The end of the Isle of Man as a banking centre?

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The Times has reported (in edited form):

Wealthier investors who have stashed their cash in offshore bonds could lose their nest eggs after the schemes became embroiled in the Icelandic banking crisis. British investors have as much as £5 billion in the schemes, most of which have a minimum investment of £100,000 and are often used by people who intend to move or retire abroad.

Aegon Scottish Equitable International has told financial planners it cannot guarantee the investments of some of its offshore bondholders, which were invested in Kaupthing Singer & Friedlander Isle of Man, which went into liquidation last week. It is understood offshore bonds provided by Axa and Canada Life are also invested in Kaupthing Singer & Friedlander Isle of Man.

The British arm of the bank was bought by ING Direct, the Dutch bank, last week. However, Isle of Man deposits and investments were left out of the deal and now require the protection of the Isle of Man compensation scheme.

The Isle of Man government last week voted to increase the deposit protection to £50,000. However, advisers said that compensation would be negligible as it is limited to one claim per firm - regardless of how many policyholders have bonds linked to the bank.

Aegon Scottish Equitable International told advisers: "The Financial Service Compensation Scheme does not protect deposits with Kaupthing Singer & Friedlander. It is too early to know what the outcome of the liquidation will be."

The bank's website says: "The Administrator will be working towards an orderly repayment to depositors . . . [but] we cannot say how much or when."

Now let's turn this into plain English. What this means is that the much vaunted depositor protection scheme in the Isle of Man has been proven to be worth £50,000 for each investment company. I call that a fraud by the government of the Isle of Man, but then I'd expect nothing more of it.

Let's hope the credibility of the place is destroyed, forever.

Let's also hope that those seeking to flee have their tax affairs thoroughly investigated.