Scheme could cost tax payers £150 million

Treasury Minister Allan Bell has spelled out the potential cost of the new depositors' compensation scheme he is asking Tynwald to approve.

He told members the new scheme - with improved protection for individuals of up to £50,000 - introduced major changes, with which many would be uneasy.

He said the scheme drawn up by Treasury attempted to respond to members' concerns and those of the banking industry, while at the same time considering the overall affordability of the proposals.

Mr Bell said it introduced the concept of the tax payer sharing the risk and potential cost of a bank failure, with a maximum sum of £150 million being called upon.

He also explained the inclusion of a so-called "Sunset clause", under which the £50,000 maximum compenation payment would cease to have effect twelve months after the scheme was approved.

Mr Bell said the "Sunset clause" would only affect any defaults which may take place 12 months after the date of approval.

He said in the intervening period the scheme would be subject to ongoing review, to ensure it remained relevant and affordable to the Isle of Man.

The minimum levy to be paid by participating deposit takers, the banks, would be £35,000 - rising to a maximum figure of £350,000.

The maximum overall contribution of the banks to the scheme would be £200 million, compared with the sum of £150 million from the taxpayer.

Mr Bell concluded by saying the Isle of Man was living through mementous times and had to position inself as best it could to both deal with the immediate pressures, and to maintain the ability to grow and develop its economy when calmer times returned.

He said in calmer times the whole situation would have to be reviewed, but he believed the proposals before Tynwald today to be appropriate, and a speedy response to the urgent situation which now faced the Island.

The new scheme includes all the categories of depositor which were in the previous, 1991 scheme.

The debate continues.