Thanks to everyone who posted replies to my blog of 14th June, Promises, Pledges and a Pile of Protection.
My interview with John Aspden, Chief Executive Officer of the Isle of Man's Financial Supervision Commission, is part of an ongoing research project I've initiated on behalf of ExpatMoneyChannel (http://www.expatmoneychannel.com) across the three islands that make up Offshore Britain - Jersey, Guernsey and the Isle of Man - to explore the options currently available to expatriate savers and investors following the financial crash of 2008/09. Its central theme is, 'where do we go from here?'
The project is completely independent. I stress this because, referring to KSF(IOM) and the Island's depositor compensation scheme, views were posted suggesting that I'd let "that man Aspden" off the hook; I had a "rose-tinted" view of events; some of you went so far as to say I'd written a piece of "cheap" and "shoddy" (someone even said "dangerous") PR for this finance centre.
As far as my personal blog is concerned, strong comment is always welcome; rudeness, however, is not.
If you think I failed to appreciate how deeply many of you feel about this, I'm genuinely sorry for both your loss and your ongoing pain. Assuming you're British expatriates, I write on your behalf - have done so for the last twenty years - and seek to pass on to you the best financial information and advice available in the market place.
One respondent asks whether I was "one of those in the pre-banking crisis days that were extolling the virtues to expats of banking on the IOM and Guernsey?" I wrote then (and still do) that what all savers should be looking for is a consistently good rate payer - and, I'm afraid, that won't be the highest. Again and again I wrote (and still do) that if the return looks too good to be true then in all probability it will be. If extraordinary rates were ordinarily achievable in the savings market, surely other deposit-takers would be offering them, too?
Back in the UK, participants in the Christmas hamper firm Farepak are still waiting for the return of their savings. That collapse happened back in 2006. Farepak's customers saved throughout the year to build up enough vouchers to redeem at the UK's largest retailers for Christmas presents and food. The point being that nowhere in the world will any government guarantee the private purse, whatever the plight of those who've suffered a loss - whether they're hard earning or just hard up. KSF(IOM) depositors are having to wait a very long time for compensation; and Farepak customers are still waiting and still not assured that the pay out will reach the insultingly small sum suggested of 15p in the £1. If you believe that somewhere in the world there's a financial Shangri-la where savers will always be bailed out by a lender of last resort (in other word's the country's tax payers), you're just plain wrong.
And to those of you warning that the Isle of Man is staring at a black hole in its Treasury, can I remind you that the UK is staring at a £176 billion black hole. And what about the black holes in Greece, or Spain, or Ireland, or Portugal?
As a reporter, commentator and author on personal finance for British expatriates, I have two objectives over and above reporting on the various products available in the market place; the first is to de-mystify, by digging beneath the small print and untangling the convoluted lexicon behind which the financial world operates; the second is to empower, so that my readers enter the market place knowing what questions they should have answered before they part with their money.
I know that were I a saver with KSF(IOM) and it was my money that was lost, and I was left stranded not knowing whether or when I would see it back, I would be frustrated in the extreme and not a little frightened.
For my readership not directly involved in the KSF(IOM) imbroglio, however, finding a savings home away from the UK is still an urgent task. The majority of British expatriates are forced to save in an offshore institution because current KYC (know your customer) regulation makes it so difficult to open a savings account back in the UK. What's more, whilst many of those expatriates want to save in sterling, others prefer the US dollar or the euro, to which end they also have to turn towards one of the three centres making up Offshore Britain. All of which is why in my blog, Promises, Pledges and a Pile of Protection, I volunteered where I was putting my money, ie, where my mouth is. I'm broadly supportive of the Isle of Man because, whilst nowhere is perfect, it provides depositors with a safety net of a £50,000 compensation scheme.
ExpatMoneyChannel. com is a bespoke platform for British expats needing to know about financial matters and wanting to talk to others in a similar situation. So, Mark - we'll be dealing with Guernsey shortly - watch this space. Lou, Angela, EV, Tricky, Stuart, are you speaking as expatriates? If so, you have the kind of experience ExpatMoneyChannel and its audience could learn from.
What do you intend to do next with your savings? www.expatmoneychannel.com/node/979
What were the factors that led you to choosing your new deposit-taker? www.expatmoneychannel.com/node/309 and www.expatmoneychannel.com/node/1154
Have you checked your new jurisdiction's financial regulation? www.expatmoneychannel/com/node/645
Do you clearly understand the difference between deposit protection and deposit compensation? www.expatmoneychannel.com/node/1129
And what do you feel now, in this post credit crunch era, about savings rates and investment returns? Your comments will move the debate forward. Stay with our forum, fuel the discussion, share your ideas and your know-how. If you're British expatriates, we'd love to have you on board.
