Interest and the DCS

  • bobbymann
  • 01/10/14 31/05/09
  • a depositor
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Posted: Thu, 16/10/2014 - 14:42

I have a question. I don't know if anyone will have a clue as to the answer! But I thought I would circulate anyway. I had about 60k in this rotten bank - expecting to be making a sweet 6-7% per annum (how incredible it seems now!)
In fact - I got zilch.
It now seems by end of November my dear old cash will be back with me, and the JL's will still have some rummaging down the sofa to do, so we should get some interest too.
However - seeing as the DCS gave me 50k of my money back a few years ago, do I have to pay most of the interest I would otherwise receive to the DCS or do I get to keep it all?
As an example...
it is now 6 years since my deposit and I should have earned £4k a year interest per annum, that is about 25k over 6 years.
However - DCS paid me back 50k 5 years ago.
Should I give 5/6 of the interest to DCS... assuming the JL's were able to pay us all the contractual interest from the assets of KSFIOM?
Logically - I accept I should have to pay DCS this cash, since it is them who has been out 50k not me (since they paid me).
However - I am not sure I remember anything in their terms about getting interest from me.

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Re interest & DCS

  • anrigaut
  • 19/10/08 30/10/09
  • a depositor
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  • Thu, 16/10/2014 - 16:06

I don't for now have any definitive answer to your questions. As already noted elsewhere, independently of any specific DCS issues, the whole issue of working out who is due what interest is complex and we have to wait for the legal intricacies to be resolved.

However, I did have some discussions a few years back with the DCS Scheme manager who seemed pretty clear that the DCS would not be looking to claim any interest. Indeed, he said that if and when the '100% plus' scenario came to pass, they would have to deal not only with those of us (and I'm in a similar position to you) who were partially paid out and have since been receiving further payments from the liquidators via the DCS, but also with the larger body of those who were fully compensated back in 2009 (the under £50k depositors), for whom they have no up-to-date contact details. He said it would be a nightmare for them, but they'd have to do it!

It is in any case clear that the first claim on any surplus over 100% will be for those whose pre-0ct 2008 uncapitalised interest was capped - and thus excluded from the currently agreed claims; this is of no concern to the DCS. From memory, I think the JLs said that would require about an additional 0.3 p/£. After that, if funds allow, there will be a possibility to claim post-2008 interest, probably at a statutory rate (the same for everyone) for a period which will depend on the funds available. The details still have to be worked out, but there will certainly never be anywhere near enough cash to pay interest for the whole 6 years - I would guess it would be unlikely to cover more than the first year. And don't forget that it took the IOM government almost a whole year to finally trigger the DCS - a year when none of us received anything (other than those early 'EPS' payments for those who chose to claim them).

So, in short, I think - and hope (!) - you are worrying for nothing. I hope that helps a little!


More re Interest & DCS

  • anrigaut
  • 19/10/08 30/10/09
  • a depositor
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  • Fri, 17/10/2014 - 08:22

Since my post above/below, I have searched out and re-read the JLs initial note on the calculation of interest in the 100% plus scenario which we have now miraculously reached. The note is here: http://www.kaupthingsingers.co.im/2013/january/18january2013/

I have outlined the main points in response to a question by D RAM on the "100% before Christmas" thread. A small correction to my previous post here: my memory was not quite accurate - the amount needed for payment in full of the deferred interest due to the cap on uncapitalised pre-Oct 2008 interest would be £3.5m, thus requiring an additional 0.4 p/£ (not 0.3 p/£).

The JLs note also discusses the situation with respect to the DCS. A number of issues remain to be settled, including whether interest payments to those who claimed via the DCS would have to be paid to the DCS or directly to creditors. The former seems most likely (as our claims were assigned to the DCS, the DCS is the creditor and thus legally entitled to interest). But this doesn't mean that the DCS would see fit to keep any such interest. Indeed, the JLs go on to say "It is our understanding that any interest paid to the DCS would be passed on to DCS claimants". Based on my earlier discussions with the DCS Agent Mike Fayle, this is also my understanding and I would be surprised - and somewhat shocked - were they to go back on that now.


Interest and DCS

  • bobbymann
  • 01/10/14 31/05/09
  • a depositor
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  • Fri, 17/10/2014 - 08:57

That could have been a real cock up by the Manx authorities. If for instance (inshallah) the PG etc returned all the contractual interest due to KSFIOM customers and we got it all, as well as the 100% (which for anyone slightly over 50k like me was mostly repaid years ago), then it would be right (logically) for DCS to get the interest for the period since they paid me on that 50k, as I would otherwise get both that interest and the interest (ha ha!) earned since 2009 on the 50k they gave me. Would be a nice outcome for us if this happened - but knowing the Manx authorities (in tough time) I wouldn't be surprised if they were a bit tougher on this if there is a sniff of money in it for them.


@ bobbymann

  • anrigaut
  • 19/10/08 30/10/09
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  • Fri, 17/10/2014 - 09:52

I'm not sure I buy that. The 'DCS' is not there to make money or even to protect any assets (it has none). It was created in 2009 as an entity specifically and solely to pay out compensation to victims of the collapse of KSFIOM. Prior to that it didn't exist as a physical entity. The funds came in part from the other IOM banks through levies and in part from an interest-free loan from IOMG. That loan will by now have been repaid in full from monies received in the liquidation. I don't know what the DCS does with the rest of the funds it has received in repayment of the (up to) £50k per claimant they paid out? There has never been a standing fund for depositor compensation in the IOM (which is why it took so long to deliver). Maybe the excess funds are being returned to the banks who provided them in the first place? I don't know, but if anyone other than the depositors has a moral claim on the interest it is surely not the DCS, which - as I understand it - will cease to exist once the liquidation is formally closed. There were of course administrative costs associated with the operation of the DCS. Unlike equivalent costs in the liquidation, these have been borne not by the creditors but by the DCS itself and I presume are accepted as part and parcel of running a compensation scheme.

All that apart, and as I've already said, there seems in practice litle chance that sufficient funds will exist to pay out more than a year's interest (over and above the deferred interest pre Oct 2008). And that will correspond to the period prior to the triggering of the DCS and thus prior to your receipt of £50k. I see no way the DCS could possibly have any legitimate claim on that.


Anrigaut on DCS and interest

  • bobbymann
  • 01/10/14 31/05/09
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  • Fri, 17/10/2014 - 14:14

Thanks for your thoughts - let's hope it becomes relevant.. suddenly KHF is able to pay all its debts in full and we get 6 years interest at 7%. Now that would be a happy ending! Seems like a fantasy now - but that was the contract!! Have a great weekend.