Reply from Mark Shimmin, Chief Financial Officer, of Man Government

  • brennajm
  • 22/10/08 n/a (free)
  • a depositor
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Posted: Fri, 31/10/2008 - 10:58

In response to an e-mail to Mark Shimmin's office withthe following question "Now that the liquidation of Kaupthing Singer & Friedlander (Isle of Man) has been postponed for about a month, may I ask that you will in the meantime be seeking to recover our deposits and return them to us. We are not terrorists, money launderers or anything of that nature, simply expats who have been saving diligently for our future in the hope of not being a burden to the State", I received the following response today:

Dear xxxxxxxxxxxx

Mark Shimmin has asked me to thank you for your e-mail concerning Kaupthing Singer and Friedlander (Isle of Man) Limited and to reply to you on his behalf.

The Isle of Man Government is determined to protect depositors with the local subsidiary and has taken the following action:

· It has gained agreement from the United Kingdom Government, which has ultimate responsibility for the Isle of Man in international matters, that it will represent the Isle of Man in discussions with Iceland over the liabilities of that country’s banks and in pressing the Icelandic Government to honour the guarantee given by Kaupthing Bank hf covering deposits in the Island’s subsidiary Kaupthing Singer & Friedlander (Isle of Man) Limited. Discussions to drive this forward are continuing with the United Kingdom.

· Treasury successfully applied to the Isle of Man High Court to adjourn the winding-up petition in respect of Kaupthing Singer & Friedlander (Isle of Man) Limited to allow more time for negotiations seeking a resolution of the bank’s situation. As a result, the matter was adjourned until November 27th 2008.

On October 23rd 2008 Tynwald approved further development of the Island’s Depositors Compensation Scheme. If the scheme is activated by the Scheme Manager when a banking institution is put into liquidation, the scheme will provide for a payment of up to £150 million by the Isle of Man Government to support the compensation of individuals who are beneficially entitled to deposits with a banking institution to a maximum of £50,000 each. This is in addition to payments into the scheme by banks.
Recoveries by the liquidator of amounts in excess of the compensation already paid on an account(s) (to a depositor) will also be paid to the depositor.
These actions demonstrate that while the Isle of Man Government is looking to the Governments of the United Kingdom and Iceland to act on their responsibilities in respect of Kaupthing Singer & Friedlander (Isle of Man) Limited, it is also prepared to commit public money to play its part in helping depositors, in partnership with the Island’s banking sector, through the revised Depositors Compensation Scheme.

The situation continues to evolve and you may find it helpful to monitor the Isle of Man Financial Supervision Commission’s website www.fsc.gov.im and the Isle of Man Government homepage www.gov.im “Banking Update” which are updated regularly.

Meanwhile, I must reiterate that the Isle of Man Government is doing everything it can to achieve a resolution of this difficult situation.

Thank you for taking the time and trouble to e-mail

Kind regards

Christine Clucas

Treasury Administration Manager

Isle of Man. Giving you freedom to flourish

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I haven't a Clucas

  • Anonymous
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  • Mon, 03/11/2008 - 00:19

The name Clucas seems to come up rather often in connection with this matter. Can anyone explain why?

(a) Christine Clucas, Treasury Admin Manager;
(b) Peter Clucas, Cains solicitor with conduct of this matter;
(c) David Clucas, Manager, FSC;


Surnames

  • cold-dose
  • 11/10/08 31/05/09
  • unspecified
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  • Mon, 03/11/2008 - 00:42

Clucas is a common surname on the Isle of Man, likewise Quayle, Quirk, Watterson, Corkill, Gelling etc. etc. It's part of what comes from the place having been fairly isolated until the late 19th century.

So, yes they are almost certainly related, but quite possibly many, many generations ago.


Clueless in London

  • Anonymous
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  • Mon, 03/11/2008 - 01:00

Thanks for that information. That explains it.


intended?

