HMG Response to DAG 'Sealed UK Secrets' Petition

HMG Response to DAG 'Sealed UK Secrets' Petition

Tuesday 4 August 2009
Sealeduksecrets - epetition response

We received a petition asking:

“We the undersigned petition the Prime Minister to open and reveal court papers for UK Savers & Tax payers to view.”
Details of Petition:
“The UK Government used clandestine and secret means to freeze £550M of sterling assets in the UK banking system during the recent Icelendic crisis. The UK court papers related to this action are sealed and not able for UK voters or tax payers to view. Therefore I implore and request that these papers be made public to understand : (a) Did the Uk government act rashly ? (b) Is the UK Government & Treasury hiding the truth ? (c) Basic representation - for a UK Taxpayers - “show us the money”.
· Read the petition
· Petitions homepage

Read the Government’s response

On 8 October the Financial Services Authority (FSA) determined that Kaupthing Singer Friedlander Ltd (KSF UK) no longer met its threshold conditions for the purposes of its authorisation to accept deposits, and was unlikely to be able to continue to meet its obligations to depositors. The FSA, in the exercise of its regulatory functions, concluded that KSF UK was in default for the purposes of the Financial Services Compensation Scheme.

Following due legal process, KSF UK was put into administration. It is correct that, when ordering that KSF UK be put into administration, the court also ordered that its file relating to the application for administration should not be open to inspection without leave of court (except for the court order and the notification of the appointment of an administrator). The FSA requested such an order because the documents provided to the court contained information which was commercially sensitive and confidential under section 348 the Financial Services and Markets Act 2000.

Ernst & Young LLP has been appointed as the Administrator for KSF UK. As part of the administration process, as is usual, a moratorium is in place on the enforcement by creditors of claims against KSF UK.

Kaupthing Singer & Friedlander Isle of Man (KSF IoM) had deposits in the region of £532m with its sister company KSF UK at the time of KSF UK entering into administration. Under UK insolvency law, KSF IoM ranks like any other creditor in the administration - money that a customer has placed with a bank on deposit (including with a sister company) is a liability of the bank in which it has been placed. The customer only has a debt claim against the bank. If the bank chooses to place the money it has received on deposit from a customer with a second bank, the first bank is placing its own money with the second bank and the customers of the first bank do not have any direct legal claim to the deposit with the second bank. KSF IoM will have been fully aware of this. It could have chosen to put its money elsewhere and to have diversified the deposits it made rather than making a single large deposit, which concentrated the credit risk to which it was exposed. As it is, this sum is now subject to UK insolvency procedure and forms part of the administration estate of KSF UK.

The first UK creditors’ meeting for KSF (UK) was held on 1 December 2008. At this meeting, representation for the Creditors’ Committee was determined by the creditors. Although the KSF IOM Joint Provisional Liquidator is not a member of this Committee, the administrators of KSF UK are in ongoing, constructive and cooperative discussions with the Joint Provisional Liquidator for KSF IOM. Useful information can be found on the administration of KSF UK and KSF IOM on the KSF IOM website: HM Treasury has been in regular contact with the Government of the Isle of Man.


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