Slim Posted June 10, 2009 Share Posted June 10, 2009 The DCS obliges the banks to contribute in proportion to their deposits. No it doesn't. Link to comment Share on other sites More sharing options...
pongo Posted June 10, 2009 Author Share Posted June 10, 2009 the FSC’s key advice to existing and future depositors remains: “Do not put all your eggs in one basket”. Whilst we agree this is eminently sensible advice – we have to ask: why then are the banks allowed to put all their eggs in one basket? That sounds almost exactly like something I posted on one of these various threads here. I wonder whether ... oh nothing. My point though was that a basically free depositor protection scheme could be built by turning the advice into a formal process of box ticking regulation (ie actually not allowing depositors put their metaphorical eggs in one basket). And if they did then they broke the rules and it is their own fault. Depositor should not be allowed to put more than some fraction (say 1/5) of their savings or other investments with any single group / institution. Link to comment Share on other sites More sharing options...
chris watson Posted June 10, 2009 Share Posted June 10, 2009 the FSC’s key advice to existing and future depositors remains: “Do not put all your eggs in one basket”. Whilst we agree this is eminently sensible advice – we have to ask: why then are the banks allowed to put all their eggs in one basket? That sounds almost exactly like something I posted on one of these various threads here. I wonder whether ... oh nothing. My point though was that a basically free depositor protection scheme could be built by turning the advice into a formal process of box ticking regulation (ie actually not allowing depositors put their metaphorical eggs in one basket). And if they did then they broke the rules and it is their own fault. Depositor should not be allowed to put more than some fraction (say 1/5) of their savings or other investments with any single group / institution. Disclosure: I have no idea where the Manx Herald gets it's opinions, could well be they had read something you had written. A free depositor protection scheme sounds interesting, but I've no idea how practical it would be. If one had five saving/investment accounts and then deposited all the proceeds from a house sale and placed it into just one of the five accounts, and a bank collapsed the next day, it would be very harsh to rule the depositor had not adhered to the rules by having more than 20% of their total savings/investments in the bank group that crashed. I'm all for protection/schemes, so long as they are funded and payout promptly. If limits are exceeded, the non-protected portion can be realized by the remaining bank assets, on a "depositor beware" basis. I think the problems with KSFIOM include the fact ex-Derbyshire depositors were apparently led to believe there was a parental guarantee in place with Iceland at the time of the acquisition and the fact that this is not being honoured, yet. I'm not sure about bond holders, whether they were wrongly advised that they were 100% protected or what, but for retail depositors like me, the DCS limits were set before I deposited and were, fortunately, raised. I had my eyes open when I put my money into it and actually thought it was the right thing to keep it there when I heard what was going on in Iceland, because I didn't want to contribute to a run on the bank! Link to comment Share on other sites More sharing options...
La_Dolce_Vita Posted June 10, 2009 Share Posted June 10, 2009 There are other banks operating on the IOM whose parent companies have recently had to be rescued from default by taxpayers in other jurisdictions. IOM taxpayers have had to contribute NOTHING to keep banks such as Lloyds TSB and Royal Bank of Scotland in business on the IOM. Governments around the world have been generous with their own taxpayers' money to support their financial services industries. The Isle of Man is the only jurisdiction in the world in which Kaupthing customers have not yet been promised the return of all their money. Yet in fighting for parity with other Kaupthing depositors some residents of IOM have the temerity to call the depositors who have lost everything greedy ! If the economy is doing so well it can afford to do the honorable thing to support its depositors and 'stand in their shoes ' as other governments have done and at the same time enhancing its reputation as a safe and secure financial centre. WHAT?! There isn't anything honourable or morally correct/right in using taxpayers money to support those depositors who have lost money. None at all. And the banks were not bailed out because it was the right thing to do for the depositors. Really if things mess up like they have it is tough shit for the depositors, the bank, and the shareholders. But where banks have been bailed out the government's decided that shift the problem onto everyone. They socialised the risk. There isn't anything morally right about this at all. Just because other governments have done it, doesn't mean the Island should. Link to comment Share on other sites More sharing options...
