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Isle of Man

Depositor Compensation Scheme

The Isle of Man has a depositor compensation scheme which protects deposits up to 50,000.

However, the contributions to the DCS are capped at 350,000 per participating bank per year.   There is no long term cap on total payouts, but there is a temporary cap of 200 million for bank collapses occurring before 23-Oct-09.

Isle of Man repays 60% to BCCI depositors  Tax-News.com, 15-Aug-01

So while, unlike Guernsey, the amount of compensation would not be limited by an overall cap, long term, the annual per-bank funding cap means that, even if your money is in a smaller bank, it's likely to take many years to receive your due compensation.   BCCI collapsed in 1991 and it took ten years for depositors to get back 60%.

Total deposits held with the 38 Isle of Man banks at the end of December 2008 stood at 57.29 billion, an average of 1,508 million per bank.  Isle of Man Financial Supervision Commission

Government Support

The Isle of Man increased their depositor compensation scheme from 75% of 15,000 to 100% of 50,000 in an emergency session of the Tynwald (the IoM government) on the same day as the collapse of Kaupthing Singer & Friedlander Isle of Man, and made the change retrospective so that the KSF IoM depositors would be covered to the increased amount.

The Tynwald then committed to putting in 150 million of taxpayers money, from government reserves, to top up the normally only bank-funded scheme in order to facilitate recompensing the KSF IoM depositors.

Meanwhile, the Chief Minister and Treasury Minister were quick to publicly take the side of KSF IoM depositors, engaging in a diplomatic war with the UK, which they blamed for the bank's collapse.

In December 2008 the Tynwald agreed an early payment scheme offering a 1,000 "emergency" payment to all depositors at a cost of 11m from government reserves, as an interim measure while a fuller solution was being worked out.  This was increased to 10,000, at a cost of 94m, in January 2009.

The government then put together a Scheme of Arrangement (SOA), as an alternative to liquidation and activation of the island's Depositors Compensation Scheme.  Under the SOA just over half of the depositors would be repaid in full within three months, and almost three quarters would receive all their money back within two years, although the remaining quarter, those with deposits of more than 50,000, would be dependent on realisations by the liquidator and were (then) anticipated to probably receive only 70% of their savings, spread in payments over 6 years.

However, the depositors rejected the SOA arguing that the scheme gave them little more than they would receive under liquidation, would force them to give up too many rights, and would be disadvantageous to larger depositors as the probabilities of higher returns from liquidation increase.

Consequently, KSF IoM was placed into liquidation, activating the island's Depositors Compensation Scheme, with the result that savers with up to 50,000 deposited have, after almost a year, had their savings compensated in full.

Kaupthing Singer & Friedlander (Isle of Man) Limited (In Liquidation)
KSF Creditors Report 9 July 2012  PDF

Those with more than 50,000 deposited may, eventually, get back an anticipated 97.2 - 99%, although it is expected that it will take until at least 2014 for this to be achieved. 

State of Government Finances

While it is clear that the government of the Isle of Man does believe in trying to help savers in failed banks in their jurisdiction (albeit not to the satisfaction of all depositors), as the 150 million pumped in for the KSF IoM failure represented fully half of the Isle of Man's reserves, it is equally clear that they won't be able to do the same again for any further bank failures for the foreseeable future.

Please see www.SafeOffshoreAccounts.com for further references.

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