Please add your questions for PWC weekly call at 16:00 GMT Monday 22nd Dec 2008

Thanks again to Nick and Nigel for organising this. There were some interesting questions raised, and although I sensed that Mike Simpson was quite uncomfortable at times (long pauses while he thought how to best answer questions without the answers later being taken out of context), the answers were interesting.

Unfortunately I can't say I'm very encouraged by the answers. Here's my summary of the call:

• There is still some interest in buying the bank as a whole or just the loan book, but this isn't moving quickly because bluntly, no one has any idea how much the bank is actually worth.
• Some of the banks which KSF IOM held deposits with are claiming "set off", i.e. they're saying that KSF IOM owes them money. Some are claiming set off because they're owed money by KSF UK. Simpson believes set-off can't be claimed for any money owed by KSF UK, but the matter will have to go to court. An "expedited hearing" would take place in March at the earliest (I'd hate to see how long we'd have to wait for a normal hearing).
• If the bank was wound up on 29th January, there wouldn't even be a creditors' meeting until late February, and we'd all have to apply to court with "proof of debt".
• FSC did advise the bank to send money to UK instead of Iceland, and was concerned about the "Iceland situation", and wanted the bank to reduce its exposure. Simpson pointed out that Singer & Friedlander IOM had been sending money to UK since 1973, and he didn't really answer the question about whether this upstreaming had increased since April.
• It's not even clear how ownership of the bank can be changed, as it could void the parental guarantee.
• It seems like a nationalisation of sorts of the bank is the only real option at the minute.

Dear all,

Here are the questions collated for the call with Mike Simpson at 4pm GMT tomorrow. Listen-in details are included in the first email.

Questions for Mike Simpson. PWC 22nd December 2008

Previous Questions still open
1. Are you ready now to publish the statement of Affairs for the book value of the bank?
2. Any news on when the site will be open for statements?
3. Can you put the DAG website on the Bank page?
4. Are all bank transactions after October 6th being rolled back (including inter-bank)?
Bank Restructure or Sale
1. What is the status of the companies interested in the bank as a whole or the loan book only?
2. How is PwC working with Alix Partners to review alternative solutions, e.g. sale of the Bank, if at all?
3. In view of there being interest still shown from several prospective buyers, do you think it would strengthen such interest if DAG was able to ascertain that there 'would' be a consensus of solidarity from account-holders to stay with any new owner for a period of the newly-directed bank's recovery time?
UK and IOM Government
1. What is the role of Mr. Cashen and Mr. Gelling, as we understand that they are still employed by the bank?
2. In what way are the FSC assisting you with the process of getting the money deposited with KSFUK
3. Can you also respond to the last bit of the original question last week, i.e. what role did the control authorities play in this? And why was such a relatively huge deposit (compared with KSFIOM’s total assets) not ring-fenced/ secured?
4. Why isn't PWC taking action to gain access to sealed Court papers in London? Won't these papers justify how/why UK Treasury did what it did?
5. Why did the PWC lawyers advise against a Judicial Review against UK Treasury?
6. Assuming the payout of £1,000 is made to eligible depositors, will this have any adverse effect in the future?
a. Under what conditions will the £1000 be paid? 

b. What happens if we don't agree with those conditions? 

c. Will there be an option not to accept if we believe this adversely affects our claim under DCS or IoM plan B? 

d. Why is it paid per account and not per depositor? When the DCS (for example) is per depositor? 

e. Why would we accept this without knowing the details or implications for the full IoM plan B? 

f. How much is it costing to administer this part payment?
7. Will depositors whose investment in KSFIOM is part of a group investment through another company (such as AXA, Skandia, AEGON etc) be treated in the same manner as individual depositors with regards to IOM Government’s proposed hardship payment?
8. Lord Bach said on 10 December that HMG was still in discussions with the Icelandic government to find a solution to secure depositors' money. Could Mike Simpson confirm whether or not he has knowledge of this? If so what is his understanding of the present position?
9. Lord Bach also said that depositors' money was secure. Was he simply being economical with the truth, meaning in fact that it was only secure in terms of the Financial Compensation Scheme and NOT in terms of a Treasury commitment to ensure that KSFIOM assets in Kaupthing would be restored to the Bank if there is no other solution possible?