  • Anonymous
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  • Mon, 03/11/2008 - 01:56

elgee, was that an intended pun (clueless/culcas)? Because it is actually quite funny... (must be if it brought a smile to my face at moment!)

Mat


intended

  • Anonymous
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  • Mon, 03/11/2008 - 02:07

It was intended, but it was not exactly brilliant. Anyway, I try my best.


Conflict of Interests

  • Tricky Dicky
  • 24/10/08 30/05/09
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  • Sun, 02/11/2008 - 15:45

HMG we believe are the source of the problem, and yet they are going to represent IOM in Iceland to sort out the problem they caused?? Does anyone know if an IOM representative is included in the delegation going to Iceland?


Alternative view ... I'm sat

  • go mann
  • 10/10/08 31/05/09
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  • Fri, 31/10/2008 - 17:54

Alternative view ...

I'm sat in a small office in the IOM when the World crashes in. OH SH1T.
I'm bombarded with emails from people all over the World asking what's happened and where's my money.
I haven't got a clue, I don't hardly understand how the system works anyway.
I now have an assortment of Governments and Authorities crawling all over the place, including Liquidators Provisional or whatever.
The entire IOM Finance Sector is screaming at me.
Tynwald is screaming at me.

I know what I'll do ... I'll sit down and compose perfectly structured, individual, replies to every depositor. I'll take account of their personal circumstances [level of deposit, Derbyshire, Abu Dhabi, age and inside leg] and ignore the fact that I haven't got a clue what's happening at Government level in Iceland or UK, never mind all the other people who won't answer my phone calls and emails.

Come on, folks, cut these people a bit of slack. I know how YOU must be feeling. Anyone fancy their day job right now?


Alternate View 2

  • tubefly
  • 10/10/08 31/05/09
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  • Fri, 31/10/2008 - 18:05

No problem to give slack - but I do not think they should give the impression in formal communications that they - IOM Govt. - have dug deep into their pockets and provided GBP150M (..or GBP350M) - this is not true at all - but it is being framed in such a light! Incorrectly so........If they mean what they say - then the GBP150M should be on-top-of the liquidators payback to depositors - then I am happy for them to take the glory.


View 2b[1]

  • go mann
  • 10/10/08 31/05/09
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  • Fri, 31/10/2008 - 18:17

I accept that view, but I still think we're nit-picking a bit. From my Whitehall days, that sort of statement would have circulated corridors for days and days ... I suspect they're hanging on by their fingernails trying to keep up, and frankly don't think that giving them a hard time over terminology is the biggest issue at the moment.

Feel free to disagree by all means. I just have some sympathy for those people in those offices as well, but I do wish they could be as perfect as I was in my day in the Corridors of Whitehall.
;-)


Alternate View 2b

  • Alastair
  • 10/10/08 30/09/09
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  • Fri, 31/10/2008 - 18:09

Some slack sure but dealing with issues such as these is part of being a world class off-shore financial centre. This is make or break time for all of us the IOM as well.


Tubefly

  • Monkeyface3604
  • 10/10/08 31/05/09
  • unspecified
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  • Fri, 31/10/2008 - 18:08

Thats a very good point, all they are doing is loaning people the money, they dont loose out......unless when liquidated the company turns up less than 150 million!!!
Wow thank you IOM goverment


DCS insider dealing

  • tubefly
  • 10/10/08 31/05/09
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  • Fri, 31/10/2008 - 18:17

Yes....and I bet some folks....... not saying who.... already have a sound handle on just what the possible Net Liquid Assets are....is someone dealing with a loaded deck?


DCS - Possible Sandbagging

  • tubefly
  • 10/10/08 31/05/09
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  • Fri, 31/10/2008 - 17:40

It would be very interesting if the folks that have made such a magnanimous gesture in raising DCS to GBP50k also have an inside handle on the Net Assets KSFIOM that makes the real Risk exposure to the IOM Govt. a net zero!
Unless of course they do not charge interest on the period between initial payout and liquidator payback!
Good of them to early fund - but maybe not such a magnanimous gesture after all.


