Isle of Man’s Depositors’ Compensation Scheme ("DCS")

The Isle of Man has a depositors’ compensation scheme (DCS) which may compensate you if a bank in which you have deposited money fails. Please read the DCS Regulations 2010 for full details of the 2010 DCS (in operation from 23 October 2010). The following is a summary.

To pay compensation to depositors, a fund is created when a bank fails. The fund comprises contributions from other deposit takers (banks and building societies) in the Isle of Man (to a maximum of £100 million) and money from the Isle of Man Government (also to a maximum of £100 million). Therefore the amount contributed by deposit takers and Government together is limited to £200 million outstanding at any one time, no matter how many defaults may take place. The Scheme Manager may (but does not have to, or may not be able to) borrow money to increase the fund value.

There is no time limit for payment of compensation. The amount of compensation paid and the timing of compensation payments will depend upon the size of the deposit taker which fails and the amount of funding contributed. The payment period will also vary according to whether, and to what extent, the DCS borrows, the timing of the contribution from the Treasury and the timing of levies from participants.

A summary of the cover provided by the DCS is as follows:

• The DCS compensates people who have money in current and deposit accounts in banks and building societies licensed in the Isle of Man. The maximum compensation is calculated per depositor, in respect of ALL the accounts you hold with any one deposit taker.
• The maximum compensation is £50,000 of net deposits* per individual or £20,000 for most other categories of depositor. There is no guaranteed minimum compensation. (* Net deposits: Loans with the failed deposit taker may be netted off against any deposits you have with the same deposit taker).

  Examples for individual depositors:

  (1) If two or more individuals share a joint account, they are each entitled to up to £50,000 in compensation. So, if you have a joint account with one other individual which contains £80,000, you may each claim compensation of ½ of £80,000 ie £40,000.

  (2) If in the previous example you also had £25,000 in a sole account, the total balances apportioned to you under the DCS would be your share of the joint account (ie £40,000), plus the £25,000 of your own, giving a total of £65,000. As this exceeds the maximum covered by the DCS, you would be entitled to claim the maximum compensation of £50,000. If there are sufficient funds on liquidation of the failed bank, you may receive the remainder from the liquidation proceeds.

  (3) If you have total credit balances of £80,000, also a mortgage of £50,000, your mortgage could be netted off against your credit balances, to leave a net total of £30,000. You would therefore be entitled to claim £30,000 from the DCS.

  Note that in each of these cases, the maximum amount of compensation actually paid will be restricted by the amount in the DCS fund.

• The Isle of Man’s DCS covers depositors irrespective of which country they live in or are incorporated in.
• All licensed deposit takers (banks and building societies) in the Isle of Man are members of the DCS, except those few which are listed in the Schedule at the end of the DCS Regulations. The banks listed in the Schedule do not take deposits in the Island from the general public. Here is a list of the deposit takers in the DCS.
• Your money with each deposit taker that is separately licensed in the Isle of Man is covered separately under the DCS, even if you have accounts with more than one bank in the same group. However, if a deposit taker operates under more than one “brand” (or business name), you are only covered once, and not once per brand. Here is a list of ALL deposit takers (banks and building societies) which are licensed in the Isle of Man.
• Deposit compensation schemes in the UK, Ireland or elsewhere do not cover deposits with banks or building societies in the Isle of Man.
• In order to claim compensation you will have to assign your rights to the total of all your deposits with the bank or building society to the DCS manager.
• The Isle of Man Government’s Treasury is responsible for administration of the DCS, although it may appoint another person or body as the Scheme Manager.
• If you have claimed compensation in respect of Kaupthing Singer & Friedlander (Isle of Man) Ltd, your claim will continue to be handled under the 2008 Regulations as these were in force at the time of that bank’s default.

This page has been revised to reflect the Depositors’ Compensation Regulations 2010.

Isle of Man’s Authorised Collective Investment Schemes’ Compensation Scheme ("ACISCS")

The Isle of Man also has a scheme to compensate investors in authorised collective investment schemes. A summary of the cover provided by the ACISCS is as follows:

• The ACISCS partially compensates you if an authorised collective investment scheme in which you have invested fails to pay you when money is due to you.

• Compensation may be due to you if a manager or trustee of an authorised collective investment scheme fails to repay you when required by the terms of the scheme.

• Compensation payable is as follows : 100% of the first £ 30,000 90% of the next £ 20,000 with a MAXIMUM Compensation of £48,000.

• Compensation is paid out of levies collected from other authorised scheme managers and trustees ("authorised persons") in the Isle of Man. There is no "standing fund" of compensation (i.e. money is not collected in advance).

• All authorised persons in the Isle of Man are members of the ACISCS. A list of these is on the FSC’s website.

• The legislation for the Isle of Man’s authorised collective investment schemes’ compensation scheme can be found on the FSC’s website.

Kaupthing Singer & Friedlander (Isle of Man) Limited

Information in relation to the depositors compensation scheme on Kaupthing Singer & Friedlander (Isle of Man) Limited can be accessed here.