Is suing the FSC an option worth considering??

  • IoM-neveragain
  • 12/10/08 30/03/10
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Posted: Thu, 04/12/2008 - 08:02

Copy of 2 letters from the Guernsey Paper relating to a court case many years ago when a depositor won.

see -http://www.thisisguernsey.co.uk/discus/messages/11779/17880.html?1228227001

Henry Lancaster Posted on Monday, December 01, 2008:

COMPARISONS between the financial collapse of Barnett Christie and the recent Landsbanki failure have appeared in the Guernsey Press. Some details have not been covered.
In 1976, Guernsey authorities became concerned about the functioning of Barnett Christie Finance Ltd and refused renewal of their licence as a deposit taker.
Guernsey States, through the then Advisory and Finance Committee, took no further visible steps to ensure the public were aware that Barnett Christie could no longer legally hold or take deposits. Barnett Christie continued to trade.
In 1978, Barnett Christie went bust. There followed a great deal of anguish by depositors, similar to present times.
Litigation followed against the States of Guernsey.
The States lost at the crucial court hearing and was deemed responsible through lack of diligence.
The States was forced to compensate depositors with taxpayers' money. For money value at that time, it was a large sum. No heads rolled, not publicly anyway.
Following those events, the Guernsey Financial Services Commission was born. Lessons had been learnt, so it was claimed. Proper bank regulation would be put in place. Expert people would ensure the same could never happen again.
Fast-forward to 2008 and we have the GFSC with a large staff claiming their actions have been proper. No doubt some able people are hiding in there, but senior figures would have been in short trousers back in 1978, or only just out of them.
With the current Landsbanki situation, it seems the GFSC had concerns quite some time before the collapse happened. This is as expected.
For many months, the perilous state of the Icelandic economy and of Icelandic banks had been covered extensively by financial press and on the internet.
Apparently, States departments were warned off from having money in Icelandic banks. If the GFSC thought States departments needed to be warned, then why should they assume private depositors needed no such warning? Could it be that promotion got mixed with regulation?
Confusion between regulation and promotion was a matter raised in the Edwards report. Out of that was born GuernseyFinance and costs of being a tax haven moved up a bit. With all the scurrying to and 0from China, the confusion still seems to persist.
The circumstances of Landsbanki and Barnett Christie are not exactly the same, but they are similar. In both cases the controlling authority had prior knowledge of extreme vulnerability, but did not take all reasonable steps to warn the public.
It would seem that the precedent of the Barnett Christie court case means that Guernsey taxpayers may have to pay up in the end.
HENRY LANCASTER

I am replying to your request asking the commission to comment on a letter which draws comparisons between the collapse of Barnett Christie and the recent placing of Landsbanki Guernsey into administration.
The letter suggests that the two cases are similar. They are not. The sequence of events in the Barnett Christie case is set out in part three of the 1998 Edwards Review of Financial Regulation in the Crown Dependencies. In 1976 the States of Guernsey Advisory and Finance Committee resolved not to renew the registration of Barnett Christie (Finance) Ltd, a deposit taker registered under the then protection of depositors legislation. After taking legal advice, a decision was taken by A&F that there was no legal obligation to publish the fact that the registration had been withdrawn.
Barnett Christie should not thereafter have taken further deposits. However, between 1 January 1977 and December 1978, Barnett Christie continued to take deposits. It did so in breach of the criminal law, but in circumstances where the public were not aware that the law was being breached. It went into insolvent liquidation in December 1978. However, if publication of the decision not to renew the registration had taken place in January 1977, Barnett Christie would almost certainly have gone into liquidation at that time.
In April 1994, a depositor successfully sued the States for its failure to publish, in January 1977, a list of the then registered deposit takers, which would necessarily have excluded Barnett Christie.
The contrast with Landsbanki Guernsey is marked. In the Landsbanki Guernsey case, it became clear only on the evening of 6 October that the bank could not carry on and the board decided - and the commission agreed with that decision - that an immediate application should be made to the Royal Court to place the bank into administration. There has been no suggestion of criminality in this case. Therefore, Barnett Christie does not have any relevant similarities to the Landsbanki Guernsey case.
Having said that, I can assure you that the commission is very aware of the despair and frustration being suffered by depositors whose money was placed with Landsbanki Guernsey. The commission is working very hard with the joint administrators and the Guernsey authorities to recover as much as possible for depositors as soon as possible.
I would also like to deal with some of the other misconceptions in the letter. It is suggested that States departments were warned off by the commission from having money in Icelandic banks. That is not true.
In addition, it is suggested that the commission in some way confused its regulatory role with a promotional role. The commission does not have any promotional role at all - that role is played by GuernseyFinance, which is an entirely separate body responsible to the Commerce and Employment Department. The commission is completely independent of the political authorities and industry.
The suggestion is also made that the commission had prior knowledge of the 'extreme vulnerability' of Landsbanki Guernsey and yet did not act properly. On the contrary, the commission took the correct actions at each stage of the developing crisis on the basis of knowledge at the time and what was reasonably foreseeable in what has clearly been an unprecedented period of turmoil in financial markets.
It is important that neither incorrect assumptions nor the benefit of hindsight are used as a basis for judging the commission's responses.
Peter Neville,
Director general,
GFSC

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Suing the FSC

  • IoM-neveragain
  • 12/10/08 30/03/10
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  • Sat, 06/12/2008 - 11:56

The questioned first proposed was Is suing the FSC an option worth considering?