Well I hope so, but

  • Ramsey resident
  • 22/10/08 31/05/09
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  • Fri, 31/10/2008 - 15:04

Captain your remarks are offensive and unneccesary

This debacle was not of the IOM's making and the IOM Gov is doing all it can to get you and I out of this situation

Have you asked yourself why you exposed yourself to such an extent in a dodgy Icelandic bank. Hindsight is a wonderful thing!!


"Dodgy Icelandic Bank"???

  • librasaver
  • 12/10/08 n/a (free)
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  • Fri, 31/10/2008 - 17:52

A slight bit of rudimentary research would show that in January and February 2008 , this "dodgy Icelandic Bank" had better ratings than most British banks.
Many savers started saving more than 20 years ago, when Singer and Friedlander was a bank with a fine and impeccable record, and conservative policies. S&F was purchased by Kaupthing in 2005, and the same level of service was continued by the same staff in the IOM.
What the IOM may well have done is spell out the real risk in believing that there existed a GUARANTEE.
Nowhere can I find anything dated 1992 that states just how flimsy that "Guarantee" was. Why does the IOM government also not publish a copy of the Kaupthing "parental Guarantee" which implied that savers were fully protected. I feel that S&F are certainly not the only ones guilty of some deliberate misinformation and "Smoke and Mirrors" advertising to entice savers with a false sense of security.
If the true facts were known, I seriously doubt whether this many people would still have been duped. Very few would put their lifetime savings into a Dodgy bank. How "Dodgy" was HBOS that required a 20bn rescue!!!! Only Darren Brown could have done this with less pain.


Ramsey resident

  • mikeinfrance
  • 12/10/08 28/09/09
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  • Fri, 31/10/2008 - 15:29

Any ideas on who,in IOM, we can pester in order to try to find out what happened during the IOM/UK meeting last Friday ? Also on why the contents of the Kaupthing Iceland parental guarantee are being kept secret (by the FSC)?


The meeting was attended by

  • Ramsey resident
  • 22/10/08 31/05/09
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  • Fri, 31/10/2008 - 16:10

The meeting was attended by Mary Williams Chief secretary of IOM Gov together with John Aspden Boss of IOM FSC and IOM Gov Treasury representative. I doubt that they will tell you anything as I will be surprised if anything happened other than IOM putting its case to UK counterparts. No instant decisions will have been made or we would have heard by now. So in truth there is likely to be nothing to tell.

Re guarantee I do not see why it is secret. I recently obtained a copy from Irish Nationwide IOM of their parent guarantee to FSC which they will freely hand out. That was a simple very short letter saying that all liabilities are guaranteed by the parent. The Kaupthing one is likely to say just the same

Relying on this guarantee is not worth waiting for as Iceland is broke

As an aside the Irish Gov guarantee on its six main banks was confirmed this Monday as also covering their IOM subsiduaries


parental guarantee is it worthless!

  • mikeinfrance
  • 12/10/08 28/09/09
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  • Fri, 31/10/2008 - 18:50

I tend to agree that the parental guarantee will not produce the result we need but nevertheless the fact remains that the FSC is keeping its contents secret. Ask yourself why, what do they have to hide? Expat has tried everything possible to find out but has hit a brick wall.Perhaps it has no substance and is worthless anyway... we can only guess. The FSC was also responsible for moving our funds from Iceland to KSFUK but then failing to secure (ring fence) those funds...again why?

Re the meeting; I for one would like to know what the IOMs case is...Was the meeting about how our funds could be returned to us or just ,as I suspect, pressing the UK to pursue efforts to get Iceland to pay up ,which we know they are unlikely to do... It would be nice to know. Why are they staying silent on this matter as well ?

Most MPs and Gordon Brown and the treasury continually seem to be saying that it's up to Iceland to pay up, and ignore the fact that the british govt. triggered the problem with KSFUK in the first place by lumping ALL Icelandic banks together with Landsbanki.

