Monday, July 27, 2009

The real aims of the inquiry into the collapse of KSFIoM

The Tynwald has chosen not to have an independent inquiry into the collapse of the Kaupthing bank. Why? Because it does not want the truth to come out. Why? Because it would be a deadly blow to the reputation of the Isle of Man as a trustworthy & competent offshore financial centre.

The word on the street is that it has already been decided that this inquiry should be a public relations exercise to project the IoM as having a vibrant & well regulated financial services industry. Clearly it can not do that if it has a frank & objective report, so we can expect to see a report that will be a whitewash in which the directors and the Financial Supervision Commission will be held not to blame for the demise of the bank.

This is the way politics work in the Isle of Man. The Treasury Minister speaks as though he is doing the depositors a big favour by saying that 75% of them will have their deposits restored by the end of September; that's just a few days short of 12 months since the bank closed its doors in October 2008.

Well, the reality is they would have had their deposits restored a long time ago if the Treasury hadn't introduced what turned out to be a hugely expensive cockup in proposing a Scheme of Arrangement whose primary aim was to look after the interests of the Isle of Man and not those of the depositors.

75% of depositors will get 'compensation' before the end of September but that still leaves 25% who will have to wait 6 years to get back what can be realised from the liquidation of the bank. Those depositors are very angry and will be saying to the world through Youtube & Twitter DON'T BANK ON THE ISLE OF MAN.

Wednesday, July 22, 2009

No independent inquiry into the collapse of the bank

July 2009.....TYNWALD has voted unanimously to set up a select committee to investigate the causes of the collapse of the Island's Kaupthing Singer & Friedlander bank.

The committee will also examine the role of the Financial Supervision Commission in ensuring the KSF (IoM) bank was properly managed to protect depositors' funds and it will also consider the credibility of the government's depositor compensation scheme.

David Cannan (Michael) who tabled the motion calling for the setting up of the committee said this was an issue of accountability and the bank's collapse had to be investigated to reassure the people of the Island and our customers that we have a sound and responsible regulatory system in place.

He said: 'There must be no perception of whitewash or cover up. The Island must have the highest standards of integrity to ensure its reputation internally and internationally.'

The motion was carried unanimously as amended by Health and Social Security Minister Eddie Teare to require the select committee to report back to Tynwald by the March 2010 sitting. Juan Watterson (Rushen), John Houghton (Douglas North) and Eddie Lowey MLC were voted in as the committee's three members.

Clearly this important inquiry is not going to be independent as it should be. Such as it is it must be undertaken in public and must call on all affected parties to give evidence, especially the Depositors' Action Group. Finally its report must be made public.

Thursday, July 16, 2009

inquiry must be done with transparency

So the Tynwald is presently discussing having a Tynwald Select Committee to inquire into the collapse of the Kaupthing IoM bank.

'Transparency' is one of the keywords that the government uses as a hallmark of the way banking business is conducted on the IoM. Independent objective assesment would suggest that it is at best opaque and at worst still 'smoke & mirrors' with a lot of business done in secret hanky-panky.

The idea of a Tynwald Select Committee being the appropriate body to conduct such an important investigation as the collapse of one of its pillar banks is a nonsense. The thought that it might be conducted in private with its findings kept secret reeks of known guilt that needs to be covered up in order to protect the guilty parties & the tarnished reputation of the IoM.

To be transparent this Kaupthing inquiry should be conducted by an independent body, should be in public, should be open to evidence being given by victims of the collapse, and the findings should be made public. Anything proposals for an inquiry that falls short of these terms would be an outrage.

Sunday, July 12, 2009

Why you can't bank on the Isle of Man

"Trust is a relationship of reliance. Trust is a prediction of reliance on an action, based on what a party knows about the other party. Trust is a statement about what is otherwise unknown -- for example, because it is far away, cannot be verified, or is in the future." Wikipedia

Trust has become a big issue in British society. The sense of betrayal is widespread and becoming deep rooted in the minds of citizens. Events over the past 12 months have caused the Nation to mistrust the institutions of Parliament, the activities of Whitehall, the shenanigans of banks, the dubious operations of the City & questionable mechanisms of international finance.

