The Kaupthing Singer & Friedlander (IOM) Ltd (KSF IOM) ‘Early Payment Scheme’ received an almost unanimous vote of approval in this week’s sitting of Tynwald (Tuesday 20^th Jan). Liberal Vannin Party Leader, Peter Karran MHK was the only dissenting vote; which appears consistent with his views on the use of taxpayers’ money to bail out failed banks, or in this case, a bank that has nearly failed.

The ‘Scheme’ will provide a maximum payment of £1000 to ‘eligible’ depositors in KSF (IOM) on the 8^th October, 2008. However, they must make an application for the payout and sign a ‘memorandum of assignment in favour of the (IOM) Treasury’; which will enable the government to recover the equivalent sum, by deduction, from any other payout the account holder receives.

The IOM Government has made available, from the Reserve Fund, £11million to meet any claims and the administration costs of the Scheme.

It is interesting to note that in the attached note to the Order, in the ‘Reasons for the Measure’ it states that they are: “To provide a level of financial support to those depositors facing cashflow difficulties following the freezing (our emphasis) of their assets at Kaupthing Singer & Friedlander (IOM) Ltd …”

Members of the Manx Government have been very scathing and critical of authorities in other jurisdictions ‘freezing assets’ yet appear unfazed by accepting the same has occurred in the IOM.

Perhaps unsurprisingly, the Scheme has not received universal acclaim from depositors in KSF (IOM) who had the assets ‘frozen’ by the authorities in the IOM, some of whom believe it is too little, and perhaps even too late for some.

Certainly there is a strong view held by a proportion of depositors that the Government is just trying to drag things out as long as possible to avoid having to trigger the Depositor’s Compensation Scheme.

The Manx Herald has received a copy of a letter from one disgruntled depositor, who views the DCS as a sham; and who, incidentally, expresses concern that the Financial Supervision Commission is spending its time trying to track down who leaked a copy of the parent company guarantee instead of working to solve the issues with the bank.

Furthermore, the KSF Depositors Action Group have posted, on their website, a press release, dated 17^th January 2009, which states inter alia: “Despite goodwill, effort and confidentiality by those representing the KSFIOM Depositors Action Group, they have yet to see anything to convince them that the suggestion of an alternative to liquidation is little more than an attempt to prevent the Depositors Compensation Scheme (DCS) being triggered. The activation of the DCS would not only cost the IOM Government and local banks dearly but would expose the scheme for what it is; namely an inadequate and outdated guise of protection that contains so many provisos and matters open to legal interpretation that the Government is refusing to explain clearly how it would work if it were to be put into action.”

This may be a cynical viewpoint, but it perhaps has some justification given that it appears that the Government prefers an ‘orderly winding down’ of the bank to presumably what they think will be a ‘disorderly winding-up’.

Full details of the ‘Early Payment Scheme’ can be found on the government’s website www.gov.im