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13 comments:
One thing that might be useful for you to do, that would really help and aid expats (who directly and indirectly move the UK economy forward by exports) would be to campaign more than it appears you do, to try and reverse the situation, whereby UK passport holders wherever in the world they work or live can have access to UK Bank accounts. If UK banks with offshore branches can impose the 'know your customer' anti money laundering regulations, in those offshore branches, then it must have the systems in place to do exactly the same for mainland UK branches. This to my mind would also help the UK banks with their liquidity problems, they could pay back the Government the money they owe and then the Government would not be looking at such a large black hole as they are now
Hannah,
Thanks for your reply to the comments of KSFIOM depositors on your blog of 14th June (you will no doubt have seen that several more have been posted since the 5 you mention).
While I do not question your integrity, I feel you have fallen under the spell of the Spell man and been seduced by the spin of John Aspden. They are very practised at it – as we are well placed to know! I refer you to Tony Cavanna's post for a reminder of some of the less positive aspects of the IoM's handling of the collapse of KSFIOM, which no doubt were not mentioned in your interview. The result of all their procrastination and delaying tactics (remember there is no standing fund for the compensation scheme, so no way they could have paid out in a timely fashion) was that, apart from two so-called « early payments » (one of £1000 and another of £9000, respectively around 3 and 6 months after the collapse of the bank), depositors, including those with deposits below the compensation limit, received nothing until one full year after the collapse. How different from the retail depositors of the London arm of the same Icelandic bank, who were paid out with weeks.
I wish you luck with your project, but think you are on a hiding to nothing. The real options for expatriate savers are now almost non-existent. In my case, I am fortunate enough to live in a European country where banking is a priori at least as safe as in the UK and only retained an IOM account because I wanted an account in sterling for use on visits etc. But many expats are in a much more difficult situation. I really don't know what they are supposed to do. As Tricky says above, the only real solution would be for the mainland UK banks to be obliged to allow expatriates to open and maintain accounts. Sure the regulations have made it more complicated for them, but – as HMG never fails to point out to us – they are not legally prevented from doing so.
Most of us would like nothing more than to be able to open a straightforward savings account in a UK bank or building society which is « a consistently good rate payer », but they are all closed to us. Since recovering a part of my lost savings in KSFIOM, I – like others - have tried, but with no UK address they simply refuse point blank. But I will never again keep anything more than a minimal current account in the IOM or any other offshore jurisdiction. Once bitten ...
Since recovering a part of my lost savings in KSFIOM, I – like others - have tried and failed, but with no UK address they simply refuse point blank. But I will never again keep anything more than a minimal current account in the IOM or any other offshore jurisdiction. Once bitten ...
When, back in 2001, I opened an account with Derbyshire Offshore (IOM), I was not looking for « extraordinary rates ». I was looking for exactly what you describe – a « British » building society with decent but not extraordinary rates. Yet in late 2007 I found myself an unwitting customer of a a « northern European bank » I had never heard of and would never have chosen, with no possibility of withdrawing funds from two fixed term accounts without penalty. All this under the watchful eye of Mr Aspden. Less than a year later, my money was gone. About half of all KSFIOM victims were former Derbyshire depositors, a majority of them expats.
I wish you luck in the IOM. But I wouldn't count too much on the compensation scheme's safety net in case of a future collapse. It might sound all well and good on paper, but there is still no standing fund. This time it took a year and financial input from the IOM Treasury to gather together enough to meet its obligations. Next time around it may well take even longer.
Having re read your article there are points that perhaps would help your research project:
1. You wrote "Again and again I wrote (and still do) that if the return looks too good to be true then in all probability it will be. If extraordinary rates were ordinarily achievable in the savings market, surely other deposit-takers would be offering them, too?"
KSFIOM was not offering extraordinary rates, it was even in Sept 2008 holding 'AAA' ratings AND the bank was using as marketing the fact that it had a Parental Guarantee to fall back on.
2. You wrote "The point being that nowhere in the world will any government guarantee the private purse, whatever the plight of those who've suffered a loss - whether they're hard earning or just hard up."
So how was it that if you had an Icesave account or other Icelandic bank account and were a UK resident citizen, HM Government protected your deposit 100%. Every country that was affected by the collapse of the Kaupthing Group has ensured that its depositors were repaid, quickly, 100% of their deposits EXCEPT IOM and Guernsey.
