Legislation 1

Depositor Compensation Scheme

The Government's Depositors Compensation Scheme was introduced in 1991, and is a fund of last resort for customers of banks in the Isle of Man.

The Isle of Man has a Depositors Compensation Scheme (DCS).

The Scheme was introduced in 1991, then amended and reinforced in October 2008, and amended again in October 2010. 

The manager of the DCS is the Isle of Man Treasury, or a person who may be appointed by the Isle of Man Treasury.

The manager may also appoint an agent to administer the DCS on its behalf when a fund is created,o provide compensation to customers of a failed bank.

Fund of Last Resort

The DCS is a fund of last resort for customers of Isle of Man banks. It recompenses some depositors if such a bank is unable, or likely to be unable, to pay claims against it, and as a result is declared by the Treasury to be in default.

Not an unlimited provider of funds

The DCS is not designed to act as an unlimited provider of funds, to bail out global banks' Isle of Man operations.

It is limited in what it can and cannot do; the DCS fund is not a standing fund but is made up as required by levies from the participating banks and money provided by the Treasury.

The Process

When a bank is declared in default, it may be placed into liquidation and the depositor will not be able to withdraw their funds in accordance with the contractual terms of their account.

In general terms, the DCS provides protection for those individuals with lower value deposits/savings (up to £50,000 in total).

It may also deliver a pay out of up to the first £50,000 for depositors with higher amounts held with the bank than would be available in the shorter term from the liquidation of the bank's assets.

A lower level of protection is provided (up to £20,000 in total) for many other types of depositor such as companies, trusts and charities; it should however be noted that monies held in client accounts are not entitled to protection.

Acknowledgement: Financial Supervision Commission