Tuesday, September 15, 2009

The IMF report is not a clean bill of health for the IoM

The IMF has just released its report on its team's visit to the Isle of Man in September 2008. The visit preceeded the collapse of the Kaupthing IoM bank so makes no reference to it.

Allen Bell, Treasury Minister, said way back last Autumn that the IMF report was imminent. Then why has it taken 12 months to report on what was a comparitively simple task undertaken way back last September? From reading the report it is self evident that it was deliberately delayed to take account of (1) the changes made by the IoM Financial Supervision Commission to the Banking Regulations & the Rule Book, (changes made as a direct consequence of the failure of KSFIoM), & (2) Basel II's review & update of its own protocol which was not completed until July 2009.

In other words the report was not comparing the IoM banking regulations of September 2008 with the Basel protocol at that time, but was reporting on the regulations relative to Basel II as they are today. Hence it is a report based on a 'stable cleaned & the door shut after the horse had bolted' after KSFIoM collapsed.

Invevitably Tony Brown, Chief Minister, puts a spin on the findings of the report, making it look as though the Isle of Man has a clean bill of health & is a safe place on which to deposit one's life savings. It isn't. The report only addresses the standard of banking regulation relative to the standards laid down by the Basel II protocol. That is a long way from saying that the IMF endorses the Isle of Man as a risk free place for depositing one's life savings.

Indeed the report says that the IoM is not risk free - that its banks rely heavily on their onshore banks if they get into trouble and that in itself is not a guarantee of security. It also considers the Depositors Compensation Scheme is unsound.

The plans for the Titanic had stamped all over them unsinkable, but it sank! The IoM is already holed by th collapse of KSFIoM and is sinking. The IoM can not borrow from the IMF but the IMF could offer the UK government a loan to enable the IoM government to meet the just demands of the Kaupthing depositors to have all their lost savings returned to them. Why doesn't it?

Best advice at the present time is: DON'T BANK ON THE ISLE OF MAN as there are significant risks involved in doing so.

IMF Report [PDF format]: here

1 comment:

  1. There is a significant risk inherent in either depositing or investing money on the Isle of Man.

    This risk connects directly to ineffectual regulation of the island’s financial services industry by a discriminatory government.