As this thread has developed it seems clear to me that it is worthy of further investigation.

Before a conclusion is reached on this matter I suggest that details of what role the FSC did, or did not play, in the transfer of the £550M as an unsecured loan.
Taking into account dsm's very helpful comments then it would seem that the FSC were at best negligent. It they were instrumental in the transfer, which has been suggested elsewhere, then the FSC beggars belief.
However the incestuous relationship with an FSC member also on the board of ksf iom must also question the FSC's probity.

The FSC’s prime regulatory objective identified on their web site is:
securing an appropriate degree of protection for the customers of persons carrying on a regulated activity
By any assessement they have failed in this.
The IoM keep trotting out the old mantra that it’s not our fault it’s those nasty lot in the UK. Fine the UK may have precipitated it however it is the FSC whose duty it is to - secure an appropriate degree of protection - something they have clearly failed in.

The FSC is an independent statutory body but they are still accountable to the IoM government. They must have professional liability insurance and considering the size of the business they are supposed to be regulating then the insurance must be of considerable size.
There is also the upcoming review by the UK of the industry in the IoM, and the CDs; it was out of the last one, the so called Edwards report that also followed a bank collapse in the IoM that the FSC was born. The lesson it would seem has not been learnt.

Back to the point – it would seem that the option of suing them is worth considering and I am asking that a first opinion be obtained from the legal eagles as to the prospects for success and what would be involved, fee wise, in further investigations.


To sue or not.

  • dclf1947
  • 10/10/08 31/08/09
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  • Sat, 06/12/2008 - 13:00

I tend to agree the ultimate responsibility for depositing the 557M seems to be the FSC. By not having it ring fenced it is classed as unsecured (this has been stated publicly) and it goes into the pot with other money to be divided at some stage by E&Y. E&Y have no blame on this matter as they are doing their job, they now can't release it that is for sure. If HMG used their authority to release the deposit it would set a precedent and other depositors would expect theirs to be released as well. It also seems a little late for HMG to suddenly come up with a statement like "we know it was there for safe keeping so they can have it back" as it has been over 8 weeks now. I would have thought that if the FSC could prove that HMG recommended this deposit to them there really would not be a problem.
Even to get the initial percentage handout from E&Y from the 557M will take months as they have been instructed to concentrate on the transfer of assets to Landbanski(??) first.
All other countries appear to have settled with Iceland to return 100% depositors monies by helping them with loans and probably assisting them with the IMF. This leads to the question why has this not been done in the case of the IOM. First it is very small (pop. about 77,000) and could not afford a loan of that magnitude and secondly it seems that Iceland seems to have washed their hands of the IOM and possibly the UK is just paying lip service to being the spokesman for the IOM/Iceland negotiations (if there is really any at this time). This again maybe because of the FSC actions.
I am also concerned that Mr. bell (who in all fairness seems straight) has staed that he does not think we will get the full 557M back and also has called in experts to investigate the KSF IOM to see if it possible to get back assets that would pay out better than the IOM compensation scheme. These comments mean that the IOM treasury does not believe that 100% will be paid out.
It seems that the FSC is being protected by the treasury / IOM government and even PWC.
If it was decided to sue, would that have to be in an International court or initially in the IOM?
My believe is that unless there is political involvement like a loan to the IOM and Iceland from HMG we will certainly not get 100% of our money back as it stands. If it can be proved there is negligence on the part of the FSC perhaps we may.
Another problem is that the weeks are passing and not much is happening. As time goes by the media are going to lose interest because it is old news, this maybe another reason for the stand-off until 29 January.


To sue or not

  • homeless
  • 18/10/08 01/01/16
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  • Sun, 07/12/2008 - 11:51

I agree with a lot of which you have written but I question the professionalism of both the FSC and Mr Bell.

Apparently the FSC in its 2007/8 annual report identified exactly the type of problem currently being experienced by KSF IOM. In describing things at that time they said ... "this is the principle reason why the Commission operates a policy of only licensing banks which are financially very sound and able to provide full support to their local operations at all times." It then goes on to say ... "However, in light of the turbulence in financial markets during the period, the Commission has been considering carefully its policy towards cross-border dependencies which banks may have on their parent groups." Liquidity and where funds are held was discussed and whether an element of "ring fencing" should be introduced for subsidiaries !

The Commission recognised that there was the possibility of a, "bank finding itself moving from a normal, going-concern environment into something approaching a crisis, extended liability positions can suddenly crystallise as immediate obligations. How adequately to plan for such a transformation is provoking much thought in wider circles".

Why then was nothing done ?