Bank Operations
1. Can he clarify why upstreaming took place to Kaupthing UK, which is a sister company, instead of to the parent company. Was it initiated in early 2008, when there were concerns about the Icelandic banks?
2. Was any attempt made to ring fence the KSF IoM deposit in KSF UK and if so by whom? Was ring fencing directed/advised by a third party, if so by whom? If ring fencing was attempted, why did this action fail, or why is it not seen as being valid?
3. Are in-flight funds currently held within the £550m in KSFUK and, if not, where are they? Shouldn’t they have been returned to KSFIOM from KSFUK?
4. In the E & Y Statement of administrators proposals document 2.17B dated 14th Nov it was stated: quote "KSFIOM held funds at KSF on deposit. At present investigations and discussions are underway to determine and agree the exact nature of the transactional exposures between the two entities" The question is; has the exact nature of the transactional exposures between KSFIOM and KSFUK now been determined and agreed, and if so, what was the outcome?
5. Banks are required to have counterparty limits with other banks and for intergroup thus a question on why KSFIOM was allowed to make such a large single deposit. The regulator has set legal limits, which are normally a percentage of the Bank's capital. If £555m sent to KSF (UK) was in excess of 10% of the Capital then this would have breached the standard Regulatory guidelines. Can Mike Simpson confirms that:
a. The counterparty assumptions as set out here, are correct?
b. Were KSF(UK) and KSFIOM working within those 10% counterparty limits?
6. If the IoM bank is restructured or bought, would its new title and ownership negate the effect of clause 27, as it would no longer be related to Kaupthing Iceland? If that is the case would that free up the £550m quicker than if it remained KSF in administration?
7. In his last statement MS spoke of the chance of an offset in liabilities between KSFIOM and KSFUK can he confirm what prevents confirmation of this? Is clause 27 of the Statutory Instrument?

Reporting
5. Can he update the cash held on account. I assume that the loan book is receiving cash all the time and indeed some loans are constantly falling due.
6. Can he estimate when at least a significant percentage of funds might be made available to depositors? Might this be measured in months, or perhaps years?
7. If a restructuring looks unlikely, can he estimate when the DCS might be implemented?

Other
1. What can the DAG do to help PwC get our money back faster, e.g. take legal action.

1. Lord Bach said on 10 December that HMG was still in discussions with the Icelandic government to find a solution to secure depositors' money. Could Mike Simpson confirm whether or not he has knowledge of this? If so what is his understanding of the present position?

2. Lord Bach also said that depositors' money was secure. Was he simply being economical with the truth, meaning in fact that it was only secure in terms of the Financial Compensation Scheme and NOT in terms of a Treasury commitment to ensure that KSFIOM assets in KaupthingUK would be restored to the Bank if there is no other solution possible?

Why do we not yet know the precise number of deposits held and the locations of the savers involved?

Can we request this information please?

Within a week of the failure of Landsbanki, Guernsey, the Administrator from Deloittes sent each depositor a letter and also posted it on the website. Included, amongst other information, was an unsolicited list of the number of accounts held in the bank, by location, ie: Guernsey, UK, Other etc., and the percentage of funds held by each of these groups. There was also a provisional breakdown of the assets and debts.

I find it extraordinary that such information about depositors has not yet been released by PwC as it would be very useful on several counts.

In view of there being interest still shown from several prospective buyers, does Mike Simpson think it would strengthen such interest if DAG was able to ascertain that there 'would' be a consensus of solidarity from account-holders to stay with any new owner for a period of the newly-directed bank's recovery time?

Are these questions forwarded by hard copy prior to the call....surely this would give Mike Simpson time to prepare comprehensive answers rather than off the top of his head...?

