Government The Inquiry Into Collapse Of Kaupthing Iom

[Sebrof]

The point remains that virtually all our banks operate on this basis and in my mind it is not that secure for depositors - in this context its interesting that the first quarter 2009 figures for Manx deposits shows that £1.2 billion has been taken out of Manx subsidiaries.

 

That's right. They are as secure as their parents.

 

Doesn't leave many alternatives, does it?

 

If you want ultra-security, buy Gilts. But expect a lower return.

 

S

[Evil Goblin]

Sebrof - you show a touching faith in HMG being able to meet it's future obligations. The sad reality is that they will end up inflating themselves out of the current "impossible ever to repay" debt position i.e. you will get your £100 per £100 nominal value of Gilt but it'll have become worth only£50 or less in purchasing power. Sadly, the rest of the World's Governments seem to be getting themselves in the same boat, save for China. So, either invest in China or find yourself a comfortable cave, many cases of baked beans, a shotgun and plenty of ammo!

[Sebrof]

Sebrof - you show a touching faith in HMG being able to meet it's future obligations. The sad reality is that they will end up inflating themselves out of the current "impossible ever to repay" debt position i.e. you will get your £100 per £100 nominal value of Gilt but it'll have become worth only£50 or less in purchasing power. Sadly, the rest of the World's Governments seem to be getting themselves in the same boat, save for China. So, either invest in China or find yourself a comfortable cave, many cases of baked beans, a shotgun and plenty of ammo!

 

I agree entirely. Inflation is the only way I see out of this mess. The fact is that a lot of value has been lost, and house prices are still massively out of line with what ordinary people can afford - even here. When inflation starts rocketing up again, those who have been saying that houses are very affordable will be singing a different tune.

 

I wasn't really recommending Gilts as an investment; but for those who are very risk averse they have some appeal.

 

S

[oakley]

Its just bending the rules of prudence to accomodate what the banks with a presence here want to do which is just shunt their deposit books back to head office.

 

Yes, but that is inevitable. There would be little point in these banks being here if their parent compamies weren't going to use the money that people deposit with them.

 

We have to accept that a bank operating as a subsidiary company is really no more than a branch of the parent bank. It is set up as a subsidiary company rather than a branch for various reasons, such as:

 

1 Local regulations may require it.

2 There may be fiscal benefits

3 It is easier to dispose of, or walk away from, a separate company than a branch.

 

In most cases, however, such subsidiaries operate like branches, nothwithstanding their legal status.

 

S

 

 

 

 

The point remains that virtually all our banks operate on this basis and in my mind it is not that secure for depositors - in this context its interesting that the first quarter 2009 figures for Manx deposits shows that £1.2 billion has been taken out of Manx subsidiaries. I would expect that trend to continue as depositors find out that the risks are greatly increased when all your bank is is an offshore piggy bank for its shaky UK or Irish parent. I would certainly expect anyone banking offshore with an Irish bank to question whether allowing these banks to pass their assets 100% to the Irish parent is prudent in this climate. Its clear the Irish guarantee scheme is not worth the paper its written on so why not force these banks to diversify their exposure?

 

Yikes,walk away banks lost your dough tarah.

[007Pimpernel]

........

The IOM isn't subject to these regulations. Please stop lying

 

Sir, you are wrong again

 

The Financial Supervision Commission has a rule book in which you will see:

 

QUOTE: Rule 8.36 - Large exposure management

 

1. A licenceholder must —

1. not incur an exposure which (including accrued interest) exceeds 25% of its large exposures capital base unless the exposure is an exempt exposure

 

'Q' has asked me to pop over to Iran to do a piece of undercover work so I may not be around for a few days to acknowledge your apology which I am sure will be forthcoming if you are a true gentleman.

[Tugger]

It's already been established that it was an exempt exposure.

 

Stop lying

[007Pimpernel]

It's already been established that it was an exempt exposure.

 

Stop lying

EVIDENCE

[Sebrof]

It's already been established that it was an exempt exposure.

 

Stop lying

EVIDENCE

 

Turn back a page and you will see this:

 

Rule 8.38 - Exempt exposures

The following exposures are exempt exposures —

...

e. exposures to other group companies which are credit institutions in Zone A countries;

 

But you probably saw it yourself, and in your usual charming way decided to ignore it.

