Why is my compensation less than I expected?

Monday 14 September 2009

Basis for the calculation of compensation

After the closure of the bank, you probably received a statement of your account including interest. The accrued interest was based on the contractual rate of interest applicable to each account.

Under Isle of Man statutes and rules, where a company is in liquidation and is not able to pay its debts in full, the amount of accrued interest that can be claimed in the lower of the contractual rate or 5% per annum.

As a result of this provision, your claim in the liquidation, in this case through the Scheme Manager, is reduced to the lower sum and the balance of interest is deferred. This applies to all claims irrespective of whether or not you have claimed in the DCS.

The amount of compensation payable is based on "an eligible protected deposit". Subject to all the validation criteria being met, the value of the eligible protected deposit is the amount accepted by the liquidator as having been assigned by the depositor to the DCS. This is the admitted claim value.

In practice for most claimants this is a relatively small sum, and may give rise to a slightly lower compensation payment than you might have expected.