So many questions, Is it will be posible for LP to give answers with in the limited time of 2 hours ?
The out come will be gimmic and not a straight forward reply to the unlimited quries.It is suggested to make a limit of the very important questions

Response for 9 Oct statements is already there on KSFIOM web site that they will post all the statements before the christmas postal dead line.
To get back any money depositors will have to wait for a long time perhaps in years , speed will not be increased with asking so many questions

Does Mr. Simpson realistically belive the bank can be re-structured in some form?, and if so,

1 Can he estimate when at least a significant percentage of funds might be made available to depositors?

2 Might this be measured in months, or perhaps years?

3 If a restructuring looks unlikely, can he estimate when the DCS might be implemented?

Let me stress these are not frivilous questions; many need urgent answers to these questions to enable negotiations for bridging loans to be put in hand.

4 Finally, pertinent to the comment above, when might depositors expect a statement of account as at 9 Oct 2008 to be forthcoming?

I would like the liquidator to be asked the following question as it affects myself and many others who's money is invested with KSFIOM as a group deposit via other insurance companies:

"Will depositors who's investment in KSFIOM is part of a group investment through another company (such as AXA, Skandia, AEGON etc) be treated in the same manner as individual depositors with regards to IOM Goverment's proposed hardship payment?

Thanks.

I would like to ask who in the Isle of Man made the decision and who authorised it to send the £550 m of deposits to the UK for safe keeping in the sister bank in London?

Did they get assurances verbally and or written that they had sent this and that it would be returned on demand?

Have we as depositors, got a legal case against the IOM Government because they had the monies in their posession and they were resposible for taking care of it. They chose to send it to London and as a direct result of this action, this money has now been siezed and more than likely lost. In our opinion they have acted very irresponsibly. Would it be worth putting these questions to David Greene, solicitor from Edwin Coe?

1. What is the role of Mr. Cashen and Mr. Gelling as we understand that they are still employed by the bank.
2. In what way are the FSC assisting you with the process of getting the money deposited with KSFUK
3. How many individual depositors are affected by the KSFIOM situation and how many have been informed in writing about the situation?
4. Are we sure the GBP550m is an unsecured credit? I read somewhere it was a corporate loan.
5. can he clarify why upstreaming took place to Kaupting UK, which is a sister company, instead of to the parent company. Was it initiated in early 2008, when there were concerns about the Icelandic banks?
6. Can he also respond to the last bit of the original question, ie what role did the control authorities play in this? And why was such a relatively huge deposit (compared with KFIOM's total assets) not ring-fenced/ secured?
7. Was any attempt made to ringfence the KSF IoM deposit in KSF UK and if so by whom? Was ringfencing directed/advised by a third party, if so by whom. If ringfencing was attempted, why did this action fail, or why is it not seen as being valid?
8. Are you ready now to publish the statement of Affairs for the book value of the bank?
9. Any news on when the site will be open for statements?
10. Exactly when are we going to get statements for all deposit accounts, both personal and business accounts?
11. Are ín-flight funds currently held within the £m550 in KSFUK and, if not, where are they?
12. In the E & Y Statement of administrators proposals document 2.17B dated 14th Nov it was stated: quote "KSFIOM held funds at KSF on deposit. At present investigations and discussions are underway to determine and agree the exact nature of the transactional exposures between the two entities" The question is; has the exact nature of the transactional exposures between KSFIOM and KSFUK now been determined and agreed, and if so, what was the outcome ?
13. What can the DAG do to help PwC get our money back faster, e.g. take legal action against ........
14. How is PwC working with Alix Partners to review alternative solutions, e.g. sale of the Bank, if at all?
15. Why isn't PWC taking action to gain access to sealed Court papers in London? Won't these papers justify how/why UK Treasury did what it did?
16. Why did the PWC lawyers advise against a Judicial Review against UK Treasury?
17. Banks are required to have counterparty limits with other banks and for intergroup thus a question on why KSFIOM was allowed to make such a large single deposit. The regulator has set legal limits which are normally a percentage of the Bank's capital. If £555m (sent to KSF(UK) was in excess of 10% of the Capital then this would have breached the standard Regulatory guidelines. Can MIke Simpson confirm that:
a.) The counterparty assumptions as set out here, are correct?
b.) Were KSF(UK) and KSFIOM working within those 10% counterparty limits?
18. If the IoM bank is restructured or bought, would its new title and ownership negate the effect of clause 29 as it would no longer be related to Kaupthing Iceland? If that is the case would that free up the £550m quicker than if it remained KSF in administration?
19. Assuming the payout of £1000 is made to elligible depositors, will this have any adverse effect in the future?
    a. under what conditions will the gbp 1000 be paid ?

