SoA Clarifications

  • Ally
  • 13/10/08 31/05/09
  • unspecified
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Posted: Mon, 23/02/2009 - 11:09

I am in no way posting for or against the SoA but I do believe all facts should be laid clearly before people. I have had an email exchange with John Spellman this morning to clarify 2 points that seem to be misunderstood about the SoA. No doubt because I have had such a quick answer from Mr. Spellman some will see this as proof that I am in the pay of the IoMG. If that is what they what to think then that is up to them, however since this bank failed because I live on the IoM and have been involved in various depositor initiatives I have meet John Spellman on several occassions and due to a business like rapport that we have developed I find that he always replies to my queires in an efficient manner.

It seems they will be developing a website where people can go and check there own individual situation. Hopefully they will get this done asap.

Below is a copy of the email exchange.

From: Spellman, John

Sent: Mon 2/23/09 8:19 AM
To: (xxxxxxx(?)hotmail [dot] com)

Thank you for your email. See below for specific answers to your questions.

I will arrange access to the calculation model as soon as possible.

Regards

John Spellman
Director
Financial Services Division
The Treasury, Isle of Man Government
www.isleofmanfinance.com

From: xxxxxxxxxxxx [mailto:xxxxxxxx(?)hotmail [dot] com]
Sent: 22 February 2009 23:19
To: Spellman, John
Subject: SoA Explanations

John

In talking to other depositors and seeing various postings it seems there is some basic misunderstanding of the SoA that needs correcting as soon as possible, or I have misread the SoA myself.

There appears to be 2 basic misunderstanings

1) That if total returns are 60% and depositors under £50,000 are getting 100% then that must mean depositors over £50,000 are getting less than 60%

JS: This is not correct. The pari passu payment that would occur under a liquidation is unaffected. The “top up” payment for the guaranteed element is paid by the Isle of Man Government.

2) That if returns are over 60% none of this is repayable to depositors as the IoMG takes any upside.

JS: This is not correct. All upside is paid to the depositors in our current proposal. If there is a shortfall on assets under 60%, the advance by the Government goes to provide a safety margin for depositors.

My understanding is that both of the above statements are false in that

1) Sub £50k are made up to 100% by IoMG and bank contributions that would have been made in a DCS scenario.

JS: Absolutely correct.

2) IoMG just takes back what it lent and if 70% of assets are recovered then depositors receive 70%

JS: Absolutely correct.

It would be much appreciated if you could confirm my understanding of the SoA but also as a general point I think it would be a worthwhile exercise to have a website to put clear examples of exactly how the SoA would work with a range of deposits, so say £20k, £50k, £100k, £150k £250K etc, with a range of assets recoveries, so say 60%, 65%, 70% so people can see what the position is and relate it to the amount they have on deposit.

JS: We have constructed a calculation tool that people can put their balance and their type of deposit in to illustrate that graphically. It is currently being converted to a web enabled version so people can use it.

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IoM - PAG document for DCS -- dated March 2008

  • skintagainnow
  • 10/10/08 31/05/09
  • a depositor
  • Offline
  • Wed, 25/02/2009 - 18:04

Pity the IoMG didn't incorporate more of the PAG's suggestions into their revised DCS.. no need for any of these discussions if they had. Someone had some foresight ;;;;;;;;

http://www.positiveactiongroup.org/PAG_DCS_Submission_2.pdf

Positive Action Group

CONSULTATION RESPONSE (2)

Options for Change to IoM Depositors’ Compensation Scheme

Background

This submission follows on from the PAG submission of 24th March 08.

It comments on the structure and operation of a future scheme.

PAG Comments

  1. The Isle of Man Government must accept that the Island’s DCS is primarily their responsibility – not the responsibility of the banks. By creating and policing the banking and financial regime within which deposit compensation scheme operates, the Government is its de facto Guarantor.

PAG agree that there is a need to pay Depositors promptly under any DCS. Consequently, PAG agree with the concept in the consultation paper that Government should have power to borrow to lubricate the flow of DCS payments.

PAG requests that Government is given power to borrow to meet any call on the DCS

  1. The Isle of Man’s reputation that will suffer catastrophically in the event of any bank failure, as well as the reputation of the bank concerned. The Island could not claim to be a centre of international finance and banking excellence, if it appeared to lack self confidence in its regime for deposit protection.

  2. If the Government unreservedly accepts that providing a sound DCS scheme is a key responsibility, there is a need to examine improvements to the existing scheme from the standpoint of what might be the characteristics of a world-class leading DCS in a major international finance centre.