If it could be shown that the parental guarantee was worthless anyway then the FSC would have a big question to answer and the "it's up to Iceland to honour its guarantee" argument put forward by many, would carry little weight.


Relying on Iceland guarantee not worth it

  • gazfuk
  • 12/10/08 31/05/09
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  • Fri, 31/10/2008 - 17:09

I disagree with this comment for the following reasons:

1 Iceland has secured money from the IMF (with strings attached) and is seeking further cash from USA and other countries. It is my belief that it will not secure such advances without honouring its guarantees, or at least contributing to a wider package of help for depositors in its banks. Almost all other countries around the world have taken steps to stabilise their banking systems and Iceland will be isolated on this issue if it fails to act.

2 Iceland has a vested interest in ensuring depositors do not lose out as its financial services industry would suffer permanent and irreperable damage if they do not.

It is my feeling that Iceland, Isle of Man and the British Government will sort this out between them for their mutual benefit. It is just taking a lot of negotiation behind the scenes. I sincerely hope so anyway, as it is difficult to accept that some of the most risk-averse people around (me included) stand to lose money they chose to put in a bank rather than invest in stockmarkets. If that is allowed, it will in my view decimate banking as we know it. I for one, will find it difficult to trust a financial institution again.


Some of us did not expose

  • Ray
  • 10/10/08 31/05/09
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  • Fri, 31/10/2008 - 15:10

Some of us did not expose ourselves to a dodgy Icelandic bank, madam; we were locked into term Manx bonds with the then Derbyshire and could not extricate ourselves when DBS sold to KSF. Be assured, we tried but couldn't.


Some of us did not expose

  • Ray
  • 10/10/08 31/05/09
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  • Fri, 31/10/2008 - 15:10

Some of us did not expose ourselves to a dodgy Icelandic bank, madam; we were locked into term Manx bonds with the then Derbyshire and could not extricate ourselves when DBS sold to KSF. Be assured, we tried but couldn't.


Shimmin's reply...

  • IceCrusher
  • 14/10/08 25/10/11
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  • Fri, 31/10/2008 - 12:33

Not one word about their visit to London and their discussions with the Treasury and FSA about the return of the £555,000,000. They just play the same broken record that we hear from everyone else: discussions with Iceland (dead duck no money) and the IOM DCS (not £1 in it, just empty words).

It's been one week since the delegation went to London and this is the nearest we get to a written report. No one is moving on this, they will just bide their time until the hearing comes round again, and then they can get on and do what they wanted to do on the 24th. No word from MS on any potential purchasers; there was a lot more action than this before the hearing got postponed. So dissapointed.


Shimmin

  • mikeinfrance
  • 12/10/08 28/09/09
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  • Fri, 31/10/2008 - 13:57

I've also been wondering what went on during the London meeting a week ago, but haven't heard or read a single word about it. Can you post his e-mail address,maybe more of us can e-mail him in an attempt to force something out of them! Also fully agree about Mike Simpsons lack of communication.


Mark Shimmin

  • Mrs Not Too Happy
  • 12/10/08 31/05/09
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  • Fri, 31/10/2008 - 12:38

Another useless reply. He would have been as well not bothering


another play on words (IoM Treasury Administrator Manager)

  • skintagainnow
  • 10/10/08 31/05/09
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  • Fri, 31/10/2008 - 11:55

"the scheme will provide for a payment of up to £150 million by the Isle of Man Government to support the compensation of individuals who are beneficially entitled to deposits with a banking institution to a maximum of £50,000 each. This is in addition to payments into the scheme by banks.
Recoveries by the liquidator of amounts in excess of the compensation already paid on an account(s) (to a depositor) will also be paid to the depositor."

To a non informed average person this would read as the IoM comp scheme would pay the first £50K then anything on top recovered by the liquidator would also be paid.

However as we know the initial payment from the comp scheme wouldn't be anywhere near £50K -

Why don't these people just speak in clear easily understood English - surely it's not that difficult and would save a whole lot of anguish.


