KSFIOM the Truth once and for all

Dear Depositors,
I hope you will take the time to read the contents of this topic, I believe it is very important to all.
We have since 8th October 2008, been totally misled and misdirected by the IOM, and its PR, into the areas of where the blame lies for the collapse of KSFIOM, we have been continuously led to believe that KSFIOM assets were “stolen” by HMG, and that the FSA were “secretive” and not providing information to the FSC, most within the DAG community believed this, some still do. This is not the truth. It is hoped that the depositors who are attending the Select Committee Interview on 24th February 2010, will expose the extent to which the DAG community and wider audience, have been misled by the IOM.

To date the only 100% factual words I have heard in relation to KSFIOM from the IOM authorities were those spoken, by Chief Minister, Mr Tony Brown, at the Treasury Select Committee meeting in February 2009. Quote “The Isle of Man takes the stance that we are responsible for our affairs…….” Unquote. It is time that the IOM did just that.

There have been a multitude of words spoken and written about this whole affair, the IOM Government, its Treasury Department, its Financial Regulator (the FSC) and the Board of Directors, have all been very loud in their responses from within the IOM, in blaming the UK Government and the FSA for the collapse of KSFIOM. The main reasons put forward being that the UK Government placed KSF UK into administration and that the MoU between the FSA and the FSC failed to operate, as it had previously with, for example, the Bradford & Bingley IOM problem.

Following on from this we now need to sort facts from fiction, and arrive at a clear view of how the situation occurred and perhaps only then can we find a route forward to find out those who are culpable and target them for recompense.

The true facts of the KSFIOM debacle are:
1. KSFIOM was an IOM registered and licensed deposit-taking Bank.
2. KSFIOM was directly under the FSC for financial regulation.
3. KSFIOM was a direct subsidiary of K hf Iceland.
4. There is a Memorandum of Understanding (MoU) between the FSC and the FME (signed 27th November 2006 – initiated because of the KSFIOM operation), this is the route through which this situation should have been resolved.
5. The FSC would know this, the IOMT should know this through the FSC, the Directors would know this, the auditors would know this and the legal advisors to KSFIOM would know this.
6. A large percentage of KSFIOM’s assets, with assistance from the FSC, were “voluntarily” upstreamed to KSF UK – another Icelandic directly owned Kaupthing Bank – by the Directors of KSFIOM, believing that somehow it would reduce the banks exposure to Iceland.
7. The FSA have no jurisdiction over an IOM registered entity that is a direct subsidiary of an Icelandic parent bank, and therefore could not interfere with the FSC actions, (the MoU worked in Bradford & Bingley’s case because the entities were IOM and UK based). In our case they were IOM and Iceland based. It was the FSC’s, Directors, Auditors and legal advisors duties to ensure that KSFIOM was financially and legally sound.

To summarise and conclude:

The problem started the moment KSFIOM became an IOM direct subsidiary of an Icelandic parent bank. Prior to this KSFIOM was a subsidiary of KSF UK.

KSFIOM fell victim to the normal IOM banking philosophy, based on upstreaming money from IOM deposit taking companies (normally UK subsidiaries) to London or UK, this is the ‘standard’ practise, and in the case of KSFIOM the same system was put into place.

As KFSIOM was a direct subsidiary of an Icelandic bank then the regulatory authorities of the IOM, the Directors, auditors and legal advisors of the bank, should have taken all necessary steps to protect depositors in their (IOM) jurisdiction, instead of now trying to blame other non relevant parties, through media and costly PR.

This has now also become apparent in the saga of the Parental Guarantee, which has been deemed by the Winding up Committee in Iceland, to be non binding, and therefore effectively worthless. Officials responsible for this document in the IOM should have made certain that this Parental Guarantee was worthy, legally binding and fit for purpose. This is presently the subject to legal proceedings.

The IOMG in respect of Iceland, have done very little, except ask the UK MoJ (in October 2008), to act on their behalf in discussions with Iceland (the UK MoJ in turn have delegated this task to UK Treasury). In oral evidence given to the IOM Select Committee on KSFIOM by Mr Bell, when asked by the Chairman “have you seen any evidence whatsoever that the UK has made any effort whatsoever in representing Manx interests to Iceland?” he replied “No”. It appears that IOMG has not seen fit to make protestations to the UK MoJ. The conclusion from this is that IOMG is not doing everything it can for depositors and is in fact impotent and disrespectful.

What we are absolutely sure of is that the IoMG have done none of the following:

1. Never taken the HMG to task at previous TSC or JC hearings when they had the perfect opportunity to do so
2. Not taken legal action against the HMG as recommended at the TSC by John Thurso MP if they believed HMG were in the wrong
3. Never pointed a finger of blame at Iceland, or indeed ever said anything about Iceland despite having a recent MOU in place with them.
4. Never as evidenced via Freedom Of Information responses has IOMG pressed HMG (since the initial Oct 2008 request) to represent them with Iceland - there has been no action.
5. Not worked with HMG to find a solution as recommended by the TSC.
6. Never said since 8th October 2008, they would try to find a 100% solution for depositors
7. In relation to (6) this of course means they have not sought a UK loan or any other methods of funding a 100% solution
8. Neither the FSC nor the Bank’s Directors were instructed, cajoled or otherwise influenced by the FSA or any part of HMG into upstreaming funds to London (as confirmed by IOMG at the TSC and SC hearings).

This is the same IoM via the FSC’s John Aspden, who stated, “banks should be allowed to fail”.

The same FSC’s John Aspden, who stated that depositors need educating about the risk reward curve of " investing" in a bank.

The same IoM where Allan Bell in his 2010 Budget speech, declares they have been “proactive and caring” with regard to KSFIOM depositors

The same IoM that has patently, no plan, no desire, and no intention, to fully compensate depositors if it is at a cost to the IOM.