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Hansard of Oral Evidence T Y N W A L D C O U R T O F F I C I A L R E P O R T R E C O R T Y S O I K O I L Q U A I Y L T I N V A A L P R O C E E D I N G S D A A L T Y N (HANSARD) S E L E C T C O M M I T T E E O F T Y N W A L D O N K A U P T H I N G S I N G E R & F R I E D L A N D E R ( I S L E O F M A N ) L I M I T E D A N D T H E D E P O S I T O R S ’ C O M P E N S A T I O N S C H E M E B I N G E R - L H E H T I N V A A L M Y C H I O N E K A U P T H I N G S I N G E R & F R I E D L A N D E R ( I S L E O F M A N ) L I M I T E D A S Y S K E I M S O N K E R R A G H E Y C O A Y L F I R - V A I H A R G I D Douglas, Friday, 10th December 2010 All published Official Reports can be found on the Tynwald website www.tynwald.org.im Official Papers/Hansards/Please select a year: Reports, maps and other documents referred to in the course of debates may be consulted upon application to the Tynwald Library or the Clerk of Tynwald’s Office. PP08/11 TKSF, No. 9 Published by the Office of the Clerk of Tynwald, Legislative Buildings, Finch Road, Douglas, Isle of Man, IM1 3PW. © Court of Tynwald, 2011 SELECT COMMITTEE, FRIDAY, 10th DECEMBER 2010 Members Present: Chairman: Mr J P Watterson, MHK Mr A Crowe, MLC Mr J R Houghton, MHK Clerk: Mr R I S Phillips, Clerk of Tynwald In attendance: Mr P O’Shea Mr R Rawcliffe BUSINESS TRANSACTED Page Procedural ............................................................................................................................................273 Statement by Mr J Coyle .................................................................................................................273 Evidence of Mr J Coyle and Mr C Parrish ..................................................................................274 Mr Simpson was called at 3.54 pm Evidence of Mr M Simpson .............................................................................................................283 Dr Downs was called at 4.40 pm Statement by Dr A Downs ...............................................................................................................293 Evidence of Dr A Downs ..................................................................................................................294 The Committee sat in private at 5.51 p.m. _________________________________________________________________ 272 TKSF SELECT COMMITTEE, FRIDAY, 10th DECEMBER 2010 Select Committee of Tynwald on Kaupthing Singer & Friedlander and the Depositors’ Compensation Scheme The Committee sat in public at 3.00 p.m. in the Legislative Council Chamber, Legislative Buildings, Douglas [MR WATTERSON in the Chair] Procedural The Chairman (Mr Watterson): Welcome, everybody, to the latest session of oral evidence for the Select Committee on Kaupthing Singer & Friedlander. The Committee has reported on the first two parts of its remit and is now concentrating on the credibility of the Depositors’ Compensation Scheme and any other relevant matter. Part of its 5 inquiries will focus on action taken to try and save Kaupthing Singer & Friedlander (Isle of Man) Ltd. We have invited three witnesses today: Mr John Coyle and Clive Parrish, representing the Isle of Man Bankers Association; Mr Mike Simpson of PricewaterhouseCoopers, the Liquidator; and, in addition, we have Dr Downs, on behalf of the Depositors’ Action Group, who was unable to 10 attend last week because of the snow. Further evidence will be taken next year. For those who do not know the Committee, from the far right: Mr Roger Rawcliffe advises the Committee; Phil O’Shea advises the Committee; Alan Crowe MLC, member of the Committee; our Clerk, Roger Phillips; and to my far left, John Houghton MHK, member of the Committee. My name is Juan Watterson and I am the Chairman. 15 If I can just ask you to make sure your mobile phones are off, rather than on silent mode, because it does interfere with the recording equipment. Statement by Mr J Coyle Q1189. The Chairman: Mr Coyle, would you care to come forward? Before we start, do you have an opening statement, or are you happy to go straight to questions? 