Embargo Saturday, April 4, 2009

Brown urged to intervene in Manx savings scandal

Within hours of the G20 call for a clean up of offshore tax havens, Gordon Brown was urged to act – by stepping in to force a rescue for British victims of a multi-million pound Isle of Man savings collapse.

The pressure on the Prime Minister came from the influential Treasury Select Committee of the House of Commons.

The call by the Select Committee, chaired by John McFall, was echoed by the savers’ own action group. Many of its members have lost nearly all their life savings in what was supposed to be a secure deposit-taking bank.

Their savings were swept away when the Icelandic banking disaster also dragged down Kaupthing Singer & Friedlander’s bank on the Isle of Man (KSFIOM).

Presenting his Committee’s report into the crisis, Mr. McFall said:

        “The consequences of the Icelandic banks’ failure are clearly serious and distressing for all concerned.”

He strongly urged intervention by the Brown Government to deal with the Isle of Man Government – whose actions have been under fire from the depositors – to “resolve these issues” on behalf of the other victims.

Olly Scott, spokesman for the KSFIOM Depositors Action Group, said:

        “We are delighted that the Treasury Committee has  supported our arguments that the collapse of KSFIoM  

· ‘was caused, in part, by steps taken by the UK Government to transfer deposits from the KSF UK branch to ING.’
· “the majority of those affected are not sophisticated, investors of high net worth who are somehow insulated from the losses they have incurred; and
· many people were “forced to deposit their money offshore, outside the protection of the Financial Services Authority, and the Financial Services Compensation Scheme, as a direct result of the way in which Financial Services Authority regulations were interpreted in the UK.’ “

Mr. Scott added:

“Now that the independent Treasury Committee has concluded its inquiry – indicating a degree of culpability by both the UK and Isle of Man authorities - we call again on the UK and Isle of Man Governments to urgently work together to deliver 100% return of money for the thousands who have been plunged into despair for the last six months. The current proposals being put forward are not enough either in terms of timing or amount and the subsequent affect on the thousands of British depositors involved is enormous.”

Also under heavy fire is the Financial Services Authority (FSA), the UK regulator. John Aspden, the Isle of Man regulator, told the Treasury Committee that he felt “disappointed” and “severely let down” by the communication with the FSA as
the Icelandic subsidiaries failed. This related to the transfer of deposits between the bank’s subsidiaries in the Isle of Man and the UK.

The Committee comments in its Report:

“It is of critical importance that regulators in different jurisdictions can communicate
effectively at times of financial crisis. We note with concern the suggestion that the
paucity of information provided by the Financial Services Authority may have impeded
the ability of the regulators in the Crown dependencies to safeguard their own financial
systems.

“This is a particular concern given the close working relationship that appears
to have existed between the Financial Services Authority and the Financial Supervision Commission of the Isle of Man in relation to previous situations such as that
surrounding the failure of Bradford & Bingley just days earlier.

“We recommend that the Financial Services Authority review its existing powers and strategy for dealing with
other jurisdictions, and reports on its efforts in this respect.”

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