Isle of Man Depositors Compensation Scheme

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The credit crunch and the current economic outlook has meant it has been a very unsettling time for savers all around the world and in the offshore jurisdictions including the Isle of Man. The recent bailout by the UK Goverment of Bradford & Bingley as well as continued rescue plans by European governments has begged the million dollar question by savers, ‘is my money safe?’

Take Depositor Compensation schemes for example they have certainly been hitting the headlines as governments attempt to do give the best possible deal to savers should a bank go under. In the Channel Islands for example no scheme of this sort exists and goverments everywhere seem to be draughting legislation or putting schemes in place if they have not had one already.

From an Isle of Man point of view things are a little different to other parts of the world such as the UK and even the Channel Islands but you may have already guessed that from a place that has the worlds most dangerous motorbike road races, the oldest existing parliment and cats with no tails!
The Isle of Man has a depositors’ compensation scheme (“DCS”) is run by the FSC. The DCS partially compensates you if a bank in which you have deposited money fails. To pay compensation, a DCS fund is created (when needed) from contributions made by other banks in the Isle of Man.

The DCS compensates people who have money in current and deposit accounts in the Isle of Man with 75% of up to £20,000 of net deposits per depositor per bank, if the bank fails.

This means maximum compensation payable is £15,000 per depositor – this amount would be paid to someone with £20,000 or more. However this is currently being reviewed by Isle of Man MHK’s.

Payment is per depositor, not per account, therefore each person who shares a joint account can receive compensation, but if you have more than one account you won’t receive more than one compensation payment.

A point worth making and I am not sure how many savers are aware of this, but compensation is paid out of levies collected from other banks in the Isle of Man. Levies are collected at a maximum of £250,000 per bank per year. As there are a limited number of banks which pay levies, it could take many years for compensation to be paid to depositors. This period could also vary according to when liquidation proceeds are collected from the failed bank and how much is recovered. There is no “standing fund” of compensation so money is not collected before a bank failure). So there is not a fund of cash sitting in a safe in the back of the FSC office waiting to be handed out if the worst should happen!

I do really sympathise with the public on all of this as its peoples hard earned savings and its important that people get there money back if it should happen. What I don’t agree with is the all these banks being bailed out by governments when they have been greedy and irresponsible, the banks should be punished severely for their actions and any profits given back to the people and not to line some fat cats pocket!

What I do know is that my bank account is 100% safe while all this is going on, I don’t have any savings in it! Damm!

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