Bad News For Kaupthing's Isle Of Man Customers
There's more trouble ahead for some of Kaupthing Edge's savers. If you had an account with Kaupthing Edge in the Isle of Man, here's what you need to know.
Since the start of Kaupthing Edge's troubles, there have been several issues that have gravely concerned its account holders.
In the UK, some customers are worriedly awaiting the reappearance of money that's been missing since they organised CHAPS transfers out of their accounts. (Read this article for more information if you live in the UK.)
But unfortunately, for savers in the Isle of Man, things are even more complicated.
I thought ING Direct UK bought Kaupthing Edge?
It did -- but only Kaupthing Edge in the UK.
Kaupthing Edge in the Isle of Man operated as a completely separate company to that on the mainland. It wasn't a subsidiary of the UK business, and it was in the direct control of its Icelandic parent company.
This means that when ING Direct acquired Kaupthing Edge, it only took over UK-based savers' deposits -- not those in the Isle of Man.
So what happened to the Isle of Man deposits?
Kaupthing Edge in the Isle of Man has had its banking license withdrawn, and a provisional liquidator has been appointed.
In simple terms, the bank has gone bust. Now, all its assets will have to be sold off.
Any money raised from this will be used to pay the bank's debts -- but there's no way to know how much cash will be available after the liquidation, or how it will be distributed.
For now, all Kaupthing Edge accounts in the Isle of Man have been frozen, and customers currently have no access to their money.
Will I get my money back?
There is some light at the end of the tunnel. Although the Isle of Man is not covered by the British Financial Services Compensation Scheme (FSCS), it is covered by its own Depositors' Compensation Scheme (DCS).
Under the scheme's rules, savers who had accounts with Kaupthing Edge on the Isle of Man will be entitled to £50,000 worth of compensation per individual.
In the case of joint accounts, each of the named account holders will be entitled to individual protection worth £50,000 -- which means that the total money potentially claimable would be £100,000.
According to a spokesperson for the DCS, it's likely that the compensation scheme will be declared open sometime between now and 24 October.
As soon as it is open, claim forms will be available so that savers can apply to get their money back, up to that £50,000 maximum per person.
What if I had more than £50,000 in my account?
Unfortunately, savers on the Isle of Man who held more than £50,000 in their Kaupthing Edge accounts cannot (under current rules) be provided with extra DCS protection.
Very sadly, it seems that people in this situation stand to lose any amount they had in their accounts above the £50,000 DCS limit.
This must be a real blow for anyone in this situation -- and I'm desperately sorry I can't give you happier news.
Is there any hope?
There could be, if the UK government steps in to protect 100% of all Kaupthing Edge's Isle of Man deposits. However, as yet there's no sign that this will happen -- so it isn't something we should simply expect.
However, don't forget that the liquidation of the bank could mean some of savers' money will find its way back to them. In this case, those who have lost out might feel some relief.
I'll be keeping my arms, legs, fingers and toes crossed for you all that, somehow, this situation is sorted out.