PAG requests that the following factors be considered in trying to develop a market leading DCS scheme to enhance the Isle of Man’s reputation:

(a) All of a Depositor’s money should be seen as worthy of protection, not just a portion thereof [ to emphasise this point, savings protection should be viewed in the light of the unfairness that would ensue from someone losing their home due to collapse of a bank holding their House Sale proceeds ]

(b) Payments to Depositors should be made within 2 months of a call upon the Scheme

(c) The Government should fund initial payment and supervise administration of the bank DCS collection process

(d) A realistic time period should be set for the remaining banks in the DCS syndicate to reimburse the Government under the scheme ( e.g. 5 years )

(e) Government (i.e. taxpayers) should receive a fair market interest rate from the banks for interim funding of the DCS while collecting bank levies

(f) Banks should be required to deposit a substantial upfront DCS levy as part of being awarded a Bank Licence, in the same way that commercial businesses pay goodwill

(g) Banks should be required to deposit annual DCS contributions to help create a starter fund

(h) Banks DCS deposits should receive a fair market interest while on deposit

(i) The use of bank default bonds or insurance protection should be considered as a means to guarantee bank contributions to the DCS and also as a means for Depositors to obtain insurance protection at the level of 100% of funds on deposit in return for foregoing a small portion of their deposit interest

Positive Action Group

31st March 2008


Call for a new poll on the homepage

  • AJM UAE
  • 11/10/08 31/05/09
  • a depositor
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  • Tue, 24/02/2009 - 08:43

Although Ally (and many others) are doing their best to clarify the terms of the SoA, it is evident that we do not have enough information on which to base decisions as to whether the DCS, SoA (or neither) is acceptable to us.

I am calling for a new poll in addition to the current one on the homepage. The question would be:

Do you have enough information on which to base a vote for DCS, SoA or neither?

  • Yes
  • No

Assuming we received an overwhelmingly negative response, this would give us empirical evidence on which to ask IoMG to clarify the relative merits of both schemes. As others have said, we need clear projections (based on different levels of deposits) as to when/how much we could expect to receive under both schemes. We need to know exactly which rights we would be giving up under both schemes. We need to know exactly when the IoMG would be clawing back its loan and whether it would be a preferential creditor at that point. Maybe all of this is crystal clear to some of us but I'm pretty sure it isn't clear to most of us.

At the moment I feel like I'm trying to choose between apples and oranges without being convinced that either is acceptable.


Clarifying the SOA....

  • Anonymous
  • Offline
  • Tue, 24/02/2009 - 13:31

You are correct, many of us, including myself, have been trying to clarify what we believe has been presented with respect to the SOA. Just that. I have never come out and stated it is the way to go, I believe we all have to make informed decisions based on facts and not be led by those who go around ranting that one scheme is better than the other without having ALL the facts. To date we don’t have all the facts on the SOA or DCS for that matter, so all we can do is interpret what has been set down before us. I suggest, as some others have,that we all get our act together and try and get the government to set down, side by side a genuine comparison of both schemes in a manner we all can understand. With such facts before us we can then ask rational questions and decide which scheme better suits our own purpose.

To conduct a poll as to which one is better than the other at this stage will serve no purpose. In fact, if it is like many of the other polls conducted to date, very few depositors will respond and I would suggest the ones that do are the ones least informed about either of the schemes.


Undone, I think that this

  • expatfrance1
  • 15/10/08 31/05/09
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  • Tue, 24/02/2009 - 13:38

Undone,

I think that this poll is not saying that either the DCS or SoA is better than the other it is asking if people have enough information to determine whether one is better thatn the other.

Your post would tend to indicate that in your case, and I would add mine also, the answer is NO we do not have enough information to make a decision.


expatfrance1, you are right...

  • Anonymous
  • Offline
  • Tue, 24/02/2009 - 13:53

but do we really need another poll that is likely to be answered by a small proportion of the membership. I would think it goes without saying that more information is required regarding both Schemes. It is my understanding that the government are putting together additional facts to support, what I gather will be, an amended SOA. I believe what is needed now is more information regarding anticipated payments under a DCS as proposed in the thread hopeful started today.


Poll

  • Anonymous
  • Offline
  • Tue, 24/02/2009 - 08:55

If you want to you can set up a poll yourself - log in and then in the left-hand column on the home page click on Poll (under Create General Content).


Poll created!

  • AJM UAE
  • 11/10/08 31/05/09
  • a depositor
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  • Tue, 24/02/2009 - 09:03

Thanks to Scottr and Skintagainnow I have managed to create my very first poll! It's showing on the left hand side of the home page. Please take time to vote as it will close on 10th March.


Anyone can create a poll -

  • skintagainnow
  • 10/10/08 31/05/09
  • a depositor
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  • Tue, 24/02/2009 - 08:51

Anyone can create a poll - right-hand column, 2nd box (all members), first bullet point (Create Poll)


70% each or 70% in total

  • Alastair
  • 10/10/08 30/09/09
  • a depositor
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  • Mon, 23/02/2009 - 21:08

Ally

Does the answer below mean on a 70% recovery we would each get a minimum 70% or that collectively we would get 70%. Bear in mind that if some are getting 100% others would get less than 70%. 70% each or 70% collectively - subtle but VERY important.

