the Board of S&F? I said I would speak to the Board and get back to them.
On 11/2/2005 Paul Selway-Swift and I met Sigurdur and Armann I said that the Board would consider an approach on the basis of whether or not it was considered to be in the interests of our shareholders. It would have to be a cash bid (no Kaupthing shares!), and we would have to be satisfied that it could be delivered.
17/2/2005 Armann sends me a “draft bid letter”, and I refuse to comment on such a conditional informal approach.
On 24/2/2005 Tim Wise of Cazenove met with Deutsche and set out a proposed way of proceeding, namely that they wait till our results for 2004 are released, we give them a presentation on those results, and then they decide whether to make an approach and, if so, at what price.
At that stage I was of the view that “on an announcement these plans would be scrutinised closely by staff, the press, clients and presumably by the FSA. Based on my present knowledge I would not been able to support or justify them. The likely outcome is such that the chances of an Offer becoming unconditional are, in my view, low”.
On 15/3/2005 Warwick and I gave our “analysts’ presentation” to Sigurdur, Armann, Deutsche and Cazenove. Armann then gave their presentation on how the business would fit together.
16/3/2005 Tim Wise met with Deutsche asking for a price of £3-40.
On 21/3/2005 Kaupthing wrote to the Chairman of S&F with a price of £3-20, final indicative cash price, though Kaupthing would receive the final dividend of 4-25 p per share, making the Offer worth £3-15.75.
On 18/3/2005 Kaupthing sent an email to Cazenove setting out their “excellent relationship” with the FSA, that they have been involved with the FSA for over 2 years, that the FSA has given them approval to go to 10%, then to 20%, and then to go to 33% of S&F, and that the Kaupthing UK corporate finance division is FSA registered. “We believe that the additional approval will be largely a form-filling exercise which can be carried out in 2-3 weeks”.
On 24/3/2005 Kaupthing agreed that the S&F shareholders would receive the final dividend of 4-25 p per share, making their Offer worth £3-20 per share.
On 28/3/2005 I had dinner with Sigurdur at the Savoy Grill. We discussed their plans for the people, the business and me.
On 30/3/2005 Paul Selway-Swift, Warwick, Jonathan and I met Armann, Helgi Bergs and Henrik Gustafson with Deutsche and Cazenove to discuss strategy and plans, Branding, Legal structures, People, Conditions and outstanding issues.
On 1/4/2005 the Take-over Panel required us to make an announcement that we were in discussions with Kaupthing which might or might not lead to an Offer.
On 5/4/2005 Paul Selway-Swift and Richard Bernays met Sigurdur to discuss management structures if Kaupthing managed to get control of S&F. During this meeting Sigurdur said that he was not totally clear as to Warwick’s role!!
On 5/4/2005 the due diligence process started when I gave an Overview of the Group. At the beginning of this I played Devil in disguise.
On 11/4/2005 I met with Sigurdur and Armann to discuss the people issues, the draft presentation to staff, and how Kaupthing would operate the business should they acquire it.
14th April 2005 Paul Selway-Swift, Jonathan Spence and I with Jan Putnis (of Slaughter & May) met Jonathan Fiscal, Kevin Halpin and James Dresser at the FSA. We discussed the progress with Kaupthing’s Offer for S&F, the FSA’s approval process, and also our concerns about Kaupthing as a “fit and proper person”. At this point I had a list (Appendix 1) showing the cross-shareholdings in Kaupthing between it and various shareholders, and also the share dealing, service contracts, and loans involving the Chairman and CEO of Kaupthing. I almost certainly gave this information to the FSA. It is also at about this point that I spoke to Paul Shirley about my concerns re Kaupthing.
On 15th April 2005 I attended another meeting at the FSA, almost certainly involving Kaupthing as well. This was to discuss what information the FSA needed to approve the change of control. I am sure that Armann and Jim Youngs were at this meeting too, and Jim Youngs showed his total ignorance.
Also on 15th April 2005 I met with Sigurdur, Armann and Tim Wise to discuss my role. I explained why I would not stay with the Group as Executive Chairman or in any other role.
On 18th April 2005 there was an S&F Group Board meeting to consider the Offer.
On 28th April 2005 the agreed Offer was announced, subject to regulatory approval.
Regulatory approval was received sometime in August 2005 and the Offer went unconditional at that time.