 

Now, about that apology... And at the same time you can apologise for saying the FSC broke banking regulations.

 

S

[oakley]

It's already been established that it was an exempt exposure.

 

Stop lying

EVIDENCE

 

Turn back a page and you will see this:

 

Rule 8.38 - Exempt exposures

The following exposures are exempt exposures —

...

e. exposures to other group companies which are credit institutions in Zone A countries;

 

But you probably saw it yourself, and in your usual charming way decided to ignore it.

 

Now, about that apology... And at the same time you can apologise for saying the FSC broke banking regulations.

 

S

 

 

Excuses excuses Tugger

[Tugger]

Fuck me you lot are dishonest. First you say "it was a breach of the regulations", then, when it is conclusively shown that it wasn't, it's "well it may not be a technical breach, but now you're just making excuses".

 

It's this simple: if bellyup and the Pimpernel stop LYING, I will stop having to put them right

[pongo]

Sebrof - you show a touching faith in HMG being able to meet it's future obligations. The sad reality is that they will end up inflating themselves out of the current "impossible ever to repay" debt position i.e. you will get your £100 per £100 nominal value of Gilt but it'll have become worth only£50 or less in purchasing power. Sadly, the rest of the World's Governments seem to be getting themselves in the same boat, save for China. So, either invest in China or find yourself a comfortable cave, many cases of baked beans, a shotgun and plenty of ammo!

 

FT item by Willem Buiter published the other day which you might find interesting: Fiscal options for the UK: sovereign insolvency, inflation or serious fiscal pain.

 

His blog is often very interesting too.

[Evil Goblin]

Fuck me you lot are dishonest. First you say "it was a breach of the regulations", then, when it is conclusively shown that it wasn't, it's "well it may not be a technical breach, but now you're just making excuses".

 

It's this simple: if bellyup and the Pimpernel stop LYING, I will stop having to put them right

They would certainly be better employed questioning the regulations themselves. As they stand, they effectively place the responsibility for the liquidity and solvency of IoM Banks in the hands of other Regulators. Perhaps this point is one which prospective depositors ought to be actively made aware of before they place their funds on places like IoM. Question - if the FSC is really just a posturing, powerless body why does its' Chief Executive merit such a vast pay packet? How much nous do the members of the Commission actually have? In my humble experience the regulatory staff (including the Managers) have little idea about the businesses they are supposed to be supervising and are little more than unthinking tick-bugs.

[Evil Goblin]

Thanks for the references, Pongo. I've had a quick look through the FT article and he seems to be making a lot of sense. There is a lot in that article, though, so I will print it out and have a thorough reading later. Must admit, I've not been a fan of Buiter in the past but this article may cause me to revise my opinion!

[Evil Goblin]

The content of the Banking Rule Book relating to "upstreaming" of deposits leads to the question of whether the IoM FSC should be involved in regulating the Banks on the IoM at all. As the responsibility for the liquidity and solvency of banks lies with Regulators elsewhere why not make those regulators responsible for the regulation of the IoM branches/subsidiaries of their Banks? The responsibility for Depositor Compensation Schemes could then be placed with those other jurisdictions rather than the IoM Government. Depositors would then know when placing their funds who it was they were ultimately relying on and could behave accordingly, creating a much more efficient market. e.g. if depositors had known that they were ultimately relying on the Icelandic Regulator would they still have been happy to deal with Kaupthing?

 

Admittedly, there would still be one or two small local banks like Conister but their regulation could be sub-contracted to, say, the BoE/FSA?

 

I suspect the same rationale could be used to question the existence of the IPA.

[triskelion]

Evil Goblin, responsibility for the liquidity and solvency of the banks lies with the banks. The Directors have a responsibility to ensure the businesses are properly run, and you are grossly overstating the power of regulators in other jurisdictions.

 

One of the points Gordon Brown has hammered on about is that there was very little that could be done to stop banks becoming over-exposed to, say, sub-prime mortgages, through their US subsidaries, or whatever.

 

What this global crisis has shown is that the role of local regulators is limited, whether is it is the FSC or the FSA. Before you take this too far the other way, that doesn't mean these organisations aren't worth having.