2) IoMG just takes back what it lent and if 70% of assets are recovered then depositors receive 70%

JS: Absolutely correct.


@BC - 70% each or 70% in total

  • Ally
  • 13/10/08 31/05/09
  • unspecified
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  • Mon, 23/02/2009 - 21:25

BC

I believe this is answered in point 1 where I put to JS that

1) That if total returns are 60% and depositors under £50,000 are getting 100% then that must mean depositors over £50,000 are getting less than 60%

JS: This is not correct. The pari passu payment that would occur under a liquidation is unaffected. The “top up” payment for the guaranteed element is paid by the Isle of Man Government.

Here I believe JS is saying that what you are stating is incorrect. What he is saying is that on a 60% return over £50k depositors would not get less than 60%. I think you can also see this in Lovett's 3rd affidavit where based on a 65% return of assets 72% of liabilities are paid. This extra 7% of liaibilities being paid over and above the assets recovery is that IoMG have had to ensure that people with less than £50k get a 100% return.

So lets say asset recovery was 70% I would guess somewhere in the region of 75% of total liabilities being repaid, being over £50ks, getting 70% (or £50k whichever is greater) and sub £50k's getting 100%

So in answer to your question my reading is minimum of 70% each and 70+% in total.


BC, re 70% each or 70% in total

  • Anonymous
  • Offline
  • Mon, 23/02/2009 - 21:19

Please see my posting below titled "SOA loan impact on asset recoveries" and Ally's reply to me.


Undone

  • Alastair
  • 10/10/08 30/09/09
  • a depositor
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  • Mon, 23/02/2009 - 21:51

Indeed apologies I think your post deals with this.

I does beg the question, again I think asked below, when the IOMG then will recover its loan. By implication from 60% it will just be taking back its loan as a % of recoveries up to the final pound. This would not have been my understanding before so I would like to see it stated very clearly in any formal IOMG presentation that this is correct.

Apolgoies Ally for asking you to repeat yourself.


SoA

  • Brabander
  • 15/10/08 31/05/09
  • unspecified
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  • Mon, 23/02/2009 - 17:00

Ally,
It is good that you were able to make contact with John Spellman who clarified some important issues.
I have still some remaining concerns and perhaps you could clarify those as well with John.
1. I understand that the top up payments made to guarantee 100% recovery to depositors with £50k and under will be paid for by the IOMG. This payment is therefore an outright payment and not a repayable loan from the IOMG. Please confirm if this assumption is correct.
2. I orginally understood that under the proposed SoA all other depositors would get £50k or 60%, whichever is the higher. This means that if the asset recovery rate is 60% a depositor with £60k would get 60% of £60k=£36k topped up to £50k by the IOMG. Is this the case? If so, is this top up also an outright payment by the IOMG?
3. I assume that the sole purpose of the repayable loan from the IOMG would therefore be to accellerate payments to depositors. Please confirm.
4. I believe that in the original SoA "proposal" the IOMG loan would be paid once the recovered assets were to exceed the 60% mark. In addition it was, I believe, proposed that the IOMG would be treated as a preferential creditor in terms of repayment of this loan.
In the e-mail you received John Spellman it is clearly stated that ALL the upside (over 60%) is paid to depositors. Can you confirm how the IOMG expects their loan will be repaid. Perhaps they are hoping for a asset recovery rate of over 100%?
5. Some contributors to the DAG site appear to believe that the under the AoS the IOMG guarantees payments to all depositors of at least 60% of their deposits. John Spellman states in his e-mail:" If there is a shortfall on assets under 60%, the advance by the Government goes to provide a safety margin for depositors". Does this mean that the IOMG does guarantee a minimum payment of 60%?
Please confirm.

It is my view that if the responses from John Spellman to the above points are positive that this will make the proposed SoA much more attractive (in any case to me personally).

Thanks for your help in clarifying these issues.
Mike


For the sake of openness, I

  • SgKZ
  • 10/10/08 31/05/09
  • a depositor
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  • Mon, 23/02/2009 - 16:23

For the sake of openness, I am a less than 50k depositor with a particular hate for the IOMG after what has gone on. BUT I get it now, whereas previously I had the same misunderstanding of the IOM taking 'extra' money out of the pot above 60% that would have otherwise gone to the +50k group.

At the 60%, 70%, 80% point, higher depositors would be getting the same recovery under the SOA as they would do under liquidation (Barring the issue surrounding Bond-holders which from my reading will have a greater share of the pot than under a regular liquidation).