It is the issue of the trustworthiness of banks that is probably of most concern to people, because if their hard earned money isn't in their pocket it is either under the matress or in a bank. That is the reason why the Prime Minister & the Chancellor have spoken & acted to try to reassure people that their money is safe irrespective of events that have caused people to think otherwise.

The big problem is that Tony Brown, Chief Minister of the Isle of Man - whose economy relies heavily on the island’s financial services industry - can not speak and act in the same way. Trust is not a concept that fits into the the way the IoM does business. Yes, every bank peddling for your money all shout "trust me" but the simple fact is you can not take them at their word. Why? because their word is not their bond, and the literature and hard sell tells you all the reasons why you should trust them with your money but does not tell you the risks of banking with them. For that you have to rely on what the crafty Chief of the FSC says, & if you do that then you will not put your trust in a bank on the Isle of Man.

Friday, July 10, 2009

"The Isle of Man failed KSFIOM depositors spectacularly"

To give credit where it is due the editor of SHELTER OFFSHORE wrote a well-balanced piece in response to criticisms he received about the way the Isle of Man was being promoted as a good place to put one's money. He said:

Recently we ran several articles on the Isle of Man and its reputation as being one of the safest and best regulated offshore jurisdictions. The storm of emails that came back to me was quite overwhelming - more importantly they weren’t of the nature that I normally receive. These weren’t emails from millionaire expatriate investors who’d fallen a few percent short of the original projections, they were from very real people who had lost their entire life savings, retirement incomes and any chance of ever getting their money back. The victims were investors and depositors at Kaupthing Singer & Friedlander, Isle of Man (KSFIOM.) So why, when over 10,000 investors and depositors have lost so much while depending on the Isle of Man’s regulation and guarantees for security, am I still saying that the Isle of Man is a safe and recommended offshore jurisdiction?

There’s no point in beating about the bush - the Isle of Man failed KSFIOM investors and depositors spectacularly, and their failure to resolve the situation quickly has indeed damaged the Isle of Man’s (IOM) reputation as a safe offshore jurisdiction.

......... There’s actually a whole catalogue of blunders that resulted in KSFIOM investors and depositors losing their savings, the IOM is partly responsible but not entirely, you can find far more information at a site specifically created for the victims of the collapse. I personally am equally disgusted at the way this particular situation has been handled, but I won’t leave the blame totally at the gates of the IOM government when the UK government and the FSA also played an active role.

The Isle of Man government do deserve to be criticised for what happened and should be held fully to account, but the fact is that the IOM is still one of the most responsive offshore jurisdictions.........

In the final analysis because of the significant dependence on its financial services industry the IoM can not afford to dismiss depositors simply by implementing its flawed compensation scheme.

No doubt the government believes KSFIOM was a 'one-off' casualty of the international financial crisis and it is tough luck that the depositors are colateral dammage. But that is not good enough. In response to the financial crisis all European governments acted swiftly to ensure that savings in banks in their jurisdiction were safe. The UK did this where necessary by nationalising failing banks and guaranteeing the savings of UK residents who put money into KSFUK & Icesave. The IoM government has not responded in like fashion. It is a Crown dependency so it should.

Full article : here

Wednesday, July 8, 2009

Why do readers of 'SHELTER OFFSHORE' hate the Isle of Man?

The website SHELTER OFFSHORE has been inundated with complaints about the way it promotes the Isle of Man. It says: "But why do Shelter Offshore readers hate the Isle of Man so much? Are so many of them victims of the collapse of Kaupthing, Singer & Friedlander or are they victims of the misinformation that has been spread about the island ever since?

We decided we needed to set the record straight on the Isle of Man’s behalf. We don’t have a preference over offshore jurisdictions, but we do feel that the negative publicity the island has been suffering is actually unfair. Yes, Kaupthing, Singer & Friedlander collapsed and resultant concerns have not been handled swiftly, efficiently or comprehensively enough for some victims…however, that is only one part of the story......... we feel that the jurisdiction should be respected for what it has done and continues to do to maintain its reputation as a leading and reputable financial centre.

Well it would say that wouldn't it? It has a vested interest in making the Isle of man look attractive. But like an attractive new house on the market, what virtue does it have if it is built on hidden unsound foundations? The Isle of Man now has an economy heavily dependent on its financial sector, but though it has its symbolic three legs it does not have a bank of last resort to stand on. It is highly dependent not on its own inbuilt security to vouchsafe deposits but many of its banks are relying now on the security offered by their onshore parent banks. The Kaupthing debacle illustrated the weakness of this link when its Icelandic parent bank failed taking the parental guarantee with it.

