NI Presbyterian mutual society, Short of funds for withdrawal?

Toastandbutter

Thanks Goodbye PCI

Youre quite right, George Osborne and the government were singing off the same hymnsheet - ie both saying that the PMS fell into a regulatory gap.

In fact the Government *repeatedly* accepts the reality of a regulatory gap in the PMS context in the report and never challenges this as a fact;-

http://www.official-documents.gov.uk/document/cm79/7959/7959.pdf


It would also seem odd if George Osborne was not referring to terrible regulatory gap of both the PMS and Equitable Life, because otherwise he would not have given the House of Commons any justification for a £25m gift to the PMS.

Would he have dreamed of gifting £25m to the PMS without explaining to MPs that there had been a terrible regulatory failure, especially in these tight times?

Personally I doubt it.

Furthermore, we notice that Osborne echoes the praise David Cameron gave to PMS savers during the general election ie they did the right thing and saved for their future etc;-

http://www.conservatives.com/News/Speeches/2010/05/David_Cameron_Our_contract_for_Northern_Ireland.aspx

David Cameron said: "Last year we saw the Prime Minister betraying those who had done the right thing, when he boasted that 'not one British saver has lost a single penny' in the banking crisis.


"He should try telling that to investors in the PMS who worked hard, saved hard - and then saw their money disappear. Are they not British, did they not lose money, why has he forgotten about them?


"So I give you this pledge.


"If I am Prime Minister a Conservative and Unionist Government will work with the Executive here to ensure a just and fair resolution of the PMS.

"It's about saying we're all in this together, you've done the right thing and you deserve for that to be recognised and rewarded."


So this would certainly support the view, again, that Osborne's "did the right thing by saving" comments were directed at both PMS and Equitable Life members. And his "terrible" regulatory failure line too.

And in turn, this makes Mr Sterling's argument look rather silly.

What makes him so sure Osborne was not referring to a regulatory gap for both the PMS and Equitable Life when all the other evidence points to exactly the opposite conclusion?

We do know DETI in NI was outraged by the Treasury Select Commitee's conclusion that it had been responsible for a "fatal regulatory gap".

So perhaps this letter from Mr Sterling is just evidence of ongoing denial at DETI?

T&B

Toastandbutter

A refresher for Mr Sterling;-

18 February 2010
Treasury Select Committee press notice;-

MPs call for regulatory gap closure following mutual society losses




18 February 2010 The Treasury Committee today releases its report, 'The Failure of the Presbyterian Mutual Society', which highlights that in the case of the Presbyterian Mutual Society (PMS) there was a regulatory gap which was neither publicised nor filled and calls for this to be addressed in restructuring the financial system.

• Report: The Failure of the Presbyterian Mutual Society
• Treasury Committee

It also calls on the United Kingdom Government and Northern Ireland executive to act together to ensure that individual PMS members do not suffer unduly.
John McFall, Chairman of the Committee, said:
"It is possible that in due time the affairs of the Presbyterian Mutual Society will be unravelled. However, many members cannot wait this long for their money. We heard from some who urgently need funds for medical treatment, some who quite rightly want to enjoy their retirement before its too late and others who are struggling simply to meet the necessities of daily life in the current economic climate."
"We have long argued for the creation of a system which makes it crystal clear when whether and to what degree deposits are protected. We do not believe that, as a general rule, the taxpayer should stand behind an financial institution.
"However it is clear in the case of the PMS there was a fatal regulatory gap, which no lay person could reasonably have identified. Ministerial Working Group must report swiftly to ensure that MS members do not suffer unduly. We are not prescriptive about what solution is best; it is however clear that a remedy must be found."
What happened and why
The PMS, a Northern Ireland Industrial and Provident Society, was subjected to a run on its deposits in October 2008, which resulted in its entering administration. The estimated realisation value of its assets is significantly less than its liabilities.
There is some prospect of recovering members' money if the administration is allowed to run for a long time, but that would continue to mean that members of the Society, who might have pressing needs, would not have access to their funds.
Moreover, there is legal uncertainty as to whether shareholding members of the society are entitled to the return of any of their funds until those who have made loans to the Society are repaid. The PMS was not regulated by the FSA, nor was it part of the Financial Services Compensation Scheme. Its members have no legal entitlement to reimbursement.
In Northern Ireland, industrial and providential societies are registered by the Registry of Credit Unions and Industrial and Provident Societies (the Registry). The function of the Registry is simply to hold a register of the 180 IPSs operating in Northern Ireland, and to make sure their annual returns are filed. The FSA performs a similar function in relation to industrial and provident societies in Great Britain, in addition to its financial regulation responsibilities.
The FSA told the Committee that it took steps to mitigate the risks that registered societies were engaging in activities which should be mitigated. The Committee accepts that the Registrar had no regulatory functions in relation to Industrial and Provident societies, and could take no official action. However, it does not believe that Department of Enterprise, Trade and Investment NI (DETINI) was so circumscribed.
The Report notes DETINIs opinion that it was not their legal responsibility to regulate the PMS or manoeuvre them into regulation. However, the Committee were surprised and concerned that the Department had access to all the relevant information and yet this did not result in any preventative action or further examination being undertaken.
This might well have entailed action in London as well as in Belfast, but as the department closest to the problem, it is reasonable to expect DETINI to have taken a lead in identifying the problem, and in seeking a solution, the Report says.
The future
Today's report calls for a system in future where, in cases like the PMS, it would be crystal clear that deposits were made at the depositors's own risk, and there was no question of government assistance.
It should be clear that it is the directors, not the government, or the regulator, who have ultimate responsibility for such an institution's management, the Report says. The Committee does not believe that, as a general rule, the taxpayer should stand behind financial institutions.
The banking sector in Northern Ireland is regulated by the FSA just as in Great Britain. There were no clear indications that the regulatory system for IPSs differed between Northern Ireland and Great Britain. It is possible that a society which was mutual in life will prove to be far from mutual in death, and that small savers will lose out most heavily.
If these savers are to be assisted, the United Kingdom Government and Northern Ireland executive must act together to ensure that individual PMS members do not suffer unduly. The Report is not dogmatic about what solution is best. However, it emphasises that a solution must be found, and found quickly.