pongo Posted June 10, 2009 Author Share Posted June 10, 2009 A free depositor protection scheme sounds interesting, but I've no idea how practical it would be. If one had five saving/investment accounts and then deposited all the proceeds from a house sale and placed it into just one of the five accounts, and a bank collapsed the next day, it would be very harsh to rule the depositor had not adhered to the rules by having more than 20% of their total savings/investments in the bank group that crashed. There would definitely be practicalities which would need to be considered. Perhaps some sort of funded DPS to cover exceptions. So I'm basically proposing that the sensible advice should be formalized into some sort of consumer banking code. Formalizing common sense seems makes sense to me. // and obviously I'm talking through my hat. I have tremendous sympathy for the depositors but would never personally have put my meagre funds into one basket. I'm quite skeptical about the world of finance and small print in general. And the posher the name, the less I trust it. Having previously nearly got burned in a managed fund run by ****** *** Link to comment Share on other sites More sharing options...
Slim Posted June 10, 2009 Share Posted June 10, 2009 Depositor should not be allowed to put more than some fraction (say 1/5) of their savings or other investments with any single group / institution. A notification that you're depositing over the level of DCS protection might be worthwhile. Restricting it's not a good idea. Most depositors will be comfortable with the very low level of risk and shouldn't be prevented from making those deposits, and the associated reduction in rates and increases in potential costs. There also simply isn't enough manx banks for many deposits if you're going to max an account at £50k. How many retail deposit taking banks here, 30 or so? Maximum collective deposit on the IOM of £15 mil? I don't think so! Link to comment Share on other sites More sharing options...
pongo Posted June 10, 2009 Author Share Posted June 10, 2009 Depositor should not be allowed to put more than some fraction (say 1/5) of their savings or other investments with any single group / institution. A notification that you're depositing over the level of DCS protection might be worthwhile. Restricting it's not a good idea. Most depositors will be comfortable with the very low level of risk and shouldn't be prevented from making those deposits, and the associated reduction in rates and increases in potential costs. There also simply isn't enough manx banks for many deposits if you're going to max an account at £50k. How many retail deposit taking banks here, 30 or so? Maximum collective deposit on the IOM of £15 mil? I don't think so! I'm not suggesting restricting it to £50K. I'm suggesting restricting it to 1/5th of your money. Link to comment Share on other sites More sharing options...
Slim Posted June 10, 2009 Share Posted June 10, 2009 I'm not suggesting restricting it to £50K. I'm suggesting restricting it to 1/5th of your money. That's almost impossible to do from an offshore point of view. How is a manx bank going to know how much someones got deposited in Jersey? Link to comment Share on other sites More sharing options...
pongo Posted June 10, 2009 Author Share Posted June 10, 2009 I'm not suggesting restricting it to £50K. I'm suggesting restricting it to 1/5th of your money. That's almost impossible to do from an offshore point of view. How is a manx bank going to know how much someones got deposited in Jersey? No it isn't. 1. It would be a box ticking exercise. You are required to declare etc ... If you break the rules then it is your own fault. It would not be for the banks to check with other banks whether the customer had lied. But it would be for the banks to ensure that the customer understood the process and why it existed. 2. I would apply it to Manx deposits. ie - you would not be allowed to deposit more than 1/5 of your IOM deposits with any single IOM group. It might be possible to take the process a step further by issuing IOM depositor numbers perhaps - so anyone depositing on the IOM would get a number from govt would be attached to all their accounts. Remember that the point of this would not be mindless bureaucracy. It would be about building in low cost consumer protection. I am proposing that this could ultimately replace the need for a £50K DPS since customers would essentially provide their own spread. Link to comment Share on other sites More sharing options...