So long as the Chief of its FSC publically acknowledges that deposits like investments carry a risk especially when the rate of interest offered is high, then no one in their right mind is going to put their money in the trust of the Isle of Man. It is not a question of 'hate' but of 'mistrust' from having been betrayed by what turned out to be a number of completely false promises of security.

The IoM government could exercise some moral integrity & show a keen sense of justice if it were to accept that the Kaupthing fisaco was a regrettable - & hopefully - isolated incident for which regulatory failure on the part of its FSC played a major part. In doing so it could see to it that no depositor would lose out as a consequence. But unfortunately on the Isle of Man politics comes before the people who put their trust in this bank.

SHELTER OFFSHORE would do depositors a real service if it had the integrity to stand in solidarity with those depositors who have been legally robbed of their life savings in an offshore centre that in its own mercenary self interests it is so keen to promote. Until it does it demonstrates for all to see that money & morality do not get on well in bed together.

Monday, July 6, 2009

Rough Justice in the Isle of Man

Insult was added to injury when the Court judgement called upon the Company to pay the costs incurred by the DAG on account of the Treasury's SoA, when of course that meant the depositors will have to pay! On 3 February Tony Brown told the UK Treasury Select Committee that the IoM would deal with the KSFIOM affair by implementing its well tried DCS but he did not do this. Instead he was persuaded by the Treasury that the best interests of the IoM would be served by an alterative means of dealing with the problem, namely a Scheme of Arrangement. They could not even get the SoA right from the start which added significantly & unnecessarily to the DAG's costs on account of it.

The Depositors' Action Group did not ask for this SoA and was only prepared to accept it if it offered better terms than would be available through liquidation of the bank & the compensation scheme. Though the Treasury categorically stated that the SoA was in the best interests of the depositors, neither the depositors who had the most to lose nor the Deputy Demptster could see that it was & in May ordered that the bank should be liquidated.

When the SoA was rejected Tony Brown admitted in public that it was put forward with the primary objective of protecting the best interests of the IoM. That being the case it is extraordinary that the depositors should have to pay for the costs it incurred on account of the SoA which was not in the best interests of those who had the most to lose from it. Clearly there are grounds for the Depositors to appeal but that would involve them in further costs with doubtful prospect of the Court's decision being overturned.

Wednesday, July 1, 2009

Fishing with a spin-ning reel & well-baited line

Under the heading:   Regulation and Supervision of Financial Services Companies in the Isle of Man  the website offers prospective depositors this bait:

"The Isle of Man is almost universally respected in the financial services industry – this is largely because of the level of regulation and supervision in place that all financial services companies have to adhere to when they establish an operational presence on the island.

Any business wishing to commence ‘regulated activities’ – i.e., financial services related business - in or from the Isle of Man has to be licensed by the island’s Financial Supervision Commission, and the Commission will not issue a license unless it is 100% satisfied that the license applicant is “a fit and proper person to undertake the regulated activity.”

The ‘fit and proper test’ is both an initial test at the time of granting a licence, and a continuing test in relation to the conduct of regulated activities. The test takes into account integrity, solvency and competence and is very strict and far-reaching. It is as a result of this that only serious companies ever establish themselves on the island, and therefore, as a result, the most reputable financial advisories trust in these companies to do the best for their clients’ funds."


I have highlighted in bold text the sentence: The test takes into account integrity, solvency and competence and is very strict and far-reaching. It is as a result of this that only serious companies ever establish themselves on the island

Every depositor who has had their life ruined by the Kaupthing bank debacle will seriously question whether the directors, backed by the the FSC, acted with "integrity, solvency and competence" when they placed totally unsecured over 50% of the banks assets into Kaupthing UK, knowing that it would be at risk of being substantially lost in administration if the parent bank in Iceland failed.

At least the website does say: "The Isle of Man is almost universally respected..." It would have been better spin if the site had spent some time qualifying exactly what it meant by 'almost'. But that would have defeated the purpose of the fishing expedition as the bait would not have looked so attractive.