3. You wrote "As a reporter, commentator and author on personal finance for British expatriates, I have two objectives over and above reporting .........."
I would have thought you should be providing reporting from both sides, of a problem such as this, rather than only reporting one side and relying on depositors caught up in this to have only an avenue of commenting on a full blown report that has already 'gone to press'
4. I think you will find that every other 'country' that has a compensation scheme for depositors, also has a bank of last resort. The IOM does not have one and if called upon they have to then go cap in hand to the banks and 'ask' for levies. As most are branches of UK banks, they can as they have done in our case, tell the IOM 'where to go'.
6. What may not be understood here by other expats is that IOM, Jersey and Guernsey are just cash cows, providing liquidity in the form of retail deposits to the investment markets in London for them to play the markets with.
5. For your information, I am an expatriate
Hanna,
For the record. I am a Londoner now living in Australia.
I cannot let the "too good to be true" comment go without a rebuttal. There is a myth perpetrated on the IOM that KSFIOM paid very high interest rates. When KSFIOM took over our Derbyshire accounts the new accounts were on the same terms as the old. At the time I had a base rate tracker account, 35 basis points above the Bank of England rate. I subsequently moved my deposit to a high interest rate account. Would you like to guess what the interest rate was at that time? 8%, 10% perhaps? No, it was about 6.8% the same as other high interest accounts at other banks on the island.
In fact if you think about it banks should pay a lot more interest than a paltry 3-4% given you can loose your whole deposit if they go belly up.
Australian banks have a good reputation, some were offering 8% just before the Global Financial Crisis would you say that was risky?
Then there is the small print. In fact the Kaupthing Brochure is remarkably devoid of small print. It simply says "Licenced by the Isle Of Man Financial Services Commission to conduct Banking and Investment Business. Authorised and Regulated by the Financial Services Authority for UK Mortgage Business Only"
In the time that it took for liquidation to happen the pound had declined by approx 25% against the Australian dollar. This delay has cost me tens of thousands of dollars. Sterling is now about 2/3 of what it was at the time of the collapse. A double whammy in my case because in reality I'll get nothing like even 90% of what I'm owed.
Tony.
I think one of the major problems here is that the impression your report gives is that the IOM and the FSC are doing everything they can to help depositors, in fact assisting them in retrieving their lost deposits. The facts as we see them are completely antiposed to that view.
1. IOM have finally fired up the "much vaunted DCS", 9 months after the collapse of the bank. The money they have injected into the DCS (no bank levies as yet have been collected and if they were then the maximum from the levies would equate to £10 million per year) will be returned to them from the liquidation of the bank, as they become a creditor to the bank (ie they have or will in July this year have received back 50% of what they injected.
2. If they see the returns being as good as 93%, then why do they not for the sake of the IOM financial reputation and their slogan "Freedom to Flourish" (which in our view needs changing to "Freedom to Flounder") actually help depositors with the outstanding 7%, to me it would show what a "forward thinking centre" they purport to be, and it would probably cost them less than the millions they presently spend on their PR company Lansons, and other ‘external consultants’ to hide this mess.
3. They have only made 1 request, according to Freedom of Information to the UK Min of Justice for the UK to act on its behalf to represent the IOM in discussions with Iceland over this affair.
To be honest what you are reporting is what the IOM want you to report, to tell the expat world what a great financial world centre it is, why, because that is how the IOM makes its money, so that people like John Aspden can have a salary of £240,000 pa and yet he still talks about us as “uneducated investors” and not as depositors which we are, he makes comments such as “banks should be allowed to fail”, and these from the person who is the head of the Financial Services Commission that regulates these banks etc. Something to me is very wrong, and we are starting to find the facts that have been swept under the carpet.
Hannah
By saying "if the return looks too good to be true then in all probability it will be" you are implying that savers were chasing unrealistic rates. Nothing could be further from the truth.
In the case of Guernsey, for instance, many deposited their savings with the Cheshire. Their only mistake was not to immediately withdraw them once they discovered that their savings had been sold to an Icelandic bank that they'd never heard of, Landsbanki.
But the Guernsey FSC authorised the sale and also approved the wording of a Parental Guarantee which we now know is worthless because they didn't bother to check whether it had been signed. It hadn't.
To add insult to injury, the GFSC is now blaming savings for not discovering and reading an esoteric consultation paper that they issued on their website in which they mentioned, very belatedly, that Parental Guarantees are not legally binding.
www.landsbankiguernseyfiasco.net
www.thebankthatsank.co.uk
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