On the 18 October Dave Bradden met Mr Bell and the latter stated that he had been advised that 550 - 600m GBP of the banks assets were currently held in London and that no money had been lost at that time. He confirmed that the IOM government had very quickly requested assistance from the UK government to represent them in dealing with the Icelandic government, but that the delay in response from the UK government was due to protocols in communications between IOM and Whitehall.

He said that there were extensive ongoing discussions at many levels between IOM and UK Governments and the Icelandic Government and that he was making strong representations through the appropriate channels to effect a speedy solution.

On the 11 November, in IOM Today, it stated that Alan Bell, in reply to questions from Mr Cannan, insisted that the FSC did not issue a formal direction for KSF IOM to transfer 500m from the parent Kaupthing bank in Iceland to the London subsidiary but that from the end of March to mid April discussions took place between the FSC and the bank on reducing its net exposure to Iceland and on May 7 a letter was issued to the bank requiring that exposure to Iceland should be removed. Mr Bell added that during May and into June the exposure was eliminated and replaced with an exposure to KSF in the UK, except for a residual claim on Iceland which was allowed to remain on the understanding that it was offset by an equivalent amount of borrowing.

Since this time, when questioned about his duty to protect depositors money, he has claimed that they thought the deposits had been protected (that was the intention) and he thought they were ringfenced (but we now know that they were not).

We are also acutely aware that other countries, including the UK, have used the leverage of EU/IMF loans to settle with Iceland but IOM has been left out in the cold. Who is fighting for us, how strong were the Treasury Minister's representations to the UK and Iceland how persuasive has he been ? We have heard nothing positive.

It is time we had straight talk, names, dates who said what, when and to whom, who did what and when clear, honest, speaking not waffle.

It is galling to read today that Geir Haarde thinks that Iceland will be back on its feet in 2010, will we be back on our feet in 2010 ?

Both Iceland and the IOM say they lay the blame fully at the feet of the UK government, it is time they explained this around the world. In citing "exceptional circumstances", the Chancellor, Alistair Darling, said, "we will stand behind savers", we are savers and it is high time the IOM, Iceland and the UK stood behind us.


the elephant in the room is game theory

  • coldlightofday
  • 20/10/08 31/08/09
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  • Sun, 07/12/2008 - 16:05

not silly devils!

but the idea behind the way G. Brown sold 3G at best price (which was far more than was sensible for the purchasers)

It was briefly alluded to by a "senior banker in Switzerland, ex Barclays" as a reason for bank inaction when interviewed by C4 News early this autumn.

Much seems to be made of the point that " it was obvious that investing in an Icelandic bank was not a good idea",
" it was obvious in 2007 / early 2008 that Iceland would have problems" and numerous similar observations by newspapers, politicians ( and even my friends!)

BUT
is there a regulator on the planet with an effective course of action to cope with these circumstances.. even now?

in the absence global regulatory effectiveness how do we succeed in describing the regulators on a windswept rock in the Irish Sea as incompetent?


Because this bank and the

  • frog
  • 10/10/08 13/09/09
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  • Sun, 07/12/2008 - 16:53

Because this bank and the Jersey/Gernsey ones are the only ones that have failed?? If a government stands behind its regulator, then it should do what the European countries have done.


Ahem ... no Jersey Banks have

  • go mann
  • 10/10/08 31/05/09
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  • Sun, 07/12/2008 - 17:09

Ahem ... no Jersey Banks have failed. The Govt has very strict criteria over operations here, and there are thus only 47 [ many of which are subsidiaries, i.e. 4 Standard Chartered, 4 HSBC, 3 Barclays]. They're a mix of "International", "Private Wealth", Investment Management and that sort of thing.

Actually, for the local "ordinary person", there are basically only about 7-10 who would take your business anyway ... which is why I ended up with KSFIOM.


Yet!!!

  • IoM-neveragain
  • 12/10/08 30/03/10
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  • Sun, 07/12/2008 - 17:55

Go mann
I suggest that your opening line could be "No Jersey banks have failed YET"
IoM has had at least a couple of failures
Guernsey too
Gibraltar has had at least one.
Jersey says it only accepts the top 500 banks
Lehman brothers - a rather large bank virtually gone.
There are no guarantees that a bank will not fail.

The real difference is that countries (apart from the IoM) recognise the message that is sent out if bank is allowed to fail.
In 1992, Sweden’s banking system was insolvent, yet Carl Bildt’s government pulled off one of the most successful bail-outs of all time. The prime minister began by guaranteeing all savers.

Sadly the IoM does not recognise this, neither did Gibraltar all those years ago and they were in the wilderness for a decade


IOM neveragain

  • go mann
  • 10/10/08 31/05/09
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  • Sun, 07/12/2008 - 18:03

I did consider the "yet" ... however, to be fair to our lot, there are a lot more criteria than just the "top 500" so often cited. Our FSC did a piece in the paper recently which explained that the 500 was only the starting point before substantially more stringent criteria came into play.