I've tried making a simplistic analogy for people like me who aren't Maths wizards but I don't have the capacity to put it into words. But I get it.

I don't necessarily agree with their 60% recovery point though as I personally think that they have to shoulder alot of the blame in this whole situation and the closer that figure is to 100%, the less brown stuff will fly their way.

PS. I'm more than willing to be put right if I'm wrong. I'm stupid but not so stupid as to not accept when I have made an error.


SOA Clarif.

  • merlina
  • 26/01/09 01/06/09
  • a depositor
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  • Mon, 23/02/2009 - 15:46

Your e-mail to J Spellman is misleading us. You both banter 60% but is the operative word IF a total of etc.


If

  • bellyup
  • 10/10/08 09/01/10
  • a depositor
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  • Mon, 23/02/2009 - 17:26

If John Spellman is trustworthy also.
And is not just saying what you want to hear,


@bellyup-If

  • Hampnew
  • 22/01/09 31/05/09
  • not prepared to answer
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  • Mon, 23/02/2009 - 17:48

Do you mean John "Curveball" Spellman?


I dont know

  • bellyup
  • 10/10/08 09/01/10
  • a depositor
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  • Mon, 23/02/2009 - 18:20

I dont know only that a comment was made by someone reputable that he is not completely trustworthy and would say one thing and the next day deny that he had said /agreed to any such thing.


Trust?

  • kiwi38
  • 11/10/08 31/05/09
  • unspecified
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  • Mon, 23/02/2009 - 18:36

Anyone who trusts Spellman, Bell, Shimmin or Brown is at best being naive. They will do no more than they need to do to try to save their economy, reputation and their own skin.

They are using Alix Partners and now QC Moss to get between themselves and whatever document ends up being put forward as an SOA. They are not stupid, they are putting distance between themselves and what their appointed experts deliver so they have someone else to blame over the years ahead...


Trust?

  • Hampnew
  • 22/01/09 31/05/09
  • not prepared to answer
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  • Mon, 23/02/2009 - 19:07

Kiwi
I have to pull you up there, Manx people have always had a reputation for being particularly trustworthy. Bell, Shimmin and Brown have in my opinion tried to act honourably in respect of depositors but have not been supported.

Had thought that Spellman was known as "Curveball" because he did not fit in to the local community but have now been told that it is after a gentleman called Rafid Ahmed Alwan who I must admit I had never heard of. Having googled it, it seems like good old Manx humour to me.


@Hampnew

  • kiwi38
  • 11/10/08 31/05/09
  • unspecified
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  • Mon, 23/02/2009 - 20:39

If you believe that Spellman is leading us further away from the full recovery of our funds and not allowing the "honourable Manx men" to step up and make up 100% whole then what do you suggest we do to get Spellman out of the loop / sidelined / discredited?

Personally I think they are all in it together and as bad as each other but I am willing to listen to any ideas that may move us closer to 100% for all, and not just individuals with <£50k or companies with <£20k.


@kiwi

  • Hampnew
  • 22/01/09 31/05/09
  • not prepared to answer
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  • Mon, 23/02/2009 - 20:51

I don't think we have to do anything. My view is that the local professionals already realise where the weak link is and who is causing the damage to an industry that they have invested their lives in. Think that those with sweat equity in the industry will take any necessary action.


Hampnew

  • bellyup
  • 10/10/08 09/01/10
  • a depositor
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  • Mon, 23/02/2009 - 20:17

What proof do you have the the gentleman you have named 'have tried to act honourably'?


Bellyup

  • Hampnew
  • 22/01/09 31/05/09
  • not prepared to answer
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  • Mon, 23/02/2009 - 20:45

within the parameters of the information that they have been presented with, they have taken the only decisions that are open to them.

The associated problems, for every party in this debacle have been created by those who are providing the information.

Any consultant operating in an area in which they have little or no experience would extend the project for as long as they could as they are getting paid handsomly and are developing a new skill at the same time. To such an extent that Mr Spellman and Alix will both be marketing themselves as experts in the field in future, they are in fact merely accountants looking at broadening their cv's.

My very first question when joining this site was why arent the Government employing experts in this field to deal with the complex issue. Having done my homework I firmly believe that an expert organisation, would not be made up purely of accountants, and would without doubt recognise the opportunities and threats associated and would have recommended 100% payout immediately.

Do you think the UK Government employ a bank of pure accountants to advise them, I dont think so. This issue requires a mix of skills which I have never believed that these advisors have.


merlina - SoA Clarif

  • Ally
  • 13/10/08 31/05/09
  • unspecified
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  • Mon, 23/02/2009 - 17:11

merlina

It is not banter on my part, that is a 40% write off for me which is several 10's of thousand and for others much more, so no banter on my behalf. The reason I use the word if is I know if I didn't the reply would be a lot longer and explain how no % recovery could be guaranteed because there are so many uncertainties etc etc.