The FSA’s role in approving the change of control to Kaupthing and their management when they were not fit and proper
1. The Kaupthing Executives had limited experience of international operations, and not much of banking. The CEO was weak and inexperienced (about 30 years old). Sigurdur said that he only appointed him as there was pressure for him not to be Chairman and CEO. And the FD was also weak and inexperienced.
2. The only Executive on the Kaupthing Board was the Executive Chairman; there was no CEO and no FD on the board.
3. All the NEDs were Icelanders except for one Dane who was removed. They had negligible international or banking experience, and they came from the same gene pool. They were friends with similar opinions who were in awe of Sigurdur and the Executives (as were the UK NEDs). They loved the “kudos”.
4. The Icelandic Regulator (“Aren’t you afraid of these guys”) had limited experience, limited resources, and was over-powered by Kaupthing. They came from the same gene pool as the Kaupthing Executives and Directors.
5. Kaupthing’s auditors may have been KPMG in name, but their personnel were also from the same gene pool, with limited experience of banks and international operations. They were hardly truly independent!
6. Kaupthing’s only operations were in:
• Iceland;
• Denmark;
• Luxembourg;
• USA (a failure); and
• London (investment finance and structured debt offerings).
7. They had limited experience in:
• UK banking;
• asset management (the sales team pooled their ideas for stocks to recommend to the clients!!);
• deposit taking.
8. Where did their money come from?
9. Kaupthing breached its own very low capital requirements (in ?2003?) for some months.
10. Capital adequacy requirements in Iceland were low, and they could pool the “excess” Singers capital to improve their ratios.
11. There were no discussions about our business before their approach, and even after the Offer. They had no understanding of our business, and never sought to obtain any.
12. Neither Armann Thorvaldsen as CEO of KS&F nor Kristin Petursdottir (ex-treasury) as COO of KS&F had any management experience, or any relevant banking experience.
13. So worried was I about Kaupthing’s reputation that before we went public on the Offer I:
• consulted the FSA;
• asked Graham Simkins to let me know immediately we experienced any run on deposits, or depositors asking questions; and
• got Sigurdur to agree to supply more funding if there was a run on Singers after the announcement.
14. Jim Youngs their compliance officer had limited compliance experience and limited knowledge. “The FSA like us as a breath of fresh air”.
15. Kaupthing’s profits primarily came from trading, including marking their investment in S&F to “market”. Indeed I got a call on behalf of the Takeover Panel when our share price rose sharply on 31/12/2004 following an interview that Sigi gave. The increase in “value” was reported as a profit.
16. Kaupthing was listed in Iceland and Stockholm and so had no analysts following them. Their results were opaque and not analysed.
17. Many of the shareholders (such as the Gudmundsson brothers; Bakkavor) were entities that Kaupthing lent to, and Kaupthing owned equity in many of them too. So any increase in the value of one resulted in an increase in the value (and profits) of the other, and so on.
18. I told the FSA of my concerns. As did the Chairman of S&F, the Chairman of the Audit Committee, the Head of the Bank, and the Finance director. No reaction from the FSA.
19. Sigurdur and other of the Executives and Directors had options involving puts back to the company at cost plus interest, 4 year service contracts, and also had large loans from Kaupthing.
20. All the S&F NEDs were fired and then had to be asked to stay on another month because Kaupthing had not done their home-work. The FSA did nothing.
21. Of the new KS&F NEDs one should have known better, and the other had no relevant experience. What has the FSA done about them?
22. I said that I would not work for Kaupthing, after a short transition. Warwick Jones (the Finance Director) and Jonathan Spence (Head of Banking) both wanted to work with Kaupthing, but resigned after a couple of months due to their attitude and approach.
23. Conrad Clarke (Head of Risk) and Chris Aujard (Head of Compliance) were both fired after they said that Kaupthing was running a deposit-taker as if it was a private equity fund. Amazingly the FSA did not support either.
24. In April or possibly March 2008 I saw Mr Sants on television before a House of Commons Committee. He said that Northern Rock was the only instance of regulatory failure at the FSA. I wrote to him on 8th April 2008 suggesting that this was not the case, and that he arrange for somebody to review the files relating to Kaupthing and its acquisition of Singer & Friedlander. I received a rather pompous reply dated 13th May from a Ms Dunn. I wrote again to Mr Sants on 27th May but never received a response.

The FSA’s role in the Banking Crisis

At a breakfast in March 2005 Callum McCarthy, said that there were 3 roles for the FSA:
1. To prevent a systemic failure of the banking system;
2. To help redress the imbalance between consumers and product providers by reducing inequality of knowledge/literature;
3. To make dealing with the FSA a good experience.

