Calls for bank collapse inquiry

The scheme will cost the government about �11m

Depositors have demanded a public inquiry into the collapse of the Isle of Man's Kaupthing, Singer and Friedlander (KSFIoM) bank.

The call followed a House of Commons Treasury select committee hearing into the banking crisis, held last week.

Manx officials said KSFIoM was forced to close when deposits were caught in the UK's freezing of Icelandic assets.

The Depositors's Action Group said they wanted an inquiry into the role played by Manx and UK financial regulators.

Depositors have been left unable to access their funds since the Manx bank's licence was suspended in October.

They have called for an examination of the actions taken by the Manx Financial Supervision Commission (FSC) and UK Financial Services Authority (FSA).

Penniless depositors

A depositors' spokesperson said: "Each blames the other whilst the persons who they are supposed to protect have little understanding of what happened to their money.

"It's a disgrace. Many depositors have been left penniless."

"We want to see a full inquiry into what happened."

More than �870m was deposited by customers in KSFIoM when it went into provisional liquidation on 8 October, according to documents lodged with the High Court.

A winding-up petition for the bank has been adjourned three times while government officials seek an alternative to liquidation.

If the bank is wound up savers, many of whom have hundreds of thousands of pounds trapped in the bank, would only be able to claim up to �50,000 compensation.

Depositors can apply for a �1,000 interim payment from the government.