Uk Nationalisation Of Banks

[Max Power 6,597]

With the nationalisation of several leading banks, could this bring an end to the offshore activities of those organisations?

[Sebrof 0]

With the nationalisation of several leading banks, could this bring an end to the offshore activities of those organisations?

 

It might, but not necessarily. And there are other banks.

 

S

[John Wright 8,343]

No, indeed it increases the need surprisingly

 

The problem today is liquidity.

 

Most offshore banks do very little lending, they deposit take and then pass on to HQ, that gives HQ liquidity. Any attempt to restrict off shore banking will severely impact on onshore liquidity so its all as was

 

This is the problem however. IOM Government does not guarantee its local banks deposits. It gives banks and insurers huge breaks and receives little tax to pay out from. Instead there is a levey on the other banks, they may not be able to pay or may take years to pay or it might be a line of dominoes onec the demand is made under the scheme

 

it also shows the weakness of a parent guarantee. if you lend on all the deposits to your parent and it goes bust the parent guarantee is worth nothing and you have lost all your assets.

 

KSF had lent all of its money to UK KSF, which had lent it all to K in Iceland. K in Iceland cannot pay, so KSF in UK cannot pay so KSFIOM cannot pay

[veuve 0]

No, indeed it increases the need surprisingly

 

The problem today is liquidity.

 

Most offshore banks do very little lending, they deposit take and then pass on to HQ, that gives HQ liquidity. Any attempt to restrict off shore banking will severely impact on onshore liquidity so its all as was

 

This is the problem however. IOM Government does not guarantee its local banks deposits. It gives banks and insurers huge breaks and receives little tax to pay out from. Instead there is a levey on the other banks, they may not be able to pay or may take years to pay or it might be a line of dominoes onec the demand is made under the scheme

 

it also shows the weakness of a parent guarantee. if you lend on all the deposits to your parent and it goes bust the parent guarantee is worth nothing and you have lost all your assets.

 

KSF had lent all of its money to UK KSF, which had lent it all to K in Iceland. K in Iceland cannot pay, so KSF in UK cannot pay so KSFIOM cannot pay

 

Whilst listening to CNBC yesterday I heard a Commentator asked whether they should continue to use Offshore Banking facilities.

The reply was a most certain recommendation to move all funds to an area that has fully guaranteed their depositors.

 

How does the Isle of Man intend to respond. We have a depositors protection scheme that is totally inadequate and will struggle to pay out even the smallest bank failure for many many years. maximum levy £500k per licence holder per year. Thirty licence holders (many like Barclays having more than one and may surrender one or more) means at most £30 million a year available to compensate depositors and realistically somewhat less as people like Conister would only have to subscribe a lesser amount because of their small size. KSF may have had £2 billion of deposits of which maybe £500 million should be covered up to £50,000. That means that it will take over 15 years to repay depositors and many with more than £50k are left as big losers. A deposit in the UK or even Ireland is government guaranteed for the full amount.

 

The main reason for locals and indeed people living abroad using Manx and other offshore Banks has been to avaoid UK Income and possibly more importantly UK Inheritance Tax. Now that the UK limits have been substancially raised on Inheritance Tax that is of slightly less concern to the medium sized depositor. So why should anyone with more than £50k continue to use IOM Banks. Indeed even with under £50k

do you really want to have to wait years to be repaid should the worst happen ?

[ai_Droid 1]

The main reason for locals and indeed people living abroad using Manx and other offshore Banks has been to avaoid UK Income and possibly more importantly UK Inheritance Tax. Now that the UK limits have been substancially raised on Inheritance Tax that is of slightly less concern to the medium sized depositor. So why should anyone with more than £50k continue to use IOM Banks. Indeed even with under £50k

do you really want to have to wait years to be repaid should the worst happen ?

 

The 50k limit is the same as the UK, a sensible realistic gurantee. The countries who've made promises of full guarantees have done so for political reasons, and there's no evidence that they can make good. I'd stick with a 50k guarantee that exists rather than an unlimited one that's only on a politicians speech notes.

 

In my opinion no country can make unlimited depositor guarantees and afford to back that up in the event of a large scale banking collapse.

[The Old Git 817]

The main reason for locals and indeed people living abroad using Manx and other offshore Banks has been to avaoid UK Income and possibly more importantly UK Inheritance Tax.

 

From reading some of the KSF depositors' posting on various sites is seems that expat Brits had difficulty in opening UK bank accounts and were advised to go offshore by those banks. Avoiding tax, I suspect, is becoming harder due to tax information exchange between various countries.

Edited October 15, 2008 by The Old Git

[Minxie 20]

On Radio 4 now

 

You and Yours :

 

Offshore bank customers left in the lurch?

We ask how safe are offshore accounts?

[pongo 4,576]

The 50k limit is the same as the UK

 

The amount is the same but the terms are different and do not involve potentially waiting many years. In simple terms - the bigger the economy which backs it, the better the guarantee.

