The less visible business
Updated on 23 October 2008
Nick Martin blogs about the decision by the Isle of Man to sink half of its reserves in depositor guarantees.
Two weeks ago the Isle of Man was enjoying a relatively peaceful life as an offshore Crown Dependency.
The summer season has started to tailed off, the ferry across the Irish sea to the UK mainland was carrying fewer tourists , and the horse and carts that trundle along the promenade had been given some well earned rest.
Of course, the Isle of Man's real business is a little less visible...and a little more valuable. Its business is money, and lots of it. The big banks all have an offshore presence in the capital Douglas and around £86billion is deposited, on paper at least, in its vaults.
But the Island is staring down the barrel of a crisis which could threaten its reputation as a safe haven for money.
The failure of one of its offshore banks, Kaupthing, Singer and Friedlander IOM, on October 9th has cast unwanted attention onto the Island and brought into painfully sharp focus its ability to react to such a disastrous event.
Around 10,000 people have £850m with Kaupthing IOM and although the Isle of Man is the only crown dependency to have a compensation scheme, the big question is whether it will work.
Anyone with £50,000 or less in Kaupthing is covered by the guarantee but under pressure the Manx Government has been forced to strengthen this scheme with an extraordinary move.
It intends to sink half of its own cash reserves into the scheme, that's £150m of tax payers money, to help part compensate the Kaupthing IOM depositors.
Never in the Island's history has it had to contemplate such a move.
I've just returned from the Isle of Man and when I was there I asked the Chief Minister Tony Brown whether he thought it would speed up payments as they hope it will. 
Isle of Man Chief Minister Tony Brown talks to Nick Martin
He was unable to give such an assurance. He blamed the UK Government for the problems at
Kaupthing IOM decision, he says, to put Kaupthing, Singer and Friedlander into administration in the UK caused the parent bank in Iceland to collapse and the Isle of Man subsidiary to go into temporary liquidation.
Tomorrow (Friday) a delegation will travel to London to meet the treasury. Depositors will have their eyes and ears pressed to the keyhole of the Treasury door during that meeting. Political negotiations maybe their only way of seeing their money again.
