POUND STERLING DEPOSITORS LOSE OUT
I am a significant pound sterling depositor. Can it be explained why depositors with non-pound sterling accounts are instructed to use exchange rates current on 27-May-2009 as opposed to 8-October-2008?
Every other reference point for the accounts (interest earnt etc) is based on 8-October-2008, irrespective of when the winding up order was given.
Due to the significant depreciation of the pound between these dates the depositors with foreign currency accounts are dealt a huge favour at the huge expense of all us pound sterling depositors.
I am an advocate for fairness in this process and I don't believe this is fair for pound sterling depositors.
(18 votes)
Pound Sterling Depositors lose out
Could not agree more, you cannot under any accounting circumstance that I know start to have two sets of books, one for the foreign exchange holders and the others for Pound sterling holders. I agree that the exchange rates had to be fixed at the date the business closed i.e. 8th October 2008, otherwise there is an on-going exposure to foreign exchange gains and losses. Who set the conversion date of 27th May?
Fx rates and fairness
I am a foreign currency depositor and agree with your quest for fairness. This is what FX depositors also want!
Right now, under the current procedures for payment, there is no way to predict whether the FX depositors will win out or lose out. And either is unfair, I agree with you!
The conversion rate (rate at which our deposits were converted to GBP) is the date of default. Between the 8 Oct and 27 May the rate has gone from 1.8 to 1.4 an back to 1.6. That is not important.
What is important is the rate at which the depositors will be paid back. If the rate is 1.7 or more, Fx depositors will win on the exchange rate. And if it is 1.6 or less, they will lose.
What the procedures should do, is ensure that the FX depositors are paid the SAME PERCENTAGE of returns as the other depositors, but AFTER FX conversion.
That is, if the FX depositor had $100,000 and the rate of return for all is 75%. Then the FX depositor should have $75,000 in his/her bank account at the end of the process. Not more not less.
We also want fairness.
Run668
(Fx depositor $108,000)
Exchange rate date set at the day of liquidation
The day of exchange rate calculations has been set at the date of liquidation and this is done according to the law.
As to whether this is unfair, then remember that those who deposited in other currencies chose to do so while the UK £ depositors chose to deposit in UK £. As a foreign exchange depositor I personally would prefer to get paid my percentage of the recovery in the Euros and US $ I deposited in rather than in UK £ and would expect the same % recovery of my deposit in those currencies as the UK £ depositors, which would not be the case if the exchange rate date was at Oct 8. Also remember that the bank is in possession of foreign currency exactly because some people deposited in foreign currency. Hence the loss in the UK £ has been lessened by the foreign currency depositors money which has increased in value compared to the UK £. All in all the fairest way this could have been done was to pay people back in the currency they deposited in as all then would receive the same percentage return of their deposit in the original currency. We would have avoided this problem completely.
Exchange Rate - klauseriksen
Please note that if SOA was accepted, the exchange rate would have been 1 sterling = 1.4718 dollar.
By rejecting SOA (1 sterling = 1.4718 dollar), liquidation exchange rate (1 sterling = 1.6034 dollar) was accepted.
By going liquidation route all US Dollars holders will loose 9% of their capital (1.6034 / 1.4718).
For example for 100,000 US Dollars holders:
SOA Option - you could have claimed sterling 67,944.
Liquidation reality - you can claim only sterling 62,367.
This is the price all US Dollar holders will pay for rejecting SOA.
I agree with your comments that the day of exchange rate calculations has been set at the date of liquidation and this is done according to the law and cannot be changed.
exch. rates
Has it not occurred to you that, because the USD has fallen in value recently against sterling,if you were to convert either of the sterling amounts you quote at today's exchange rate for example you would get USD 102,100 (liquidation) or USD 111,230 (SOA) a small profit in both cases.
I tend to agree that sterling depositors have lost out simply because they have had to sit and helplessly watch the value of their deposits plummet, since last autumn, against all other currencies. There has been a small recovery since the lows of a few months ago but sterling isn't likely to recover to its previous level any time soon.
US Dollar Deposit
I think having lost 9% because of the liquidation is quite enough!
What do you want JS blood? The bank is liquidated - not as many smaller depositors like myself voted and as stated it's case Law that reimbursement is in UK Pounds Sterling on the date of liquidation.
Enough said - move on!
NOT TRUE
Hello,
it is not correct to say that GBP depositors loose out because the USD gets converted at a rate around 1.60 instead of 1.70.
Remeber that KSFIOM failed because of a very large GBP deposit that was made at KSF in the UK which was frozen. This triggered all the issues and caused KSFIOM to be liquidated. All the USD which had been deposited at KSFIOM are still part of the assets of KSFIOM and consequently the GBP value of these USD deposits which are held within KSFIOM and have not been deposited elsewhere will rise when the USD strengthens against the GBP as it did between 9 October 2008 and 27 May 2009 from about 1.70 to 1.60 USD per GBP.
Now not every USD depositor is a below 50k depositor and not every USD depositor will be paid back in full and USD depositors will also not be paid back in USD but in GBP.
This means the payout ratio GBP depositors receive will be higher because the total value of the USD deposits has gone up and increased the value of the assets of KSFIOM in GBP terms.
For USD depositors it is fair that they get a compensation in GBP based on May 27 2009 exchange rates because it allowed those depositors to do an offsetting transaction to mitigate the conversion from USD into GBP. For example, a USD depositior who had 50,000 USD which got converted into something like 31,250 GBP
could have sold 31,250 GBP against USD on the 27 May 2009 at the market rate. He would have received USD 50,000 from the sale and get his 31,250 GBP back from the DCS in a few months. By doing so he would have eliminated the effect of the fx conversion.
Also I would assume that a prudent liquidator of KSFIOM would have sold all USD deposits within KSFIOM on 27 May 2009 against GBP at the then given rate as all liabliities of KSFIOM where converted into GBP on that date. If so he would have realized the gains on the USD deposits within KSFIOM at the benefit of all depositors and creditors.
All this would not have been possible if the rate on 9 October 2008 had been used.
So dear GBP depositors please relax. You are not getting ripped off by anybody. You should be glad that KSFIOM had USD deposits.