Just a view. If total

  • thesunnysouth
  • 10/10/08 31/05/09
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  • Fri, 31/10/2008 - 15:23

Just a view. If total deposits total £820m and many depositors have sums in excess of £50k but equally an awful lot under £50K surely £150m (+ a few million from the other banks) would cover all depositors up to the maximum of the scheme? That is of course if they intend to pay the compensation on top of any funds from liquidation should that occur?


NOT SURE !!!!!

  • justr
  • 12/10/08 31/05/09
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  • Fri, 31/10/2008 - 12:17

I believe that anything distributed by liquidation comes first as a percentage of any amount a depositor has/had, then, the 150 million clicks in to top up to 50K for any shortfall. For example, if distribution is 30%, then a depositor that had 30k will get 9k from distribution and 41k from the 150m fund. Somebody with 300k will get 60k from distribution and nothing from the 150m fund. Keep it simple everybody.
From my understanding,based on figures being quoted, 150m would cover everybodys shortfall of 50K without any banks contribution, if they do contribute, then IOM needs less than the 150m. HOWEVER, we must still press for 100% for all


Apparently that is not so,

  • Captain Mainwaring
  • 11/10/08 31/05/09
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  • Fri, 31/10/2008 - 12:51

Apparently that is not so, according to others who have taken legal advice, and upon reading the scheme, the scheme will pay out up to 50K per depositor ON TOP of what the liquidator recovers.

Who to believe? I know who I would like to believe...


apparantly !!!

  • justr
  • 12/10/08 31/05/09
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  • Fri, 31/10/2008 - 18:54

maybe they meant liquidators recovery TOPPED UP BY to 50K


not so ?????

  • justr
  • 12/10/08 31/05/09
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  • Fri, 31/10/2008 - 18:51

I have only ever heard that an individual will be guaranteed THE FIRST 50K OF THEIR SAVINGS , in the same way as any other guarantee UK/ICELAND/HOLLAND etc, this being after liquidation distribution, it is not until then that any shortfall is established. The alternative suggested could in many circumstances make a mockery of the fairness of a percentage distrubution to all. No need for examples !!!!
Still, we must concentrate on 100% back for all


CAPTAIN, YOU SEEM TO BE RIGHT!

  • jkk
  • 10/10/08 31/05/09
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  • Fri, 31/10/2008 - 14:18

You seem to be right, Captain, except that according to FSC's website the scheme kicks in first and then the liquidator may top it up with proceeds from the liquidation.

Here is the quote:

(1) If you have a joint account with one other individual which contains £80,000, you would each be entitled to receive ½ of £80,000 ie £40,000.

(2) If in the previous example you also had £25,000 in a sole account, the total balances apportioned to you under the DCS would be your share of the joint account (ie £40,000), plus the £25,000 of your own, giving a total of £65,000. As this exceeds the maximum covered by the DCS the scheme provides for you to receive the maximum payment of £50,000. If there are sufficient funds on liquidation of the failed bank, the remaining £15,000 may be paid from the liquidation proceeds.

See: You http://www.gov.im/fsc/investor/dep_comp.xml


yes but

  • justr
  • 12/10/08 31/05/09
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  • Sat, 01/11/2008 - 23:53

yes but the outcome will be the same whether the '50k' scheme clicks in before distribution or not. If one has a balance of 35K and the scheme clicks in first then one would receive 35K from the scheme, but later, whatever one would have been entitled to as a percentage during distribution will be  'refunded' to the scheme. For example, if a fifty percent distribition, if distribution came first, then 17.5 K from distribution and 17.5k from fund, however if fund came first, 35K from fund then later the 17.5k entitlement from distribution will go back to the fund. So, the same outcome whatever.On the highlighted ref from jkk, the 15K could only (may be paid) be paid on the liquidators being able to pay out 100% of deposits, also, under these circumstances, the fund would get it's 50K back. I juss wont me munny back


Comp scheme mumbo jumbo

  • expatvictim
  • 10/10/08 01/11/10
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  • Fri, 31/10/2008 - 17:46

I tend to agree with MikeinFrance. The scheme is stacked in the IOMs favour (no surprise there) if the liquidator does his job. I'm sure they are happy to have had the liquidation postponed - more time to find out theirr exposure.