Sebrof Posted June 10, 2009 Share Posted June 10, 2009 1. It would be a box ticking exercise. You are required to declare etc ... If you break the rules then it is your own fault. It would not be for the banks to check with other banks whether the customer had lied. But it would be for the banks to ensure that the customer understood the process and why it existed. 2. I would apply it to Manx deposits. ie - you would not be allowed to deposit more than 1/5 of your IOM deposits with any single IOM group. It might be possible to take the process a step further by issuing IOM depositor numbers perhaps - so anyone depositing on the IOM would get a number from govt would be attached to all their accounts. Remember that the point of this would not be mindless bureaucracy. It would be about building in low cost consumer protection. I am proposing that this could ultimately replace the need for a £50K DPS since customers would essentially provide their own spread. Sounds reasonable. S Link to comment Share on other sites More sharing options...
Sebrof Posted June 10, 2009 Share Posted June 10, 2009 The DCS obliges the banks to contribute in proportion to their deposits. No it doesn't. See the regs. The banks have to contribute (subject to a minimum of £35k and a maximum of £350k in one year) 0.125% of their average deposit base. If the average deposit base of one bank is twice that of another, it will contribute twice as much, subject to the maximum and minimum caps. S Link to comment Share on other sites More sharing options...
Slim Posted June 10, 2009 Share Posted June 10, 2009 See the regs.The banks have to contribute (subject to a minimum of £35k and a maximum of £350k in one year) 0.125% of their average deposit base. If the average deposit base of one bank is twice that of another, it will contribute twice as much, subject to the maximum and minimum caps. S It's not simply a total proportion of deposits, as you say it's capped and it excludes deposits from other banks. There's also provision in there regarding the total amount expected to be levied in future years from all banks: "may determine to levy from each participant by way of contribution in respect of the relevant year an amount equal to such proportion of the maximum amount which the Scheme Manager would otherwise be entitled to levy from such participant pursuant to this regulation as the estimated aggregate compensation costs for the relevant year plus (if the Scheme Manager considers it is appropriate to take such costs into account) any estimated compensation costs in respect of any one or more future years bears to the Aggregate Maximum Levy. " Sorry for the google manxman2, but I haven't memorised the act. Link to comment Share on other sites More sharing options...
bellyup Posted June 10, 2009 Share Posted June 10, 2009 There are other banks operating on the IOM whose parent companies have recently had to be rescued from default by taxpayers in other jurisdictions. IOM taxpayers have had to contribute NOTHING to keep banks such as Lloyds TSB and Royal Bank of Scotland in business on the IOM. Governments around the world have been generous with their own taxpayers' money to support their financial services industries. The Isle of Man is the only jurisdiction in the world in which Kaupthing customers have not yet been promised the return of all their money. Yet in fighting for parity with other Kaupthing depositors some residents of IOM have the temerity to call the depositors who have lost everything greedy ! If the economy is doing so well it can afford to do the honorable thing to support its depositors and 'stand in their shoes ' as other governments have done and at the same time enhancing its reputation as a safe and secure financial centre. WHAT?! There isn't anything honourable or morally correct/right in using taxpayers money to support those depositors who have lost money. None at all. And the banks were not bailed out because it was the right thing to do for the depositors. Really if things mess up like they have it is tough shit for the depositors, the bank, and the shareholders. But where banks have been bailed out the government's decided that shift the problem onto everyone. They socialised the risk. There isn't anything morally right about this at all. Just because other governments have done it, doesn't mean the Island should. If you had your money in Bradford and Bingley IOM you are being supported by the UK taxpayers money even if you live in the IOM. Link to comment Share on other sites More sharing options...
La_Dolce_Vita Posted June 10, 2009 Share Posted June 10, 2009 If you had your money in Bradford and Bingley IOM you are being supported by the UK taxpayers money even if you live in the IOM. Well that is up to the UK government and it is up to the Isle of Man government what it does but morality and honour don't play in the part in the reasons why they were bailed out and why they should. Link to comment Share on other sites More sharing options...
triskelion Posted June 10, 2009 Share Posted June 10, 2009 If you had your money in Bradford and Bingley IOM you are being supported by the UK taxpayers money even if you live in the IOM. Even though B&B's deposit business is owned by Santander? Well done. Link to comment Share on other sites More sharing options...
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