One comfort I take from the fact that IoMG do not take back any funds until depositors receive a minimum of 60% (100% for sub £50k's) is that if there are prepared to wait until a 60% recovery then they must be pretty confident that recoveries will be over 60%. If it was me doing a deal where I did not take back my loans until recoveries were 60% I'd make sure I was pretty damn happy recoveries were going to be comfortably more than 60%


Ally, Also read your bit to

  • skintagainnow
  • 10/10/08 31/05/09
  • a depositor
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  • Mon, 23/02/2009 - 13:49

Ally,

Also read your bit to klause on the other topic - part of the loan is not refundable via assets.

You've just done a great job for the IoMG in the face of mounting opposition, far better than any of their high priced accountants, legal specialists and PR - You should demand to be on the payroll. My guess is several on here would back you.


@skintagain

  • Ally
  • 13/10/08 31/05/09
  • unspecified
  • Offline
  • Mon, 23/02/2009 - 14:16

Skintagain

Thank you. I haven't done it for IoMG though I have done it for myself and to help others. As you say with all the accountants and other assorted hangovers they have working for them someone should have been able to knock up some very easy examples by now. They have really been poor in terms of information flow.

With regard to being on the payroll some think I already am!!! However sadly I am not. But I might just put an invoice in to Allan Bell with copies of my postings to see if he'll pay me. Now if I invoice about £50k and with a 60% recovery from assets that should see be back to just about 100% :-)


Go for it Ally :-) There's

  • skintagainnow
  • 10/10/08 31/05/09
  • a depositor
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  • Mon, 23/02/2009 - 14:29

Go for it Ally :-)

There's always the flip side, keep a few area's deliberately muddy draw attention away from some other parts they don't want under scrutiny & questioning -

Oh! I'm really becoming EVEN MORE cynical these days, never used those tactics myself of course.


Reply to Ally - SoA clarifications

  • Gordon 45
  • 22/10/08 n/a (free)
  • a depositor
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  • Mon, 23/02/2009 - 13:29

Hi Ally,

Thanks,

All good stuff, as you can see by the comments, but people still do not have a clear picture. Based on a reply by Hopeful and the >£500k Bondholders I have currently updated for a second time my thoughts on Mike Simpson's Balance Statement of 8.10.2008 - show how I see, it taking into account my guestimates of what might be returned to the Prov Liquidator. I have also finished my letter to accompany this. And I am trying to struggle through a second table showing straight comparisons between DCS/Liquidation and the SoA - not easy. I hope to put this onto the site at some point to-day to everyone in an effort to try and get everyone behind the one way forward. So we can hopefully get what we need sent to the Deputy Deemster, Tony Brown, Allan Bell. John Wright, Diver. Paul Morris, Alan Morgan -Moodie the 5 guys who sent affidavits on behalf of the life companies, Attorney General etc,. by mid March so we know what we need to know by 9.4.2009.

Your stuff is always good, keep going,

Gordon 45


Thx Ally - it helps, But -

  • skintagainnow
  • 10/10/08 31/05/09
  • a depositor
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  • Mon, 23/02/2009 - 13:11

Thx Ally - it helps,

But - in,

2) IoMG just takes back what it lent and if 70% of assets are recovered then depositors receive 70%

JS: Absolutely correct.

It still recoups the loan amount from the KSF assets - thus there's still a shortfall for depositors - I'm quite used to plundering budgets, bringing budgets forward, pro forma invoicing, delay invoicing etc,. anything to balance a budget shortfall in the medium term - but a shortfall is still a shortfall somewhere unless additional external funding is found.

In this scenario the input from the banks is the only possible external funding source - if they pay up this should net £8>10m / annum capped at £200m, if IoMG loan amounts to £100m - that's still 10 + years before the external funding catches up with the depositors.

The only way I see this loan working at no cost to >£50K depositors is if the IoMG loan is not recouped until 100% deposits are returned and the IoMG receives an income from the banks of the £8>10m / annum, ie - the way they originally proposed DCS.

They can't expect depositors to pay the compensation scheme out of the banks assets.


At Last someone nows see the problem

  • Mike
  • 10/10/08 31/05/09
  • a depositor
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  • Mon, 23/02/2009 - 15:17

Skintagainnow At last someone sees my point. I am relieved that some else understands the problem. I thought it was only me that had the wrong batteries in my calculator.