The quote from the website does not explicitly state that the liquidator would pay 15k on top of the compensation 50k. Infact in this instance I expect the liquidator would be paying 65K and the compensation scheme zip.

From the Shiminn letter:

"Recoveries by the liquidator of amounts in excess of the compensation already paid on an account(s) (to a depositor) will also be paid to the depositor".

Seems to me the key word is 'excess.. For the example from the website where an individual has lost 65k (ignoring the complications of dual accounts):-

If the liquidator recovers (less fees) 65k/person (or more). The individual gets his 65k back.The IOM compensations scheme pays nothing.

If the liquidator manages to recover (less fees) only 50k/person then the 'excess'= zero. The individual gets 50k and the IOM compensations scheme pays nothing.

If the liquidator recovers (less fees) less than 50k/person. The individual will get 50k (eventually) - and loses 15k; the IOM compensation scheme makes up the difference (between what the liquidator recovered and 50k)


scheme payout

  • mikeinfrance
  • 12/10/08 28/09/09
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  • Fri, 31/10/2008 - 15:07

For what it's worth, my simplistic understanding is that If the liquidator is able to distribute enough so that everyone has received at least 50K (for those with 50K or more deposited) and 100% for those with less than 50K, then the scheme pays out nothing.
If the liquidator distributes less than this then the scheme acts to top up all those who received less than 50K from the liquidator. (or to 100% if they had less than 50K deposited).

It seemed simple before I tried to write it down!


scheme payout

  • justr
  • 12/10/08 31/05/09
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  • Fri, 31/10/2008 - 19:03

If the liquidator is able to distrubute 100% for ANYBODY then they are able to distribute 100% for everybody, it is done on a percentage for all claims. As I said previously, lets keep it simple. Stop giving people false hopes through interpritation of these issues and concentrate on 100% for all


scheme payout correction

  • mikeinfrance
  • 12/10/08 28/09/09
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  • Sun, 02/11/2008 - 13:07

On reflection it's apparent that what I wrote above wasn't what I meant to write!
It's clear that if the liquidator is only able to distribute anything less than 100% to all then the scheme will payout to top up so that everyone eventually has received at least 50K (or 100% for those with less than 50K deposited).
I believe this is a valid statement. If we can't agree between us how the scheme operates than how can we hope to explain it to the MPs !


Well I hope so, but

  • Captain Mainwaring
  • 11/10/08 31/05/09
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  • Fri, 31/10/2008 - 15:26

Well I hope so, but supposedly the FSC have different versions depending on whether there is a turnip shortage, or if Rover has pooped outside Tynwald.

What a terrible little amateur little hole that place is - they should be allowed to hold a picnic for two woodpeckers in a forest, yet alone be allowed to control internation banking. I for one would not lose an ounce of sleep if all banking activities were halted forthwith or even quicker.

Amazing how one can fall for the crap that the CI and IoM are reputable banking domains, when in actual fact they are little more than fraggle rock with a cheque book.


A bit of a bu66er if you live

  • go mann
  • 10/10/08 31/05/09
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  • Fri, 31/10/2008 - 20:17

A bit of a bu66er if you live in the CI, of course.
Still, there's always Al Barclays or McLloyds to rely on, or perhaps Manuel Abbey, or Fa Flung HSBC ...

Go on, Mainwaring, just for a change present something positive.
Your solution is WHAT?
Don't rush ... a considered reply would be nice. ;-)


Thanks for those helpful comments Captain

  • manx-person
  • 17/10/08 31/05/09
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  • Fri, 31/10/2008 - 19:53

Thanks for that Captain - rest assured with those kind words, all of those in the finance sector will be using all of their influence wherever and however possible to secure a favorable outcome


Seems clear

  • Alastair
  • 10/10/08 30/09/09
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  • Fri, 31/10/2008 - 14:24

But I remember cold-dose having a different clause that justified the opposite. Cold-dose got a minute?