That said, as I discussed with our Chief Minister in an exchange of emails, those banking in JSY include several who have accepted either UK Govt injects or are involved in being absorbed by bigger fish. BOS and Abbey spring immediately to mind, as I have funds with both!!

Next year's review by the UK-appointed Inspector will be interesting.


Fair enough

  • IoM-neveragain
  • 12/10/08 30/03/10
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  • Mon, 08/12/2008 - 08:04

I take your point, but would still have the "yet" in there.
There is much more financial trouble on the way according to most pundits.
Jersey is not immune.
As well as "more stringent criteria" there also seemed to be a little watering down perhaphs when one of the Island's major mortgage providers, Reliance, threatened to pull out as they were not allowed to take deposits, as they were not in the top 500. It was soon reported that just as they were not in the top 500 did mean they were barred.

PS would you have put Lehmans in the top 500?


Lehmans would indeed have

  • go mann
  • 10/10/08 31/05/09
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  • Mon, 08/12/2008 - 13:07

Lehmans would indeed have been in the top 500!! That was one of the points I put to Frank Walker ... JSY's fairly relaxed attitude about locally-based institutions [i.e. they're the best of the best, so nothing can go wrong], instead of having a proper DCS, could leave depositors hung out to dry just as easily as we were with KSFIOM.

As to the future ... a JSY DCS will possibly help, but whether the Island could afford to cover a major melt-down is a major question. It's strange that my biggest current worry is HAVING money, and where to put it! Inflation running at over 6% now means I'm just losing money slowly on a daily basis, regardless of fears about which institution I'm using is going to be the next to fail!


Agreed

  • IoM-neveragain
  • 12/10/08 30/03/10
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  • Mon, 08/12/2008 - 20:59

Put your money in the IoM, then loose it all there- nothing to worry about QED!!

Have a look at the Gsy DCS, looks OK till you see that its limited to £100M and that is over a 5 year period too.
1st bank, well for Gsy it would be 2nd or 3rd, and bang no DCS for another 5 years!!!


on "homeless" posting

  • Anonymous
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  • Sun, 07/12/2008 - 13:56

I have 3 comments on your excellent posting:

(1) I would prefer to replace "professionalism" by the word "competence";
(2) If Alan Bell wrongly thought the bank's deposits were protected and claims that that was the intention, then that clearly suggests that the FSC was negligent in not having asked about or confirmed this;
(3) I would want to see a copy of this letter dated 7 May 2008. SO far, I have not been able to get any information or copy documents from the FSC. Would someone else like to try to get a copy under the IoM Code of Practice?


Homeless, Thank you for this

  • IceCrusher
  • 14/10/08 25/10/11
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  • Sun, 07/12/2008 - 13:45

Homeless,
Thank you for this detailed precis.
Ice


IoM loans

  • Anonymous
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  • Sun, 07/12/2008 - 02:49

Information posted earlier on this site was that the IoM as a Crown Dependency is not empowered to take out loans.

The UK should borrow money to repay us directly. Many of us have paid tax on the interest to the UK gov. Now the UK gov is saying our plight is nothing to do with them. The benefit from taxation should be protection - that's what's happened with banks in the UK.


IoM Loans

  • IoM-neveragain
  • 12/10/08 30/03/10
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  • Sun, 07/12/2008 - 11:54

I had not seen any suggestion that as a Crown dependency the IoM is not empowered to take out loans.
I am as certain as I can be that this is incorrect; there is no reason why the IoM would not be allowed to take out a loan.

Quotes from the Framework Agreement UK with IoM setting out the relationship:

The UK has no democratic accountability in and for the Isle of Man which is governed by its own democratically elected assembly.
and
The UK has a role to play in assisting the development of the Isle of Man’s international identity. The role is one of support not interference.


which jurisdiction?

  • Anonymous
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  • Sat, 06/12/2008 - 13:12

to sue FSC - IoM court.


claim against the FSC

  • Anonymous
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  • Sat, 06/12/2008 - 12:26

I think that will certainly be part of the advice from counsel being obtained by the "legal team" (formerly the "London team" through the London solicitor. Certainly that was what was contemplated at the outset. Presumably an action for breach of statutory duty will be considered, amongst others.

Also, you can be quite sure that the FSC is acutely aware of this possibility, not least because it apparently told (ordered, instructed or whatever) KSF(IOM) to deposit £550m or so into KSF(UK). That is just one issue - there is also the inadequacy of the guarantee, a document apparently required by the FSC. Aside from any consideration of the present position of the parent and its subsidiary, it will readily be apparent from the wording of the guarantee that the parent was always in a position to unilaterally terminate its obligations under the guarantee at any time merely by divesting itself of a part (however small) of its interest in the IOM subsidiary. This alone suggests to me that the guarantee could or should never have been reasonably regarded as adequate protection for depositors. However, as I have stated elsewhere, the depositors were never in a position to verify this for themselves, because the FSC has always regarded the guarantee as being confidential.


