The Isle of Man Treasury returns to the High Court in Douglas on 9 April to seek approval for a so-called Scheme of Arrangement (SOA) aimed at compensating depositors caught in last October’s collapse of Kaupthing Singer & Friedlander Isle of Man.
If a decision is reached, it could represent an important step in a drawn-out saga that has put distraught and angry bank customers at odds with IoM taxpayers – some of whom have objected publicly to being expected to foot the cost of any form of compensation – and IoM government officials, who are constrained in what they are able to offer.
Last month, some IoM officials reportedly received threatening letters sent by disgruntled KS&F (IoM) customers.
Details of the SOA
The SOA was drawn up after the KSF failure by the Isle of Man, which believes it offers a better alternative for the KSF depositors than the depositors’ compensation scheme that would be triggered by the Icelandic bank’s liquidation.
The SOA would see 54% of eligible depositors receive 100% of their money back within three months, 71% within two years, and provide a measure of compensation for depositors whose money was held through insurance wrappers.
Explains IoM Finance chief executive John Spellman: “[The depositors] would get the same rights under the SOA that they would get under the depositors’ compensation scheme
“The cheaper option for us is actually the depositors’ compensation scheme, [but] we support the [SOA] because we feel it is better for the depositors.”
The debate continues
Spokesmen for the depositors say they have not seen enough detail about the SOA to support it, and continue to insist that the only plan they would be happy with would be one that gave them 100% of their money back.
UK residents who banked in the onshore arm of KSF, meanwhile, have begun to receive the full compensation they are due under the Financial Services Compensation Scheme for the first £50,000 they had in UK branches of the same bank.
One point all agree on is that a key element in the recovery of the KSF’s Isle of Man depositors’ funds involves the Isle of Man getting back some £557m that was transferred to KSF’s London branch from its Isle of Man unit immediately before the company went into administration.
A decision about when and whether this money will be returned to the IoM is not expected until later this month at the earliest.