Fair

  • Tricky Dicky
  • 24/10/08 30/05/09
  • a depositor
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  • Mon, 23/02/2009 - 11:50

Hi Ally,
Really do appreciate the position you are in. However one of the major aspects is that for members to make some sort of 'refined' decision on which route to take, there is a real need for some sort of comaprison on the 2 schemes. I know Alix are supposedly producing this, but at present it seems all the clarity is only for the SoA. According to the reports from the Court Hearing of last Thursday, even the DCS is unclear and needs clarification from the Deputy Deemster.
So would it not be fair to have clarications for both schemes, and not just the SoA, which IOMG seem to be pushing so hard for, especially in light of all the IOMG PR that the DCS has "served us well for many years"
Perhaps Mr Spellman would like to produce a web site that allows that comparison to happen? - when you next conatct him


Ally

  • giveus backourfunds
  • 13/10/08 31/05/09
  • unspecified
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  • Mon, 23/02/2009 - 12:51

Hi Ally, very good information for a change on this site.

SOA has to be the way ahead for the majority and they are in the under £50K grouo and would surely be voting for this, why would we want to wait under the DCS.

This by the was has nohting in it and if this is needed it would take 17 years for anyone to get back even £50K.


Ally

  • Tricky Dicky
  • 24/10/08 30/05/09
  • a depositor
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  • Mon, 23/02/2009 - 13:01

I agree that Ally is providing good information re a SoA, it would also be good if IOMG were taking as much time and diligence on clarfying their DCS. and providing this for us all to compare the two schemes.
It is my feeling, although the major reason for IOMG implementing a SOA was faster returns, that in actual timescales there is very little difference in time for payments between the two, in the case of <£50K depositors. If the SoA had been operational in Nov 08, then it might have the case.

Can you show the details where you think it will take 17 years for <£50K depositors to have their refund the DCS can be found here: http://www.gov.im/lib/docs/fsc/PressReleases/compensationofdepositorsreg...


@ Tricky - Fair comparison

  • Ally
  • 13/10/08 31/05/09
  • unspecified
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  • Mon, 23/02/2009 - 12:41

Tricky

I agree. The SoA has not overwhelmed me by any stretch of the imagination, but neither I am convinced of the merits of liquidation. At the moment the only thing that can be clarified is the SoA as there has been some attempt to map that out.

The trouble with the DCS is I don't think anyone really knows how it will work and how quickly it will be funded and that is why currently it is difficult to do comparisons. If someone could outline this then calculations could also be done for that.

In the 3rd affidavit of David Lovett he did do comparisons between SoA and DCS. We can always make suggestions to IoMG and see if they will put DCS comparisons on to a website. However whether they do or not is out of my hands as I can only make suggestions.


Fair Comparison

  • Tricky Dicky
  • 24/10/08 30/05/09
  • a depositor
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  • Mon, 23/02/2009 - 12:51

Thanks Ally,
Its good to know that the DCS, - I'm sorry to keep banging this phrase in - which "has served the IOM very well for years" appears to be as clear as mud.
So they are spending all this time and tax payers money on revising and clarifying a SoA, but if this fails then we all revert back to a DCS, which may also be delayed because the Authorities have never really used it and will require, potentially, time to revise and have legal clarifications made - similar to what is happening now to the SoA.
Perhaps you could email Mr Spellman and suggest he spends as much time on the DCS as he is spending on clarifying the SoA

It might have been cheaper and a lot quicker at the end of the day for IOMG to bite the bullett last Oct/Nov and agreed to pay us all back 100% there and then.

Do you have any idea as to how much it has cost the IOMG to date?


re: Fair comparison

  • Ally
  • 13/10/08 31/05/09
  • unspecified
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  • Mon, 23/02/2009 - 13:08

Tricky

I have no idea how much has been spent to date. I don't suppose we will ever see the final figure.

With regards to the DCS, yes I agree, as clear as mud. I believe this is something people should bear in mind, because as you point out if we do end up in liquidation and the DCS is enacted I could see a bit of time being spent trying to clarify exactly how it is to work and how quickly it is to be funded. As for serving them well, well it has never been used, so a bit of a misleading statement, as we all know by now.


calculations

  • bobwin
  • 23/12/08 n/a (free)
  • a depositor
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  • Mon, 23/02/2009 - 11:40

Where is the treasury web enabled version so we can do the sums?

Why on earth would the IOMG donate a loan of 150million to the SOA and not the DCS?

I am leaning like the tower of Pisa to liquidation and DCS but I fear the IOMG will do everything in their power to prevent DCS or delay to the point where it reverts to 75% of 20,000 GBP(9 oct 09).


bobwin DCS £150M

  • mikeinfrance
  • 12/10/08 28/09/09
  • a depositor
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  • Mon, 23/02/2009 - 16:14

bobwin..

extract from the DCS document (see: http://www.gov.im/lib/docs/fsc/PressReleases/compensationofdepositorsreg...):

[Treasury funding
12A. (1) Where a default has occurred the Treasury shall pay to the Scheme Manager such
sum as appears to it to represent the total of the amount by which the compensation payable in
respect of each depositor exceeds £20,000.
(2) The total sum provided under paragraph (1) in respect of all defaults shall not
exceed £150,000,000.]6

The £150M referred to in 2) is to fund the increase in the DCS compensation from 75% of £20K to £50K and has been known about since October and written into the DCS as from 23 Oct.


bobwin, If you read Allys

  • expatfrance1
  • 15/10/08 31/05/09
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  • Mon, 23/02/2009 - 13:11

bobwin,

If you read Allys post he states that there will be a web enabled version, not there is a web enabled version.