Yes. Be cautious about

  • cold-dose
  • 11/10/08 31/05/09
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  • Fri, 31/10/2008 - 17:53

Yes. Be cautious about assuming too much about examples given on websites!

The example above isn't wrong, but doesn't make it clear that the additional money is paid by the liquidator AFTER he has reimbursed your compensation payment.

In other words, the DCS doesn't pay out £50,000 on top of liquidation proceeds.

Here it is in the regulations:

Compensation of Depositors Regulations 2008

10.(5).c "Compensation shall be reduced by the amount of [...] any dividend or distribution relating to that deposit"

(Dividend is the legal term for the liquidation payment)


Why so complex - Friend in Tynwald?

  • Alastair
  • 10/10/08 30/09/09
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  • Fri, 31/10/2008 - 13:00

Since we are only interested in 100% this should be irrelevant but given that this should be such a straight forward question to answer do we have a friend in Tynwald who can ask this question?


Why so complex - Friend in Tynwald?

  • Ally
  • 13/10/08 31/05/09
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  • Fri, 31/10/2008 - 13:28

Distribution of sums recovered

16A. If the Scheme Manager recovers sums from a defaulting participant in respect of a compensation payment which it has made, it shall distribute those sums between participants, holders of eligible protected deposits and the Treasury on such basis as appears to the Scheme Manager to be appropriate having regard to the sources of funding from which the compensation payment was made.

This is the paragraph that deals with recovery of funds. It says it is up to the scheme manager how those funds should be paid out. So it could be that they go back to the participants of the compensation scheme or they go to protected depositors. This is perhaps why there may be some confusion, as reading this the scheme manager can pay whom they deem appropriate.


Now I really don't understand

  • Alastair
  • 10/10/08 30/09/09
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  • Fri, 31/10/2008 - 13:42

Ally, what right would the (compensation) scheme manager have to any funds recovered in liquidation. They are not a creditor. Does 16A not referred to funds collected from a participating bank that later goes into liquidation?

Cold-dose quoted a clause earlier in the week that referred to the compensation scheme applying after "dividend and distributions" and he explained that and % we received in liquidation would be a dividend and therefore the compensation scheme would only top-up to 50k.

I still think a question with examples in Tynwald would be the way to ensure the mechanics of the scheme are a matter of public record. It is in the interests of the IOM to ensure that their scheme is clear for their credibilit, what is left of it.


Maybe I do understand (but maybe not)!

  • Ally
  • 13/10/08 31/05/09
  • unspecified
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  • Fri, 31/10/2008 - 17:16

K&A

I would definitely bow to cold-dose's greater knowledge. However my understanding of the scheme is,it is there to pay the first £50k so therefore if the liquidator recovers enough to pay the first £50k the scheme is repaid.

Liquidations are usually long drawn out processes it can take years to convert all the assets in to cash. Let’s make it easy and use round numbers. Let’s say total depositor's are owed £800 million and as an example I’ll use someone with a £100k deposit.

At 27th November the liquidator states he has managed to recover £100million (12.5% of total deposits)

He would pay a dividend of £12,500 to the depositor.
The scheme would then kick in and that depositor would be due £37.5k from the scheme. Let’s say by miracle the scheme is in a position to pay out pretty rapidly. So it pays out £37.5k to the depositor in December 08.

The depositor has now recovered his £50k that is due under the scheme. Even though the scheme has only paid out £37.5k its job is done, it is there to make sure depositor's recover up to £50k NOT to give them up to £50k.