I said that on that yardstick they failed on all three accounts. So what has happened to him and John Tiner since?
In practice the FSA dealt with minutiae and trivia. Did not distinguish between those who were trying but made mistakes, and crooks. “If it’s not in writing it didn’t happen” means “if it is in writing it happened”!
The answer is not more people, nor another reorganisation of the FSA. It needs only a few good people, with their ear to the ground, who know where to look. The Bank of England might do it better but they do not have experienced, practical, business people.

Unanswered questions
1. How can you attract capital to banks if they are low risk and therefore low return? Low risk=low return=difficult to attract capital.
2. How can investors (future pensioners) get quality performance from their money purchase pensions and investments? Since the demise of many final salary pension schemes the investment risk on many/most pensions has been passed from the employer to the employee, who is supposed to create pension fund given:
a. Volatile stock markets;
b. Incompetent investment managers;
c. Cynical product providers;
d. A tax system that has a cap on contributions, is complex, and leaves no room for error.
Many of those in money purchase schemes will be impoverished in retirement, creating a massive burden for the state;
3. Why did many investment managers allow the banks to get into this state, and to lose so much money for their investors?
a. Is it because many of them were arrogant and inexperienced in running businesses?
b. Why did they not understand the macro-economic consequences? and
c. Have they suffered for their incompetence?
4. Why do the Government, the Regulators, MPs, and the industry continually go for advice to those who have failed? Look at who is still in position; the roles of the likes of KPMG, PWC, John Tinner at Resolution, Merrill Lynch (John Crompton at UK Financial Investments).

The Solutions/Objectives?
1. Management must be responsible for their management of the business, and be rewarded for the successes and held accountable for their failures; there should be no compensation for “failure”. Their objectives should be about more than profits (e.g. risk) and should be published and be the basis for their remuneration.
2. Politicians should take a lead and demonstrate how accountability should work. They should admit their failures, and resign where appropriate.
3. Advisors should go back into their boxes, and fee structures should not incentivise companies to carry out transactions. Very very few advisers add much value. Another area where Government should give a lead!!
4. Legislators (including the European Union) should reduce the amount of laws and regulation. There should be much less content in annual reports but much more quality and material relate to assessing the financial performance and state of affairs of the business.
5. The reduction in laws and regulations should mean that lawyers are less important and less remunerated.
6. Auditors should go back to being auditors, and should not generate anything like the massive fees that they do from transactions and advising Management and Governments.
7. Remuneration structures should be based on the all round performance of business (including risk), and not just on achieving superior short-term shareholder returns.
8. Shareholders should grow up. They need to recognise that they cannot achieve superior out-performance probably at all, and certainly not consistently. They should support Non-Executive Directors and cut down on the corporate megalomaniac (Fred Goodwin??), or high-profile personalities. They should recognise when a business is bust, and indeed see the warning signs well before it gets there (Ford, GM, Chrysler).
9. Non-Executive Directors should actually look at what the company is doing, visit its different operations and meet those whose decisions can materially affect a business’s balance sheet and/or profit and loss account. Then ensure that the controls and reporting are adequate, established, and operating.
10. Banks (i.e. deposit-takers) should be low risk businesses; the larger the lending/asset risk the more capital that is needed. But they should not own risk activities such as brokers, traders, investment banks etc.
11. The more people there are who can make decisions that can materially affect the balance sheet and/or profit and loss account (e.g. the more offices around the world and indeed buildings they operate out of), the more established and proven the systems, reporting and controls must be. The rule must be the less the CEO can see and feel, the better the controls need to be. Big businesses cannot establish strong systems and procedures in a couple of years.
12. Remuneration Consultants and Head-hunters need to have a far lower profile and importance. Remuneration structures should:
a. Not be based on relative returns and growth;
b. Force management into adopting the same strategies and more or less the same risks; and
c. Mean that similar business all fail together.
13. The FSA should:
a. focus on the big issues and not with minutiae and trivia;
b. distinguish between those who were trying but made mistakes, and crooks.
c. Stop its approach “If it’s not in writing it didn’t happen” which means “if it is in writing it happened”!
d. Focus on “fit and proper” which means:
i. people in management;
ii. business plans.
iii. separate out risky businesses from deposit takers.
e. Stop relying on those who have failed or never done it!
i. investment bankers;
ii. lawyers;
iii. accountancy firms;
iv. management of failed banks.
f. Reduce the number of people it employs and should not go through yet another reorganisation. It needs only a few good people, with their ear to the ground, who know where to look.
14. One person should have responsibility for all the players, e.g.:
a. Banks;
b. Auditors;
c. Advisers;
d. Regulators; and
e. Investment managers.
That person should be one out of:
i). The Treasury;
ii). The Bank of England; or
iii). The FSA.

