pongo Posted June 12, 2009 Author Share Posted June 12, 2009 What you are calling 'regulatory failures' only seem like mistakes with the benefit of hindsight, as no one can claim to have forsaw what happened with KSFIoM. Yes definitely. Good points Triskelion. And yet now it seems so obvious. Putting more than a small proportion of the deposits with any single other institution is a mistake. We know that now and we can see why. It was not obvious previously. Who can say that the UK might not again one day have to take sudden action to put a dangerously unstable bank or other institution into administration? Or suppose a smaller banking group went down because of some other extraordinary events - perhaps another rogue trader. So would you agree that if it happened again then it would be a regulatory failure - if an institution here suffered a catastrophic loss in the future because it had an overly significant amount of its deposits with a single institution somewhere else? And when I say regulatory failure - well I am literally addressing the processes - as opposed to trying to find people to blame. I really do not think that any of this should be about blaming individuals here or anywhere else. It's always ultimately about the processes. Then I suppose my follow-up question would be what positive changes do you see coming out of this Triskelion? How can the processes be adjusted to make banking here more secure? Link to comment Share on other sites More sharing options...
Reputation Posted June 12, 2009 Share Posted June 12, 2009 Hmm. My thoughts are that if the regulator didn't have a problem with KSFIOM placing £550 million unsecured with a single institution then was he that good a regulator?.. and then what has he done since then to convince the FSC that he was worth a pay rise? Almost anyone can react to experience, but shouldn't the top person be able to think ahead to prevent trouble in the first place? I think so. Link to comment Share on other sites More sharing options...
Rhumsaa Posted June 12, 2009 Share Posted June 12, 2009 It's easy to sit here on a forum with no knowledge of the events prior to the situation occurring and say what should or shouldn't have been... Seeing as KSF UK were desperate to keep hold of all the money they could is it really likely they would go along with any regulatory demands? it's not as though the FSC could simply tell KSFIOM to leave the island immediately should they drag their heels in complying.... what else? a few public fines to bring the reputation of KSF IOM even further into the mud? I think this is being viewed with 20/20 hindsight and a firm helping of having your cake and eating it Link to comment Share on other sites More sharing options...
hboy Posted June 12, 2009 Share Posted June 12, 2009 Seeing as KSF UK were desperate to keep hold of all the money they could is it really likely they would go along with any regulatory demands? it's not as though the FSC could simply tell KSFIOM to leave the island immediately should they drag their heels in complying.... what else? a few public fines to bring the reputation of KSF IOM even further into the mud? I'm actually agreeing less with Bellyup over the last 5 pages of threads because its clear nothing is going to placate him except a big cheque and a sorry letter from all 85,000 residents of the IoM. However in terms of the lending back of the £550m - the FSC should years ago have stopped banks here just being open lines of credit for their UK parents. There was never any diversification in the loan books and virtually 100% of all deposits were lent back to the UK parents. It was always a stupid idea prone to problems once the banking system got into difficulties. It is, however, the IOMs only banking model and if the regulators stopped it we'd have no banking industry at all. They can do what they like but the minute our regulators try to force Manx deposit takers to act like proper banks our whole system is totally f**ked and you can kiss goodbye to 60% of the jobs in the banking industry. Link to comment Share on other sites More sharing options...
pongo Posted June 12, 2009 Author Share Posted June 12, 2009 However in terms of the lending back of the £550m - the FSC should years ago have stopped banks here just being open lines of credit for their UK parents. There was never any diversification in the loan books and virtually 100% of all deposits were lent back to the UK parents. It was always a stupid idea prone to problems once the banking system got into difficulties. It is, however, the IOMs only banking model and if the regulators stopped it we'd have no banking industry at all. They can do what they like but the minute our regulators try to force Manx deposit takers to act like proper banks our whole system is totally f**ked and you can kiss goodbye to 60% of the jobs in the banking industry. I disagree with your conclusion. There is no reason why the IOM banks could not be regulated to spread the risk amongst themselves. Like how independent book makers do the maths and offload bets. And - as I have been suggesting - to regulate such that depositors effectively cover themselves by not being allowed to put more than a proportion of their deposits with any single institution. Link to comment Share on other sites More sharing options...
