Savers reject failed bank scheme

Some depositors have campaigned against the compensation scheme

Depositors in a failed Manx subsidiary of an Icelandic bank have rejected the government's compensation scheme.

The arrangement was devised as an alternative to liquidating Kaupthing, Singer and Friendlander Isle of Man (KSFIOM), which collapsed last year.

It would have meant 76% of creditors getting back 100% of their savings within two years, the government said.

But with creditors voting against the scheme, KSFIOM is expected to be placed in liquidation at a hearing on 27 May.

Three separate votes were held on whether to accept the scheme, representing the three different classes of creditors.

They were people with savings of less than £50,000, people with savings of more than this amount and other creditors, such as suppliers.

Liquidation hearing

The scheme failed to be approved by the statutory majority in the latter two groups needed to approve it.

"The scheme of arrangement has not been voted in by the creditors," said a spokesperson for provisional administrator, Price Waterhouse Coopers (PWC).

The High Court in Douglas heard that tens of millions of pounds was held in the UK and frozen by the government during the crisis that engulfed KSFIOM's Icelandic parent bank, Kaupthing.

It is not yet known how much of this money, if any, will be returned to the provisional liquidator.

Depositor action groups campaigned against the government scheme, arguing that the bank should be placed into liquidation, which would trigger payouts from the Isle of Man depositor protection scheme.

Savers would be eligible to receive up to £50,000 of what they have lost, plus any other money the liquidator is able to recover.