Iceland and the parental guarantee

  • homeless
  • 18/10/08 01/01/16
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  • Sun, 07/12/2008 - 10:00

Elgee

When I read through the wording of the guarantee I recalled an article I read sometime last week where it said Iceland was trying to disassociate itself from the IOM. If I remember correctly the article stated this would not be allowed to happen. Having now seen the parental guarantee it is transparently clear that disassociating themselves from the IOM would remove all their obligations to us !

Sorry but I can't find the article now. Did anyone else read it ?


Garden party on the IoM

  • Anonymous
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  • Sun, 07/12/2008 - 11:20

I did not see the article.

As for the parental guarantee, it may perhaps have been discussed at the event in July 2007, referred to below, at which all the main players in this lamentable affair enjoyed a rather jolly garden frolic in July 2007.

http://news.bbc.co.uk/2/hi/europe/isle_of_man/6269170.stm

Sigurdur Einarsson (Exec Chairman of Kaupthing hf) - or Siggy, as we now affectionally refer to him. My Icelandic isn't that good, but readers may wish to experiment with an English translation of his surname

Allan Bell (allegedly the "brains" of the Isle of Man government)

Mark Shimmin (IoM Chief Financial guru, but see above)

John Aspden (of the FSC - the genius behind the transfer of £550m from KSF(IOM) to KSF(UK))

Paul Haddacks (The LG of the IoM - evidently nothing "fishy" about this man)

The article does not reveal whether any other hobbits were spotted.


Garden Party

  • Bill
  • 13/10/08 n/a (free)
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  • Sun, 07/12/2008 - 12:07

Article says that "The bank has an Isle of Man subsidiary based in Douglas."

What did they have in July 2007?


expansion

  • Anonymous
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  • Sun, 07/12/2008 - 13:39

It just means that KSF(IOM) has (since 2005) been a wholly-owned subsidiary of Kaupthing hf and still is


parental guarantee

  • Anonymous
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  • Sun, 07/12/2008 - 02:52

Why was the parental guarantee confidential?
Its existence was publicized, but its wording was secret?


Parental guarantee a fag-packet document

  • sami
  • 10/10/08 31/05/09
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  • Sun, 07/12/2008 - 10:18

I was shocked when I saw the parental guarantee. It reminds me of an agreement that's been rushed at the last moment and has no substance.

I used to write better agreements than that during my professional career, most of which were just to cover a few thousand pounds' worth of business; not nearly £1bn.

The other thing that surprised me was the handwritten name and title at the bottom - very unprofessional indeed. Technically, yes, it is a legal document, but it looks like a novice has written it. As such, I would think a good lawyer could successfully argue it was not thought through.

Perhaps there may be additional documents to support it, such as a balance sheet showing safeguarded funds that could be used in the case of a crisis? Or am I being too trusting there?


re Parental Guarantee - back of a fag packet

  • skintagainnow
  • 10/10/08 31/05/09
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  • Sun, 07/12/2008 - 03:41

Old sayings like -- £800m on the back of a fag packet & honest guv I'm really an honest person not out to rip you off but the thingamebob and do dah are not covered --- spring to mind.

Has the right words - would it stand up in court - (into builder mode) sucks air through teeth -- maybe in a month or two - somewhere between £££ & £££££££££££

Bob the builder or even his US counterpart from the election trail Joe the plummer could have done a better guarantee job than that..


fsc

  • Anonymous
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  • Sat, 06/12/2008 - 00:50

The role of the FSC in KSF IoM is not clear.

Did the FSC intercede in the business of a private bank (presumably on behalf of the depositors); order the bank to stop transferring deposits to its parent bank; and, further, order the bank to transfer the deposits to another subsidiary of the parent bank in another country?
Is the FSC so empowered?
How KSF IoM treats its deposits is under instruction from the parent bank, Kaupthing Iceland. Do you think Kaupthing Iceland would accept the loss of revenue from its IoM subsidiary?
Who was empowered to change the flow of deposits?
Who decided to make the change?
Did the drying up of funds to Kaupthing Iceland affect Kaupthing Iceland's parental guarantee?

Before seeking legal redress we must first seek the target of our action.

When the switch was made, should depositors have been notified, maybe along the lines of "You may wish to know we no longer trust Iceland"? I do not know who the "we" is: the FSC? the directors of KSF IoM?


Transfer of KSFIOM assets to KSFUK: why no ring fencing?

  • iainb
  • 11/10/08 01/02/10
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  • Sat, 06/12/2008 - 08:02

I think this has been raised elswhere but i can't find it..

so I will post my response here

In the early days I was puzzled how anyone would send huge sums to a bank in another country without some sort of ring-fencing or guarantee.

was this normal banking practice?

i put these questions in e-mails to IOM FSC...

Sent: 22 October 2008 07:10
To: Kermode, Andrew (FSC, IOM)

I have read that KSFIOM had placed a very substantial part of its assets with the UK branch of KSF. I have also read that its difficulties are in a large part due to the UK “freezing” these assets

Is it normal for an IOM bank to transfer such large sums of depositors cash to a different country?