    b. what happens if we don't agree with those conditions ?

    c. will there be an option not to accept if we believe this adversely affects our claim under DCS or IoM plan B ?

    d. why is it paid per account and not per depositor ? when the DCS (for example) is per depositor ?

    e. why would we accept this without knowing the details or implications for the full IoM plan B ?

    f. how much is it costing to administer this part payment ?
20. In his last statement MS spoke of the chance of an off-set in liabilites between KSFIOM and KSFUK can he confirm what prevents confirmation of this. Is is clause 29(i think that was the number) of the Statutory Instrument.
21. Can he update the cash held on account. I assume that the loan book is receiving cash all the time and indeed some loans are constantly falling due.

Will there be a Skype link to listen in?

In the E & Y Statement of administrators proposals document 2.17B dated 14th Nov it was stated: quote "KSFIOM held funds at KSF on deposit. At present investigations and discussions are underway to determine and agree the exact nature of the transactional exposures between the two entities" The question is; has the exact nature of the transactional exposures between KSFIOM and KSFUK now been determined and agreed, and if so, what was the outcome ?

1. Exactly when are we going to get statements for all deposit accounts, both personal and business accounts?

2. Are ín-flight funds currently held within the £m550 in KSFUK and, if not, where are they?

In connection with Q.6 I would like to ask:

Was any attempt made to ringfence the KSF IoM deposit in KSF UK and if so by whom? Was ringfencing directed/advised by a third party, if so by whom. If ringfencing was attempted, why did this action fail, or why is it not seen as being valid?

My questions for PwC include:

1. What can the DAG do to help PwC get our money back faster, e.g. take legal action against ........
2. How is PwC working with Alix Partners to review alternative solutions, e.g. sale of the Bank, if at all?

1. Why isn't PWC taking action to gain access to sealed Court papers in London? Won't these papers justify how/why UK Treasury did what it did?
2. Why did the PWC lawyers advise against a Judicial Review against UK Treasury?

Banks are required to have counterparty limits with other banks and for intergroup thus a question on why KSFIOM was allowed to make such a large single deposit. The regulator has set legal limits which are normally a percentage of the Bank's capital. If £555m (sent to KSF(UK) was in excess of 10% of the Capital then this would have breached the standard Regulatory guidelines. Can MIke Simpson confirm that:
a.) The counterparty assumptions as set out here, are correct?
b.) Were KSF(UK) and KSFIOM working within those 10% counterparty limits?

Question.
If the IoM bank is restructured or bought, would its new title and ownership negate the effect of clause 29 as it would no longer be related to Kaupthing Iceland? If that is the case would that free up the £550m quicker than if it remained KSF in administration?

Thank you

Assuming the payout of £1000 is made to elligible depositors, will this have any adverse effect in the future?

1. Have Derbyshire (and Nationwide as the purchaser of Derbyshire BS) being put on notice of a potential claim on behalf of the creditors against them for failure of their duty of care or other failure, and if not why not.

2. In his last statement MS spoke of the chance of an off-set in liabilites between KSFIOM and KSFUK can he confirm what prevents confirmation of this. Is is clause 29(i think that was the number) of the Statutory Instrument.

3. Can he update the cash held on account. I assume that the loan book is receiving cash all the time and indeed some loans are constantly falling due.

cancelled