Then let’s say in March 2009 the liquidator says he now has another £300 million (37.5% of deposits) of cash to declare a dividend with. This would mean the depositor with £100k would be due another £37.5k. However the compensation scheme has already paid this, so my understanding is that this is paid direct to the compensation scheme and so that is why the paragraph below is relevant and why the Compensation scheme manager would receive funds from the liquidator.

16A. If the Scheme Manager recovers sums from a defaulting participant in respect of a compensation payment which it has made, it shall distribute those sums between participants, holders of eligible protected deposits and the Treasury on such basis as appears to the Scheme Manager to be appropriate having regard to the sources of funding from which the compensation payment was made.

Then lets say in September 2009 the liquidator has managed to recover another £80 million (10% of deposits) the depositor would get a dividend from the liquidator of £10,000.

Hope this explains it!

The new DCS was drawn up and passed into legislation very quickly and that is why they had to do a rewrite of certain parts a couple of weeks later. I still think it could be made clearer than it is, and maybe they will get around to tidying up the wording for clarity.

But more importantly we don’t want the scheme to kick in anyway. We just want 100% of our deposits back.


scheme or 100%..cold dose/expat ?

  • mikeinfrance
  • 12/10/08 28/09/09
  • a depositor
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  • Sun, 02/11/2008 - 20:04

Referring to this comment from Allys post: "But more importantly we don’t want the scheme to kick in anyway. We just want 100% of our deposits back"
I've been struggling during the last few days to understand why, if the bank is wound up and the scheme kicks in, that would necessarily mean that we would never get 100% back for all ? It's my understanding that attempts to recover the banks assets would continue and that furthermore a different liquidator could be appointed..many people have expressed the opinion that Mike Simpson does not necessarily have our best interests at heart. Maybe I'm missing something?
Any comments on this question cold dose or anyone ??


Scheme or 100%

  • Ally
  • 13/10/08 31/05/09
  • unspecified
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  • Sun, 02/11/2008 - 21:25

Mike

You are correct if the liquidation went well and the liquidator was able to recover the assets of the bank and convert them in to cash at anything near to the value stated on the balance sheet then there is a fair chance that the payout would be near 100%.

However the trouble with liquidation could be

1) the timescale it could take several years to receive final payments
2) It is unlikely that he would recover 100% of the balance sheet value, the 2 main reasons being

a) The loan book - At 30 Sept 08 this is down as a value of £410 million. A buying bank would look to buy that at a discount. It all depends on quality of the loan book but if its a fairly good quality loan book I think the liquidator would take a 20% discount to the book value. On £400 million that could be anything up to £80 million +

b) A big chunk of the funds are in KSF UK which is itself in administration. Depending on the payout from there depends on what the payout on the IoM liquidation would be. Lets say the administrator in the UK was only able to payout 80% of debts owing, then obviously the liquidator in the Isle of Man would not be able to pay out in full.

These are obviously assumptions, but it would be very hard to get 100% back in a liquidation situation, that doesn't mean if the liquidation went well that recoveries coulnd't be 80 or 90% or more.


Further to what Ally said...

  • cold-dose
  • 11/10/08 31/05/09
  • unspecified
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  • Sun, 02/11/2008 - 23:56

There is nothing in the compensation scheme that would stop the liquidator returning 100% of the deposits if he could get his hands on the money.

However, the compensation scheme requires the liquidation of the bank as a prerequisite. A non-liquidation solution is generally regarded as being preferable - not just in terms of getting more money back, but also in terms of the potential speed of sorting everything out.


thanks !!!

  • justr
  • 12/10/08 31/05/09
  • unspecified
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  • Fri, 31/10/2008 - 19:13

common sense innit !!!!


Claw-back

  • cold-dose
  • 11/10/08 31/05/09
  • unspecified
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  • Fri, 31/10/2008 - 17:58

Ally is correct - section 16 deals with liquidation monies becoming available AFTER the compensation has been paid. The clauses quoted work together with a few others - the overall effect is that liquidation dividends go to the DCS until your entire compensation payment has been repaid (and then go back to the Manx Treasury or the participant banks depending on the split in the original funding).