It would seem quite a risky thing to do unless cast iron guarantees were in place..and as we know sometimes these “guarantees” are not what they seem
Are there any controls over this? Your views would be appreciated

From: Kermode, Andrew
Sent: 22 October 2008 12:20

The Commission has rules and guidance for large exposures, including those for inter-bank and inter-group. These rules are consistent with other similar jurisdictions and international standards.

Sent: 23 October 2008 06:24
To: Weldon, Michael (FSC, IOM)

On another point….I have read that approx GBP500m was sent from KSFIOM to KSFUK If true, why would that have been done?

Is it normal for banks to send such huge sums to other independent banks in separate countries?

What guarantees would be in place? Did the FSC know about it? Can it be returned? If it were returned could KSFIOM resume trading?

From: Kermode, Andrew
Sent: 23 October 2008

For banking groups it is not unusual for assets to be placed with other credit institutions in the group in accordance with regulations and guidance. KSFIOM is not alone in this. The matter of the return of the funds fro the UK to KSFIOM is for the “liquidator provisionally” to address.

may be of interest..for the record


dsm

  • Anonymous
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  • Sat, 06/12/2008 - 08:23

I am a former banker and banks are required to have counterparty limits for other banks and intergroup thus the question on why KSFIOM was allowed to make such a large single deposit is valid. The regulator has legal lending limits which are normally set at a percentage of the Bank's capital I have not seen KSFIOM's financial statements but if £500MM was in excess of 10% of the Capital which I suspect it was then this would have breached the standard Regulatory guidelines.
It is worth asking the question.

The query I have is that we are supposed to be covered by the FCSC guarantee so when are we going to be allowed to make a claim what is the point of deferring the liquidation if there are no serious buyers and the Manx authorities are not pressuring the UK government for return of the funds?

I have seen a lot of heartbreaking stories of UK citizens resident overseas who lost a great deal or everything because of the need to deposit offshore. All of those people should make sure that the Manx government is clear that they will be the brunt of extremely bad publicity in the countries where you now reside and that very few people will trust the Isle of Man again unless they start protecting the interests of depositors in their jurisdiction. Those of us who are UK taxpayers and residents who invested our pensions money should put pressure on our SIPP providers to in turn as a group make clear to offshore jurisdictions that they will not recommend them again to their clients. Those who are British taxpayers also need to keep the pressure on their MPs.


I think FSC Duped Kaupthing (IoM) Into Making The Transfer.

  • colinalvin63
  • 28/10/08 n/a (free)
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  • Sat, 06/12/2008 - 01:27

From watching the videos of various consultations this afternoon, I gained the distinct impression that the FSC advised Kaupthing (IoM) to put a large sum of money in Kaupthing (UK) where it might be more secure than if it were transferred to the parent Kaupthing in Iceland. No sooner had this happened, than the UK Government Treasury froze Kaupthing's (UK's) assets along with the transferred £557 million.

After the fact the FSC stated that there were no guarantees given to Kaupthing (IoM) that transferring to Kaupthing (UK) would be without problems, or would be safe.

It appears that the FSC duped Kaupthing (IoM) into making the transfer under the false pretences that it would offer the most secure destination for most of it's assets should Kaupthing (Iceland) go bust. If anyone thinks I've got the wrong impression here, please offer an alternative explanation for what happened.

I'm starting to get the distinct impression that the FSC and UK Government were in on this together and conspiring to bring Kaupthing (IoM) down in order to set a political example and to discredit the IoM as a safe haven.


colinvale63 - FSC or FSA?

  • steveejeb
  • 10/10/08 31/05/09
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  • Sat, 06/12/2008 - 02:13

I kind of understand what you are suggesting but do you mean it was the FSA(UK) that was doing the duping rather than the FSC(IoM)? I don't see why FSC(IoM) was in collusion to bring down KSF(IoM) and discredit the IoM? If you mean the FSA(UK) then yes fine that is a possibility but even then I don't think the UK would have been thinking that far ahead in terms of wanting to damage the IoM.

It would be more likely to have been a retrospective after thought i.e. oops we have knackered KSFIoM and Landsbanki Guernsey! What do we do now? I know let's say that Crown dependency banking is nothing to do with us and a matter for themselves to manage. While we are at it, let's now have a review of offshore banking to distract from the issues. Hmm and while we have created this mess it could be a great opportunity to reel in the IoM and Channel Islands. Effectively trying to both wash their hands of their errors and liabilities to ourselves and then trying to take some trumped up moral high ground about offshore banking, something to which they have been happy to have enjoyed the benefits of for nearly 12 years while in power.

Just as an aside it's interesting to note that on the one hand the UK were happy to have signed agreements with the IoM only on 29th September this year but are now jumping up and down saying that reviews need to be made?! As Richard Littlejohn would say "you couldn't make it up could you?"


Think I've Confused FSC With FSA !

  • colinalvin63
  • 28/10/08 n/a (free)
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  • Sat, 06/12/2008 - 13:29

Hi Steveejeb,

Yes, you are correct, I've got my TLA's muddled (Three Letter Abbreviations).