 

In most cases the interest rates IOM vs UK are very similar.

 

The countries who've made promises of full guarantees have done so for political reasons, and there's no evidence that they can make good. I'd stick with a 50k guarantee that exists rather than an unlimited one that's only on a politicians speech notes.

 

The UK could potentially guarantee any sterling amount since it prints its own money - although it has not made any open ended commitments. I suppose you mean Ireland. Worth noting that the Eurozone govts have now pledged that no Eurozone bank will be allowed to fail. I guess that pledge needs a bit more explaining.

 

No UK private savers have lost their money with UK licensed banks during the current crisis. That will speak more than any guarantee to most people. Even if all of the money is ultimately recovered.

 

From reading some of the KSF depositors' posting on various sites is seems that expat Brits had difficulty in opening UK bank accounts and were advised to go offshore by those banks.

 

I'm still not sure if that was policy by the banks or whether it is was UK legal thing. I assume that it will be addressed at the UK end so that ex pats have no reason to go offshore in future.

 

Meanwhile - IOM residents are disadvantaged with respect to savings because the NS&I products which are tax free in the UK and which are 100% guaranteed by UK Treasury, are taxed on the IOM.

[The Old Git 817]

From reading some of the KSF depositors' posting on various sites is seems that expat Brits had difficulty in opening UK bank accounts and were advised to go offshore by those banks.

 

I'm still not sure if that was policy by the banks or whether it is was UK legal thing. I assume that it will be addressed at the UK end so that ex pats have no reason to go offshore in future.

 

Yes, it did sound a little odd

 

Meanwhile - IOM residents are disadvantaged with respect to savings because the NS&I products which are tax free in the UK and which are 100% guaranteed by UK Treasury, are taxed on the IOM.

 

NS&I deposits are held by an Irish Bank aren't they? I guess savings are as safe as they can be, but it just shows that you don't know where your money ultimately ends up these days.

[pongo 4,576]

NS&I deposits are held by an Irish Bank aren't they? I guess savings are as safe as they can be, but it just shows that you don't know where your money ultimately ends up these days.

 

Irish connection is interesting - I wonder whether that applies to all of their products.

 

Anyhow - they are guaranteed 100% by the UK Treasury - that's the bit that matters Annoys me that the products which are tax free in the UK are then taxed here - given that the IOM is supposed to be low tax but offers no similarly guaranteed simple alternative.

Edited October 15, 2008 by pongo

[ai_Droid 1]

The amount is the same but the terms are different and do not involve potentially waiting many years. In simple terms - the bigger the economy which backs it, the better the guarantee.

 

I don't follow the logic. The FSCS is funded by levies on banks the same as the IOM scheme. The UK is bigger, but so is the total number of deposits in the UK. There's no guarantee of payout times in the UK either.

 

The UK could potentially guarantee any sterling amount since it prints its own money - although it has not made any open ended commitments. I suppose you mean Ireland. Worth noting that the Eurozone govts have now pledged that no Eurozone bank will be allowed to fail. I guess that pledge needs a bit more explaining.

 

They're still political guarantees, they've been made as reassurances. Printing money? You seen Iceland's situation?

 

No UK private savers have lost their money with UK licensed banks during the current crisis. That will speak more than any guarantee to most people. Even if all of the money is ultimately recovered.

 

That's true, although some have lost out as I understand it particularly those with accounts through wraps etc.

[pongo 4,576]

Printing money? You seen Iceland's situation?

 

Iceland's population is a few hundred thousand - they were too small to exist as a viable country outside of some larger economic federation. Certainly too small to be running a currency. A government of a few hundred thousand people with no obvious way of producing large amounts of revenue is too small to be guaranteeing a finance industry. They were too small - if it hadn't been this it would have been something else, in the end.

 

But I take your points, in general, which are always well made and logical. On the other hand - finance is also about confidence and how safe something seems.

[ballaughbiker 1,816]

IOM residents are disadvantaged with respect to savings because the NS&I products which are tax free in the UK and which are 100% guaranteed by UK Treasury, are taxed on the IOM

Premium bond winnings aren't taxable here

 

Now that the UK limits have been substancially raised on Inheritance Tax

Really, they've only increased it a bit haven't they?

[pongo 4,576]

IOM residents are disadvantaged with respect to savings because the NS&I products which are tax free in the UK and which are 100% guaranteed by UK Treasury, are taxed on the IOM

Premium bond winnings aren't taxable here

 

Agreed. But the National Savings products which are tax exempt in the UK are taxable here.

 

Prizes are a different thing.

[Lee54 0]

From today's Manx Independent.

The IOM Government will have to borrow money on the open market to pay out compensation to the KFS clients, if it is to honour its promise to pay any compensation within a two month period. So much for the taxpayer not bailing out the Banks