The IoM government has taken up a bottom line position of doing the least that it is obliged to do under its statutory obligations, namely implement the Depositors' Compensation Scheme. Quite simply it doesn’t have to do anything else because:
1. it refuses to accept that the collapse of the Kaupthing bank was ultimately due to the regulatory failure of the FSC and the bank’s directors;
2. it does not feel under any moral obligation to accept that the global financial crisis means that it should treat the collapse of KSFIOM any differently than if the bank had failed in 'normal' conditions;
3. it will not concur with the UK Prime Minister’s words of 7 June: "where there is unfairness & irresponsibility we have got to act"
Thus the IoM government will not review its position unless there were a significant development that either seriously threatened its constitutional independence from the UK or compromised its economic stability.
What could happen to force the IoM government to review its position?
1. if the UK government exercised its constitutional prerogative by calling on the IoM government to come into line with the international policy objectives of the g20, and underwrite 100% all deposits in KSFIOM;
2. if there were a crisis of confidence in the IoM banking system resulting in an exodus of funds from the IoM.
In respect of (1) the UK Ministry of Justice to date has sat on the fence as though the issues in the document 'The Road to Recovery' were irrelevant to the IoM. Furthermore, it has not considered the KSFIOM debacle to be of such a serious nature as to require HMG to intervene under its constitutional powers.
In respect of (2) the failure of KSFIOM ought to have been enough to cause many to remove their deposits & investments in the IoM, but this bankrupcy has hardly caused a ripple in the media due to a large extent to the other issues that have taken precedence in the news headlines. Likewise the DAG press releases have not made the desired impact in the face of the many other competing issues confronting people (eg: unemployment, bankruptcies, inability to pay mortgages, the Westminster allowances scandal,etc.)
What then could bring about a change in position on the part of the IoM government?
There are many who believe that only the following will now bring about a change in the position:
1. legal action against the FSC & Directors of the bank
2. a high profile campaign to discredit the IoM in the eyes of the world.
Watch this space for further developments