It does get pretty confusing with the many parties that are involved in all this.

I can't seem to edit my post now to correct it, when I display it , it doesn't say Edit at the bottom.


Sue FSC?

  • IceCrusher
  • 14/10/08 25/10/11
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  • Thu, 04/12/2008 - 10:49

I suppose it's a statutory body, and if it couldn't afford the huge claims, it would have to turn to the UK responsible for sovereign debt to pay them off. That would be poetic justice ;-)


Regulator bad publicity

  • Alastair
  • 10/10/08 30/09/09
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  • Fri, 05/12/2008 - 11:31

I would guess that if this isn't resolved satisfactorily then this is one course of action and the IOM Gov't knows what the impact of a finding against their finacial regulator would be even one that was unable to pay the claim.

This is why the IOM Gov't should be well aligned with us.


FSC

  • Anonymous
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  • Fri, 05/12/2008 - 13:03

There has since the outset been little doubt that the IoM regulator is a candidate for legal action in respect of KSF(IOM)'s collapse.


Elgee I agree ... I don't care if we send IOM broke

  • MichaelB
  • 16/10/08 31/05/09
  • unspecified
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  • Fri, 05/12/2008 - 13:19

By way of the lack of due diligence by the FSC in the management of the PG in itself is a scandal and worthy of legal action.

This PG was the cornerstone of the building of confidence to allow depositors to initially bank with KSF IOM.

As flags were steadily raised about Iceland's banking the FSC should have stepped in waving the PG about asking if this agreement still held up.

If it was in any doubt that it might fail it was obliged to inform depositors of such or better still ask the Parent to ring fence funds to allow for a possible failure.

Clearly it failed to either and must be held accountable. I guess the IOM Govt retreats back behind the DCS as a defence.

I don't care if we send IOM broke paying us all back ..... I want 100% back not some limp pay off and I don't care who's name is on the chq


reply - vulnerability of IoM

  • Anonymous
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  • Fri, 05/12/2008 - 13:38

It is the representation of the existence of the parental guarantee and the existence of the DCS as a means of reassuring depositors in the recent past that are amongst the IoM government's and regulator's most significant vulnerabilities. The deficiencies in the former have been highlighted on this site in the past couple of days and the deficiencies in the latter are, I believe, the reason why the IoM government is trying so hard to avoid triggering the scheme (the IoM banks apparently intend to challenge the DCS if it is triggered).

If I am right, a triggering of the DCS is likely to reveal that the scheme has and never had any real substance - in other words it was only any good as long as it was never called upon. As I have said elsewhere, the emperor has no clothes, but in this case the emperor knows it and is hoping that by not showing himself that no-one else will ever find out.


All a sham.

  • user1123
  • 14/10/08 31/05/09
  • unspecified
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  • Fri, 05/12/2008 - 15:20

You are right elgee, a real sham of a scam which has been promoted all along by those disgraceful incompetent people who like to think they run this Island. Yes I am talking about that horrible little man Cashen and the buffoon Gelling, both apparently still getting £30K salary from KFS as Directors and £30K in their regulatory posts as well as other regulated company directorships. I am just flabergasted that no one has asked them to resign or taken any action against them. They are still taking OUR money under false pretences and living off the earnings of hard working people in the IoM. What is the FSC and Treasury doing to rectify this? Have they not heard about morality and governance. It just goes to show that these people have no integrity whatsoever.

BTW, latest figure I have from my contact within the Treasury is a proposed 66p in the £ payout. Was full payout before the new VAT rate arrived and the banks backed out. Sorry I can not verify this but contact is working with the consultants.


all a sham

  • Anonymous
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  • Fri, 05/12/2008 - 18:20

I wonder if that 66p in the pound is the result of a detailed calculation (as suggested by quoting it to an accuracy of 1%) or merely a hand-waving 2/3rds. If it is the former, then where are the figures upon which it is based? If it the latter, I think we have all come up with something similar by assuming that about half of the money deposited in the UK will be recoverable.

I am mystified as to what the new VAT rate has to do with it - can you explain? Also, by banks backing out, I presume you mean prospective buyers of KSF(IOM) rather than those banks trying to wriggle out of contributing to the DCS. Is that right?

Does your friend in the Treasury have any views on our (apparently) joint opinion that the DCS and the IoM's confident statements about recapitalisation and sale etc. are a sham and misleading respectively.

Do you know for sure whether KSF's directors are still drawing salaries, or why?


The new VAT rate - quite

  • skintagainnow
  • 10/10/08 31/05/09
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  • Fri, 05/12/2008 - 19:25

The new VAT rate - quite simple, the Manx government have just took a large hit - they have a VAT sharing scheme - thought you'd be up on that one..


How does the IOM Govt. VAT

  • frog
  • 10/10/08 13/09/09
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  • Fri, 05/12/2008 - 19:26

How does the IOM Govt. VAT rate affect the KSFUK Returns?


IoM gov doesn't have the

  • skintagainnow
  • 10/10/08 31/05/09
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  • Fri, 05/12/2008 - 19:30

IoM gov doesn't have the spare funds it bargained for - hit on the VAT - knock back by the banks = less funds to spare for us silly bu88ers.


