The final battle by thousands of Kaupthing Singer & Friedlander Isle of Man (KS&F IoM) depositors to recover their savings has now begun, with the bank having been formally placed into liquidation.
The liquidation, which occurred on Wednesday, means that the island’s Depositors’ Compensation Scheme (DCS) has now been activated. As a result, individual depositors are eligible to get up to £50,000 each, although it is expected to take some time because much of the money will come from the liquidation of the bank’s assets. Institutions are eligible for up to £20,000 under the plan.
The development follows the rejection by the bank’s more than 10,000 depositors of a Scheme of Arrangement (SoA) that had been proposed by the Manx government as an alternative to the DCS, after KS&F(IoM)’s Icelandic parent collapsed last October.
The majority of small depositors – those with claims under £50,000 – had favoured the SoA, which Manx officials maintained was a much better plan for most of the depositors, but larger depositors and unsecured creditors vetoed it.
The veto of the SoA was seen as a blow for some investors whose money was held in the bank through investment bonds, since they would have been better off had it been accepted.
"Final recovery is very difficult to predict as it relies on many factors, including the performance of world stock markets," said Axa Isle of Man managing director Mike Foy.
"Under the SaA there was an expectation of 75% recovery at least, based on a recent announcement from the liquidator of the UK arm of Kaupthing suggesting 50% recovery of UK-based assets held by the bank in the Isle of Man."
Call for inquiry
News of the liquidation prompted renewed calls by some KS&F(IoM) depositors for an investigation into the transfer of some £550m of deposits from the KS&F branch on the Isle of Man to its UK headquarters just before the parent company’s collapse.
Critics, including the Kaupthing Singer & Friedlander Isle of Man Depositors Action Group, have argued that this last-minute transfer of such a large amount of money was out of character for the bank and unfair to the Isle of Man branch’s depositors, in that it left it unable to return their money.
Meantime, KS&F(IoM) depositors said that their ability to check their balance online, at the bank’s website, has just been cut off. “It’s not particularly significant, I suppose,” one KS&F(IoM) depositor noted, “[but] some depositors felt happier that they could still see their money there, [even if they couldn’t get at it]”.
Information about the liquidation can be found on the the Isle of Man government’s website at www.gov.im. A new website to provide information about the Depositors’ Compensation Scheme is at www.dcs.im. In addition to providing information about the scheme, it will later enable claimants to submit their claims on-line and be the main form of general communication to depositors, according to the government.
A letter is due to to be sent to potential scheme claimants by 5 June that will explain who may submit a claim and how to go about it. The same information is also due to be posted on the DCS website.