As for the £150 million. The IOM government have stated, and it has been repeated many times on this site, that this is the contribution they will make to the DCS. However this must also cover any other bank failures between now and October.

Any money they contribute to the SoA, whatever that may be, will be contributed whatever happens to any other institution on the Isle Of Man.


DCS reverts to 75% of 20k compensation: Oct 2009

  • Anonymous
  • Offline
  • Mon, 23/02/2009 - 12:04

If the SoA v DCS saga is not resolved by October, and the IOM-G reverts to the old DCS for KSFIOM depositors, we shall amass out 10,000 troops, declare war on the island, and sent in our gunboats.


Clarification of IOMG Intention on above 60% return

  • podather
  • 10/10/08 31/05/09
  • a depositor
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  • Mon, 23/02/2009 - 12:29

I believe the IOMG has to clarify how it intends to recover funds once depositors reach 60% return.

I believe it Intends to take every penny recovered over and above this figure until the entire £150 million is repaid, and only then will additional recovered assets be distributed to depositors with funds still outstanding.

But it should conisder that once 60% of depositors funds are recovered it becomes a pari passu creditor to the tune of £150 million.
So it takes the same percentage share of assets received as all other outstanding creditors. This way all depositors will still receive payments of all future recovered assets above 60% but share these payments equally with the IOMG. This way there contribution to the SOA becomes a recoverable loan providing sufficient funds are recovered but they dont recover all their money if we dont.
If there is then 100% recovery they get all there money back.

Sounds fairer to me than what I believe they currently intend to do and is a compromise between them waiting for 100% return to depositors before getting any return on their contribution (which I believe they should)


Problem with IoMG's intention of return of > 60%. Poss soln?

  • follow_the_tao
  • 11/10/08 31/05/09
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  • Mon, 23/02/2009 - 20:08

I agree with the way the debate here is going.

It's actually a tricky problem. And it's going to confuse a lot of people. So if we're going to find an equitable solution we are going to have to think hard, and so are IoMG.
And to stop us going round in circles we are going to have to be clear, clear in our own minds, express ourselves calmly and restrict ourselves to this aspect of the overall problem, express ourselves in the most simple terms the problem allows. And work with clear examples.

What makes it so tricky?
We are trying to find a solution to a situation that is unknown.
We do not know what the recovery rate will be. If we start sharing the money before the recovery rate is known how can we possibly know is what proportions to share it?
We can’t.

Secondly the IoMG, through Spellman today, are only now clarifying points that allow us now to direct our focus at this issue.

Thirdly it is complex.

Is it possible to find a mathematical solution to such a situation? Any mathematicians reading this might like to comment. What characteristics might a solution have in this situation?

Well working to any formula to produce an equitable result requires that we ascribe to a variable a value we don’t have won’t work. The computer will crash.
If we guess at the value of the variable the answer is in this case going to an approximation to the real outcome (99.9% probability). It is either going to favour one or other party.

There are various solutions that would serve to reduce the potential error if we have to guess. We can discuss these afterwards.

But there is another problem. A serious problem if we’re seriously looking for a solution. Let’s use an example to illustrate it. Suppose the recovery rate is 60%.
We haven’t lost anything on the recovery, but the government doesn’t get it’s loan back.
Now what are we going to do in this case. What is the real statistical probability of this outcome? What is the significance?

As we are now in a situation where we can see the problem coming, and we haven’t yet committed ourselves to the path, so we are actually in the position of being able to avoid embarking on a path where we know there is an irresolvable problem ahead

I suggest there is no mathematical solution to this situation unless you are able to go back and modify previous results, i.e. an iterative approach to the whole situation is used.

I suggest strongly that there is no mathematical solution to find an equitable situation.
The problem isn’t mathematical it’s political.

Therefore as a party involved I require a political dialogue with the other party to resolve this situation.

This is a logical argument. I believe it would hold in a court of law. What do others think.


Clarification of IOMG Intention on above 60% return

  • Mike
  • 10/10/08 31/05/09
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  • Mon, 23/02/2009 - 15:25

The figure of 60% seems based on the point where the IOMG has paid up those entitled to compensation. That is when IOMG obligation seems to end and they recall back there loan. What stops then the IOMG having a fire sale on the remaining loan book to recoup their loan and then wash their hands of the whole affair? Good PR 71% were paid in full, but no mention of the poor sods that got shafted.


