Banking and the Isle of Man

The last 9 months (9 months at the time of writing this) has proven one thing about the Isle of Man and its financial industry.  It is finished.  Looking at how the Isle of Man has handled this - albeit of the UK Governments making - disaster it has demonstrated the weakness and lack of sound leadership in the Isle of Man government (the Tynwald).

 

The Isle of Man has just 80,000 residents and yet had a multi-billion pound financial industry, mainly banking.  Created from its lower corporate taxation (compared with the rest of the UK  & Europe) and outside the beady eye of the UK tax enforcers it attracted a lot of - possibly slightly grimy - money.  Coupled with a less-than-transparent 'regulatory' system and a compensation scheme (DCS - Depositor Compensation Scheme) that was in place more for marketing purposes than actual consumer protection, the Isle of Man financial industry was never going to be sustainable.  Like a pack of cards, while the financial weather was good everything was OK but as soon as a tea-cup sized storm blew (IE. The UK Government taking the assets of an IOM bank to pay cat charities, Labour friendly millionaires  -Dave Whelan  and public companies that Labour MP's had shares in) the cards started to fall - the Kaupthing Singer and Freidlander debacle is just the start of IoMs collapse.

 

The leaders of the Isle of Man's 80,000 residents, Chief Minister Tony  Brown and Treasury Allan Bell started well  by correctly identifying the UK Government as the instigators and cause of the Kaupthing disaster.  But after being read the riot act and bullied

into changing their stance by senior UK ministers, with an eye to not rocking the boat with the G20 summit approaching, in a secret meeting prior to the UK Treasury Select Committee hearing 3 months after the disaster they suddenly changed their tone.

 

Following the secret dressing down by the UK Government, and with only 80,000 residents the IoM Government had no hope of ever being able to guarantee the Kaupthing Singer and Freidlander depositors savings.  Rather than biting the bullet and being honest about this, Tony Brown and his sidekick Allan Bell went on the offensive against the depositors.  Allan Bell and Tony Brown spent millions of pounds on devising a scheme that wouldn’t actually make the depositors any better off than the discredited DCS, but meant that the depositors could not mount any legal offensive against the Isle of Man!  After a dreadful and fundamentally flawed vote, the depositors rejected the scheme.  As if proof of the Isle of Man's stance of trying to penalise the innocent and suffering depositors was needed, Allan Bell and Tony Brown have shamefully gone on to make the depositors pay for the costs of the dodgy scheme they tried to con them into accepting.  The depositors, who already stand to lose the vast majority of their savings due to banking on the Isle of Man (many forced to do so), never asked for the dodgy scheme and at no point showed any support for it.  Yet the (now thoroughly discredited) Isle of Man law courts decided that that the depositors should pay the costs of the rejected scheme!!!! Anyone thinking of putting one penny of their money into an Isle of Man bank should really think twice as the evidence shows that the Isle of Man is not a safe place to put any money (unless you are part of the Brown/Bell/Corlett inner circle of chums).

 

The bottom line is that the Isle of Man simply should never be a centre of finance.  It simply does not have a high enough population and has not got a large enough economy to support a financial industry.  Over the coming years, and with the evidence of the dreadful treatment by the Isle of Man government meted out to the depositors becoming evident, savers and investors will realise the folly of using the Isle of Man as a financial centre.  During the first 6 months after the disaster the author of this site received many many emails from overseas British citizens saying that they were taking their money out of the Isle of Man (the emails were actually 'best wishes' emails, but also added that they were getting out) and taking exchange rate hits to bring their money to them locally (Remember that, without a UK address, it is impossible to get a UK bank account!).

 

The Isle of Man had the chance to prove its standing on the global financial stage.  But the leaders blew it.  As a result, thousands of innocent bank savers have had their lives destroyed and in the longer term the Isle of Man residents will suffer as their economy collapses.  The James Antony Brown's and Allan Bell's have badly let down the people who looked to them for leadership.  Shame on Tynwald.