Sunday, September 6, 2009

Depositing on the Isle of Man could seriously damage your wealth

John Aspden, Chief of the IoM Financial Supervision Commission, counsels that anyone depositing in the IoM is taking a risk in much the same way as if their deposit were an investment. His advice now is not to put more than £50,000 in any one bank on the IoM. Why not? The government is constantly trumpeting about how good is its financial services industry, and how well placed it is to ride the waves caused by the international banking crisis and the recession. if it is so good why suggest that it is risky to deposit more than £50k on the island?

If it is rash to place more than £50k in an IoM bank then why did Mr.Aspden sanction the directors of KSFIoM putting £532million of the bank's assets into one bank, especially knowing that the bank in question (Kaupthing UK) was one of the riskiest of banks to put the lifeblood of KSFIoM? The predictable event of Kaupthing UK going into administration cut of the flow of blood to the very heart of KSFIoM causing a massive heart attack. There was no life support machine in the form of a bank of last resort to resuscitate the patient.

Offshore centres are suddenly finding themselves with their backs to the wall. If the Cayman Isles - the Caribbean 'daddy' of them all - is in dire straights what hope is there for the Isle of Man? The island has nothing like the 3 trillion dollars that Cayman has in its finance houses.

Best advice is not to put any money on deposit on the Isle of Man as it could seriously damage your wealth.

3 comments:

  1. Sound advice Jim! I do enjoy reading your daily blog.

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  2. "His advice now is not to put more than £50,000 in any one bank on the IoM. Why not?"

    Because £50,000 is the compensation limit under the Depositors' Protection Scheme. Why else?

    "The government is constantly trumpeting about how good is its financial services industry, and how well placed it is to ride the waves caused by the international banking crisis and the recession."

    All of which is true. But if Alistair Darling were to collapse another solvent UK bank holding funds from its Isle of Man counterpart, depositors with more than £50,000 invested could once again find themselves in an invidious position. The UK is, in my view, currently governed by a cabal of professional criminals: their actions are becoming increasingly difficult to predict or anticipate.

    "If it is rash to place more than £50k in an IoM bank then why did Mr.Aspden sanction the directors of KSFIoM putting £532million of the bank's assets into one bank."

    Because he had been specifically advised by the FSA that that bank was fully stable and liquid - which it was until Darling intervened.

    "The predictable event of Kaupthing UK going into administration…"

    There was no predictable event, and any fool can be wise with hindsight.

    "There was no life support machine in the form of a bank of last resort to resuscitate the patient."

    And how exactly would a nation of 80,000 people maintain a central bank with the liquidity to conduct immediate bailouts of any failed institutions in the jurisdiction?

    "If the Cayman Isles - the Caribbean 'daddy' of them all - is in dire straights what hope is there for the Isle of Man?"

    The Cayman Islands are not in dire straits, although they face a structural deficit. All they need to is broaden their tax base, which currently consists only of import duties and a minor property tax.

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  3. Sir/Madam: thank you for your comment. My response is HERE

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