Sure it affects the IOM, but

  • frog
  • 10/10/08 13/09/09
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  • Fri, 05/12/2008 - 19:49

I haven't heard that the £150M that they planned to inject into the compensation system (or maybe use partly for restructuring or the so-called 'hardship payments') is at risk at all.


VAT - IoM - Knock on effect

  • skintagainnow
  • 10/10/08 31/05/09
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  • Fri, 05/12/2008 - 20:11

Maybe it will have an effect, maybe it won't - any reduction in revenue from whatever source has a knock on effect, I can't remember the exact figures but whatever they are money has to be diverted from one area to cover the shortfall in another. The £150m I don't suppose is sitting on a shelf next to our £550m, this would have been from projected earnings from next years budgets, so however £10's m they are short on VAT returns has to found or saved from elsewhere.

You have to look at the bigger picture, we already know the other banks on the Island were up in arms about the proposed hike in fees to cover the new DCS - and refused to play ball on the original figures - there's a partial knock back, now income in the form of the VAT returns is also being hit.

-- I'm having a bad few days, it's best at the moment I don't inflict any tainted or prejuce views on the rest of the forum, all the information is available on the net and easily understood as long as the blinkers are off.


on the contrary

  • rk
  • 12/10/08 31/05/09
  • unspecified
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  • Sat, 06/12/2008 - 15:02

hi skintagainnow...

if it cheers you up slighly, the IOM Government actually has CASH RESERVES of approx £350m...(see the 2008/9 budget (a link to which has been posted elsewhere on here) i.e. it is potentially committing a significant chunk of this cash to us in whatever form...

the IOM Govt doesn't have any "soverign" debt as such, which is a primary reason why the Island has in the past had a AAA credit rating...


IoM's £350m Cash Reserves (!?)

  • jkk
  • 10/10/08 31/05/09
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  • Sat, 06/12/2008 - 16:02

If they really have such a heap of spare change safely stashed away why don't they just assume the ownership of the bank and run it as if nothing happened?

They would make everyone happy and could even make profit in the long run.


reserves..

  • rk
  • 12/10/08 31/05/09
  • unspecified
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  • Sat, 06/12/2008 - 18:23

because it's all IoM taxpayers money and would be political suicide to spend it all on bailing / purchasing one bank.....


If they don't, they'll

  • frog
  • 10/10/08 13/09/09
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  • Sat, 06/12/2008 - 23:43

If they don't, they'll probably lose this and a lot more in legal action taken by the depositors due to their decisions previously.

It would be better to get a loan and pay off the depositors then have an international scandal.


£350m Cash Reserves

  • jkk
  • 10/10/08 31/05/09
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  • Sat, 06/12/2008 - 19:42

Ok, but I am not advocating SPENDING this money on bank PURCHASE. The IoM Government has the sovereign right to take over a subsidiary of a foreign company whose parent organisation went BANKRUPT.

Unlike Kaupthing hf, KSF IoM is in perfectly good shape financially and could start trading tomorrow. In the US, banks are obliged to keep 8% of their assets in cash. KSF IoM already has around 12% liquidity so there is no objective reason why it should not have its licence restored immediately.

The Government's cash reserve MIGHT be necessary to cover a possible run on the bank in the first days of its operation, but that will never happen if the Government guarantees unconditionally 100% of all deposits.

Yes, some of us are so disgusted with IoM's handling of this crisis that they will take all their money and never look back at the Island. But most of us will keep their accounts where they are simply because KSF IoM was the best offshore savings bank on the face of the Earth. And new depositors lured by the Government's guarantee and high interest rates will come in droves and it will be BUSINESS AS USUAL.

In all probability, the Government's cash reserves will never have to be touched. Their mere existence will be sufficient to avert a potential bank run. And even if some of that money will have to be dipped into, it needs not to be given in a form of a bailout. It may be loaned to the bank just like it has been done in all those countries (including UK) where Kaupthing subsidiaries were operating.

Can somebody on the Island please forward that message to the Government?


350 million Cash Reserves

  • fight theft
  • 10/10/08 28/05/13
  • a depositor
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  • Sun, 07/12/2008 - 16:51

If this is true - have you sent this to everyone at the top (ha!) in the IOM and UK and MIke Simpson? If there is a possibility of a solution this fast and simple we'd all smile breath again....


£350 Million Cash Reserves

  • jkk
  • 10/10/08 31/05/09
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  • Sun, 07/12/2008 - 18:22

I have not contacted anybody in high places yet. I thought we could kick the idea around between ourselves first to see if it holds water.

But I am getting the impression that most participants of this forum are more interested in social interaction with others than in finding a genuine solution ;-)


Good Karma!

  • cottesmore
  • 21/10/08 16/07/12
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  • Fri, 05/12/2008 - 20:18

Chill out my friend.Read todays joke.It just might be worth trying down the pub (that's if you've got a euro in your pocket!)