hboy Posted June 12, 2009 Share Posted June 12, 2009 However in terms of the lending back of the £550m - the FSC should years ago have stopped banks here just being open lines of credit for their UK parents. There was never any diversification in the loan books and virtually 100% of all deposits were lent back to the UK parents. It was always a stupid idea prone to problems once the banking system got into difficulties. It is, however, the IOMs only banking model and if the regulators stopped it we'd have no banking industry at all. They can do what they like but the minute our regulators try to force Manx deposit takers to act like proper banks our whole system is totally f**ked and you can kiss goodbye to 60% of the jobs in the banking industry. I disagree with your conclusion. There is no reason why the IOM banks could not be regulated to spread the risk amongst themselves. Like how independent book makers do the maths and offload bets. And - as I have been suggesting - to regulate such that depositors effectively cover themselves by not being allowed to put more than a proportion of their deposits with any single institution. Is that not what the DCS does. It just spreads the risk of failure across all banks rather than encourage them to diversify their books? Link to comment Share on other sites More sharing options...
triskelion Posted June 12, 2009 Share Posted June 12, 2009 Hmm. My thoughts are that if the regulator didn't have a problem with KSFIOM placing £550 million unsecured with a single institution then was he that good a regulator?.. and then what has he done since then to convince the FSC that he was worth a pay rise? Almost anyone can react to experience, but shouldn't the top person be able to think ahead to prevent trouble in the first place? I think so. Using generic terms like 'single institution' kind of obscures the issue; context is very important. KSFIoM didn't put this money into some Cook Islands-domiciled investment plan; they put it with an established bank within their own group that was operating successfully within the UK - a stable and well-regulated jurisdiction. Also it is unfair to say it was all John Aspen's doing - he is not the entire FSC. Arguably, wasn't it proactive to insist that they recall monies upstreamed to the parent bank in Iceland? Clearly the FSC has not covered itself in glory, but it was hamstrung by the fact KSFIoM was unable to continue as a going concern. Who can say that the UK might not again one day have to take sudden action to put a dangerously unstable bank or other institution into administration? Or suppose a smaller banking group went down because of some other extraordinary events - perhaps another rogue trader. So would you agree that if it happened again then it would be a regulatory failure - if an institution here suffered a catastrophic loss in the future because it had an overly significant amount of its deposits with a single institution somewhere else? And when I say regulatory failure - well I am literally addressing the processes - as opposed to trying to find people to blame. I really do not think that any of this should be about blaming individuals here or anywhere else. It's always ultimately about the processes. Then I suppose my follow-up question would be what positive changes do you see coming out of this Triskelion? How can the processes be adjusted to make banking here more secure? Well, the role of the regulator is never, and should never, extend to ensuring a business never makes bad decisions. In terms of financial services, you will inevitably get businesses that have exposed, or over-exposed, themselves to a venture that goes south. Really though, how many small banks are left now in Western Europe? I personally do not see any changes of great significance to the Island's regulatory regime. The deposit-taking banks will have to keep upstreaming substantial amounts to their parents. A massive issue with KSF was that the FSA did not inform the FSC of what was going on, but I don't see that changing. I'm also struggling to imagine anyway upstreamed deposit monies could be given priority, as ultimately they are subject to the regulatory regime in the parent bank's country. Link to comment Share on other sites More sharing options...
pongo Posted June 12, 2009 Author Share Posted June 12, 2009 However in terms of the lending back of the £550m - the FSC should years ago have stopped banks here just being open lines of credit for their UK parents. There was never any diversification in the loan books and virtually 100% of all deposits were lent back to the UK parents. It was always a stupid idea prone to problems once the banking system got into difficulties. It is, however, the IOMs only banking model and if the regulators stopped it we'd have no banking industry at all. They can do what they like but the minute our regulators try to force Manx deposit takers to act like proper banks our whole system is totally f**ked and you can kiss goodbye to 60% of the jobs in the banking industry. I disagree with your conclusion. There is no reason why the IOM banks could not be regulated to spread the risk amongst themselves. Like how independent book makers do the maths and offload bets. And - as I have been suggesting - to regulate such that depositors effectively cover themselves by not being allowed to put more than a proportion of their deposits with any single institution. Is that not what the DCS does. It just spreads the risk of failure across all banks rather than encourage them to diversify their books? Bookies offload bets in order to limit their own risks - ie so that they don't go out of business. ^ well that is certainly how it used to be. I've no idea how it works these days. That's why they traditionally had a son who became a maths genius Link to comment Share on other sites More sharing options...