Appendix 1
Vatryggingafelag Islands hf. owns 3.80% of Kaupthing Bank ("KB") and KB owns 30% of them
Meidur ehf. Owns 16.98% of KB and KB owns 19% of them

Eignarhaldsfelagid Sveipur hf. Owns 3.75% of KB ) KB owns 20% of
Eignarhaldsfelagid Samvinnutryggingar svf owns 0.97% of KB) Eignarhaldsfelagid
Verdbrefathing hf.

NB Nominee shareholdings re not disclosed in annual report

Chairman and CEO each bought in November 2003 812,000 shares @ ISK210 per share with a put option back to KB. Share price ISK442 at 31 December 2004 (similar arrangement to 60 employees in all)
Chairman and CEO each have 4 year contracts
Loans to directors, CEO and managing directors for the purchase of shares in KB (some with put options attached) amounted to ISK1,944 million (£19 million) at 31/12/04
Trading gains (including unrealised gains) ISKl 1,290 million in 2004 eq to 38% of Other Operating Income, 59% Net Interest Income
Deposit base; how solid? Behavioural modelling Committee Reports short on detail

January 2009


Indeed, very interesting

  • anrigaut
  • 19/10/08 30/10/09
  • a depositor
  • Offline
  • Sun, 25/01/2009 - 14:37

Indeed, very interesting reading.
Everyone should read this too.


FSA Failed Again!

  • expatfrance1
  • 15/10/08 31/05/09
  • a depositor
  • Offline
  • Sun, 25/01/2009 - 08:09

AT first sight this looks like yet another failure on the part of of the FSA. They must be taken to task on this.


Thanks for extracting the key

  • frog
  • 10/10/08 13/09/09
  • a depositor
  • Offline
  • Sat, 24/01/2009 - 21:49

Thanks for extracting the key bits.

My read on this is that the FSC is lining up their position against the FSA for which they will want to get the money back - it is a good start to a haggle where the end result is a 'loan' to the FSC which would cover the retail depositors (similar to the KSFUK action) and transfer the credit to the FSC who would pick it up with Khf alongside the FSA - in fact the FSA would handle the representation for the FSC and the FSC would just wait for either the loan to go away or for Khf to pay up.


Your not kidding Elgee

  • Consuelo
  • 13/10/08 31/05/09
  • a depositor
  • Offline
  • Sat, 24/01/2009 - 15:13

In the lingo of financial regulators this evidence could hardly be more strongly put and is sure to make some people view the FSC in a different light although for sure there have been failings on their side too


What does the FSA say about this?

  • manx-person
  • 17/10/08 31/05/09
  • not a depositor
  • Offline
  • Sat, 24/01/2009 - 23:50

It will be interesting to see the FSA's version of events.

It won't be the first occasion in recent times that the FSA have cocked up, if indeed they have in this case.
see http://business.timesonline.co.uk/tol/business/industry_sectors/banking_...

I wonder if the FSA will comment on this, or provide any evidence?

It is also interesting to read the submission of the former CEO of KSF in the UK and his take on the regulator's performance.

I wonder if the FSA allowed KSF Uk to move away from the agreed maturity ladders, or whether this happened without their knowledge or consent.


What does the FSA say about this?

  • manx-person
  • 17/10/08 31/05/09
  • not a depositor
  • Offline
  • Sun, 25/01/2009 - 00:15

.. inadvertent double post ...


Your not kidding Elgee

  • Anonymous
  • Offline
  • Sat, 24/01/2009 - 15:45

I am never kidding on this forum, except when I suggest that people sue their clarivoyants for failing to predict the bank's collapse.

I agree that the above document it very interesting, but should be read bearing in mind that the IOMG has to portray the FSC's actions and inactions in the best possible light. So I recommend that it is read with the following in mind: "if they did what they say they did and did not do what they say they did not do, are there other explanations for their actions and inactions which do not reflect nearly so well on the FSC?