20 Mr Coyle: If I may make just a brief opening remark, which is to say that the Isle of Man Bankers’ Association is a trade – The Chairman: Sorry, if you could just introduce yourselves for the tape, and then give your 25 opening remarks. Mr Coyle: Apologies. John Coyle of the Bankers’ Association. My opening statement is simply for the purpose of clarification, to inform the Committee that the Isle of Man Bankers’ Association is a trade association. It has no executive powers. It is simply 30 a focal point for the players of the banking industry to come together and debate matters of common interest. As the President of the Bankers’ Association currently, I do not exert any power or any special influence over any of the banks who comprise its membership. The Chairman: Thank you. _________________________________________________________________ 273 TKSF SELECT COMMITTEE, FRIDAY, 10th DECEMBER 2010 EVIDENCE OF MR J COYLE AND MR C PARRISH 35 The Chairman: Mr Crowe. Q1190. Mr Crowe: It is Mr Clive Parrish, is it? Mr Parrish: I am the Secretary of the Bankers’ Association. I have been since 2008. I am paid 40 on a part-time basis to do that job. I am here in support of the President, really. Q1191. Mr Crowe: Thank you very much. If I can just open up with a few questions. I can see the main plank of your evidence was in 45 your letter of 20th September, in which I think you responded to the Chairman’s queries on certain issues and we will largely be picking up points that are within that submission you have made. If I can start by asking about the Depositors’ Compensation Schemes of 2008 and 2010: when and how were you consulted about these schemes, what timescale was set for the consultation and do you think you were given sufficient time to respond? I know it is a three-part question, but if 50 you could go through those points, please. Mr Coyle: I will take the first one and if I have forgotten your multiple part question, please remind me. To the first question about the 2008 DCS, obviously that has to be seen in the context of 55 everything which was happening in the financial world, specifically about the time of September and October 2008. So the reality is that there was very little consultation on the DCS amendment of 2008 that was being brought forward in early October. There had been momentum gathering, certainly I think there had been political momentum gathering in the House, because, I guess, constituents of MHKs were becoming more concerned about the Island’s depositor compensation, 60 when comparing it to arrangements that were being changed in the UK at that time. So some work had been done by the FSC many months before on potential options for changing the DCS, but very little had actually happened to take the results of that exercise and to transform it into a piece of new legislation to update the old 1991 DCS Effectively, we found ourselves, in October 2008, with the financial world in the greatest of turmoil and the Government 65 response, at that time, was to propose, with quite short notice, a revised DCS that gave much improved levels of cover for certain classes of depositor, but it really did come in with little or no pre consultation on its exact nature. Q1192. Mr Crowe: So for that 2008 Scheme, because of the financial crisis in the world, you 70 were given very little notice, or no notice at all, hardly, to comment on the Scheme – although, as you say, there had been some consultation earlier in the year, because of comments made in Tynwald, in Questions and so on. Mr Coyle: I think it was recognised by all stakeholders that the 1991 Scheme, with limits of 75 compensation cover, which had not changed since 1991, really was overdue for review and for change, so the general principle that changes were necessary and appropriate was well understood. Q1193. Mr Crowe: So the Bankers’ Association were quite comfortable that change was due and was probably necessary. 80 Mr Coyle: I think the reality is, if you go back a couple of years pre-crisis, there would have been a school of thought that said, did the Isle of Man, in fact, need a depositor compensation scheme at all, because our closest competitor jurisdictions – i.e. Jersey and Guernsey – saw no need to follow the Isle of Man’s lead back from the early 1990s. 85 But that wisdom of 2006… Certainly everything changed after the Northern Rock meltdown in the UK and, all of a sudden, depositor compensation was no longer a hypothetical issue; it became a real issue in people’s lives, so the banks were as alive to that as any other stakeholder, and knew that a degree of change would be required. We were playing a part in giving views as to what that change might be – I think, in fact, round about February 2008 – but ultimately it got overtaken by 90 the events of the later part in 2008, which saw the Government wish to act in real time, almost, to the situation that was unfolding.
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