hboy Posted June 12, 2009 Share Posted June 12, 2009 Bookies offload bets in order to limit their own risks - ie so that they don't go out of business. ^ well that is certainly how it used to be. I've no idea how it works these days. That's why they traditionally had a son who became a maths genius I do actually agree with you on that. However as we have seen with the likes of AIG in the States the risks of being a key market player are systematic. If you are a big player in that system your screwed as your writing similar contracts and covering similar risks across the board with competitor businesses. I still maintain that we have no business model if we were to encourage risk sharing amongst banks. As someone pointed out to me years ago; you might as well go on the roof of any bank here with an angle grinder and cut a great big slot in the roof because all they are is tax-free piggy banks for their UK parents. They don't do anything, they don't even offer any services to locals, they just take in money through a big slot in the roof and lend it back to the UK. They have no other function. And to be fair if you asked their staff to run a lending book they would not have a clue what to do. Link to comment Share on other sites More sharing options...
pongo Posted June 12, 2009 Author Share Posted June 12, 2009 I personally do not see any changes of great significance to the Island's regulatory regime. The deposit-taking banks will have to keep upstreaming substantial amounts to their parents. A massive issue with KSF was that the FSA did not inform the FSC of what was going on, but I don't see that changing. Agreed. They could not have notified anyone in advance of what was (according to the media) an intelligence based do. I'm also struggling to imagine any way upstreamed deposit monies could be given priority, as ultimately they are subject to the regulatory regime in the parent bank's country. In that case I think that depositors should not be allowed to put more than a certain fraction of their IOM savings with single IOM depositor taker. I'm suggesting 1/5th. Which is only to enforce common sense. all they are is tax-free piggy banks for their UK parents. They don't do anything, they don't even offer any services they just take in money through a big slot in the roof and lend it back to the UK. I don't understand why the British Govt do not make it easier for UK ex patriots to open accounts in the UK. Then the IOM would not be in this mess. Link to comment Share on other sites More sharing options...
The Voice of Reason Posted June 12, 2009 Share Posted June 12, 2009 As someone pointed out to me years ago; you might as well go on the roof of any bank here with an angle grinder and cut a great big slot in the roof because all they are is tax-free piggy banks for their UK parents. They don't do anything, they don't even offer any services to locals, they just take in money through a big slot in the roof and lend it back to the UK. They have no other function. Well as a local I have a current account with one of them, through whom I took out a mortgage. Are these not services? Also loans, savings accounts etc? Link to comment Share on other sites More sharing options...
hboy Posted June 12, 2009 Share Posted June 12, 2009 As someone pointed out to me years ago; you might as well go on the roof of any bank here with an angle grinder and cut a great big slot in the roof because all they are is tax-free piggy banks for their UK parents. They don't do anything, they don't even offer any services to locals, they just take in money through a big slot in the roof and lend it back to the UK. They have no other function. Well as a local I have a current account with one of them, through whom I took out a mortgage. Are these not services? Also loans, savings accounts etc? They are ancilary services. The mortgage rate you get here is bugger all close to the discounted deals the same bank offer to UK resident account holders through their UK branches. When has a manx mortgage ever been competitive compared to the deals you can get in the UK? Link to comment Share on other sites More sharing options...
The Voice of Reason Posted June 12, 2009 Share Posted June 12, 2009 As someone pointed out to me years ago; you might as well go on the roof of any bank here with an angle grinder and cut a great big slot in the roof because all they are is tax-free piggy banks for their UK parents. They don't do anything, they don't even offer any services to locals, they just take in money through a big slot in the roof and lend it back to the UK. They have no other function. Well as a local I have a current account with one of them, through whom I took out a mortgage. Are these not services? Also loans, savings accounts etc? They are ancilary services. The mortgage rate you get here is bugger all close to the discounted deals the same bank offer to UK resident account holders through their UK branches. When has a manx mortgage ever been competitive compared to the deals you can get in the UK? Ancilliary services to what? If you walk into, say, Barclays here you will find they offer the same retail services as they offer in their Liverpool, London etc branches . Basically you are wrong when you say "they don't even offer services to locals " (who use those retail services). But hey I'm not into petty point scoring so your mistake does not really matter. Link to comment Share on other sites More sharing options...
manxman2 Posted June 12, 2009 Share Posted June 12, 2009 pps is the new black. Link to comment Share on other sites More sharing options...
The Voice of Reason Posted June 12, 2009 Share Posted June 12, 2009 pps is the new black. Parliamentary Private Secretary? Link to comment Share on other sites More sharing options...
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