The Department of Economic Development is consulting on a proposal to change the order in which recovered money is repaid in the event of a local bank becoming insolvent.
The move would give ‘preferred creditor’ status to eligible deposits as defined and covered by the Island’s Depositors’ Compensation Scheme (DCS), ranking them ahead of other creditors in the liquidation process.
This change would mean that vulnerable depositors and, if claim was made to the DCS, the public purse would be reimbursed earlier. For example, when Kaupthing Singer & Friedlander failed, the DCS pay-outs were funded initially by the Government, these would have been repaid earlier (reducing the financing costs) if preferred creditor status was in place.
The proposal is in line with developments in the European Union and elsewhere to protect smaller depositors and reduce the taxpayers’ exposure to loss through schemes to guarantee retail bank deposits.
Minister for Economic Development Laurence Skelly MHK said:
‘This proposal aims to better protect the interests of the vulnerable depositors and that of the Isle of Man taxpayer by ensuring they receive faster recovery of funds. Further it would reduce the interest costs incurred by the Government of financing the DCS. If the proposed scheme had been in place for the pay out to the depositors of Kaupthing Singer & Friedlander, then the speed of payment would have been substantially improved.’
The Isle of Man DCS provides protection up to £50,000 for individual deposits and £20,000 for corporate deposits.
The consultation opens on 11 September 2015 and closes on October 23 2015. Details can be found under Current Consultations at:
www.gov.im/about-the-government/government/government-consultations/