I tend to agree

  • RWT
  • 10/10/08 01/12/09
  • a depositor
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  • Mon, 23/02/2009 - 19:00

I'm no accountant or expert with figures and although I have tried to understand Ally's explanations some things in my view don't add up. It seems to me (maybe someone can correct me if I'm wrong) that the IOMG are using percentages to confuse issues. I'll try and explain:

Say we are at the point where 60% has been recovered and paid out. Now say another 100m is recovered. The IOMG is now another creditor so will get an equal percentage of that 100m as all the other creditors. So everyone, including the IOMG, will be on the same percentage payout (for arguments sake let's say that's 70%). However if the IOMG was not a creditor, that extra 100m would be shared by fewer creditors and therefore each creditor would receive more. Of course John Spellman can say that the IOMG will only get the same percentage as the other creditors but it hides the reality that the other creditors get less money overall!

Have I got something wrong here? If not then it seems to me that the larger depositors are in a way subsidising the smaller depositors (it's not their fault of course). The IOMG should not receive anything until all depositors have 100% return.


SOA loan impact on asset recoveries

  • Anonymous
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  • Mon, 23/02/2009 - 20:00

I don't know if this will help but, as I see it, one has to look at what is being stated as how it impacts the depositors as a whole and not the individual.

Let us assume when combined payouts to all depositors have reached 60% it is made up of 55% asset liquidation and 5% government top up (loan). At this point, if an additional 10% is realized through more asset recovery, the government will take 5% to offset its loan and depositors will receive the other 5%. Therefore, depositors in total will have received payouts of 65% (60% + 5%) which is identical to the total assets recovered (55% + 10%).

However, one must remember that this does not mean that each depositor will have received 65% of their account(s) because as we know the under £50,000 group will have received 100% payout as guaranteed under DCS. Even though I am an above £50,000, I support that guarantee so don't want to make this posting into a them versus us. True, I would like to see 100% back for all but that appears to be a dwindling dream.

I would suggest that we all make every attempt to see that the next version of the SOA includes in writing - (a) the rights which the governments have claimed in the news media to be identical to those in the DCS and (b) conversion of any foreign exchange at a rate in effect at the time the SOA kicks in. Nothing is to be gained by simply condemning one scheme or the other without putting forth well thought out information as to why one believes what they do.

Hope the above helps to clarify and not counter the points Ally has laid out so well.


re: SOA loan impact on asset recoveries

  • Ally
  • 13/10/08 31/05/09
  • unspecified
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  • Mon, 23/02/2009 - 20:11

undone

Yes I would agree with how you read it. As you say when depositors reach 60% this could be through a combination of asset recovery and IoMG advances so in fact asset recoveries could at that point be less than 60%.

Just to clarify your second point those who are below £50k would receive 100% because the IoMG topped up their funds with a non refundable advance not because they are taking funds from over £50k depositors.


Why 60%?

  • kiwi38
  • 11/10/08 31/05/09
  • unspecified
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  • Mon, 23/02/2009 - 15:33

Look at us spending hours discussing what the IOMG should do once our recoveries hit 60% - we have done exactly what IOMG wanted and got distracted by this 60% number they pulled out of thin air.

If the IOMG are putting up £150M then let them put it up - full stop. They can have it back once all depositors have received 100%. That is the only way I think any of us should even consider voting for a SOA.


60% not enough

  • IanAbroad
  • 11/10/08 13/08/09
  • a depositor
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  • Mon, 23/02/2009 - 21:04

Spot on Kiwi
It looks like the IoM Gov have got us all ready to except the SoA once the details are ironed out, and using up valuable time summising what's on offer when not enough details have been provided.

But we need to keep going for 100% recovery ! Anything less is a travesty.
This is valuable lobbying time that can be used on the people who may be able to alter things here.
The IoM must not feel like the SoA is a done deal, though it certainly seems that way.
My savings with KSF were roughly in line with Allys, and I'm not going to kiss goodbye to £50k because the IoM won't do the correct thing and return 100% of the deposits.
And if the worst comes to the worst and I am out of pocket, I'll be spending the next 40 years of my life ensuring that no blog, website, forum or press article relating to the IoM Financial Industry goes without reference to this fiasco. And I know I'm not alone in this thinking.
On top of that, the wealthy losers will get matters to court and it will be headline news.
It's got to be cheaper for them to cough up the full deposit base now than let this thing drag them down, surely?


@kiwi38: Absolutely agree.

  • follow_the_tao
  • 11/10/08 31/05/09
  • a depositor
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  • Mon, 23/02/2009 - 21:01

All this just to avoid the DCS. I ask myself why?