goodbyepci

PMS on Sunday Sequence this morning

goodbyepci

http://www.bbc.co.uk/iplayer/episode/b00vm464/Sunday_Sequence_Changing_Minds_Over_Money_and_Morality/

14 mins 30 secs in to broadcast

no_more_f.w.o

goodbyepci wrote: »

http://www.bbc.co.uk/iplayer/episode/b00vm464/Sunday_Sequence_Changing_Minds_Over_Money_and_Morality/

14 mins 30 secs in to broadcast

What a sickening performance by Stafford Carson
He tells the story of a PMS family in danger of losing their home.

Instead of wringing his hands, and "pressing on", "hoping" "curing diseases" and "building jigsaws"

Why in the name of goodness don't the PCI write a cheque for that family to tide them over their present problems?

And while they're at it put together an accessible fund for other families in difficulties as a result of their endorsement of the PMS.

There has been precious little Christianity shown by PCI so far, that might be a good start!

joylikes2shop

http://www.newsletter.co.uk/news/DETI-faces-PMS-legal-fight.6634663.jp

Excap123

There is a clear difference between PMS and Equitable Life - in the case of the latter, the Parliamentary Ombudsman made a finding of maladministration and recommended that the government pay compensation. In the case of the PMS, the Treasury Select Committee expressed surprise that DETI had not spotted a lack of regulation, but the Committee fully accepted that DETI was not the regulatory body. Unfortunately, then, it's just the opinion of a parliamentary committee, not a legal or binding finding.

Toastandbutter

Excap123 wrote: »

There is a clear difference between PMS and Equitable Life - in the case of the latter, the Parliamentary Ombudsman made a finding of maladministration and recommended that the government pay compensation. In the case of the PMS, the Treasury Select Committee expressed surprise that DETI had not spotted a lack of regulation, but the Committee fully accepted that DETI was not the regulatory body. Unfortunately, then, it's just the opinion of a parliamentary committee, not a legal or binding finding.

Excap123 - it seems as though you are unintentionally muddying the waters.

The question is not whether PMS and Equitable Life were the same or not.

The question is whether there was a failure of regulation for the PMS.

The Treasury Select Committee (TSC) said there was;

The chancellor said there was;

The government response to the TSC report repeatedly accepted it implicitly.

It seems true that DETI had no specific prudential regulatory responsibility for the PMS.

However it also seems true that DETI failed in its responsibility to maintain a current, fit for purpose regulatory framework, as TSC put it.

DETI did not instigate legislative reforms it should have and which were made in GB in the wake of the Financial Services Marketing Act 2000.

The following article illustrates the situation well, it seems;-

http://www.newsletter.co.uk/news/Government-admits-to-PMS-regulation.5343753.jp

Lord Trimble noted that the FSA investigation found the PMS was offering financial services but that it decided to take no further action against the directors. "I read into this a tacit admission that there had been a regulatory failure on the part of DETI or FSA or both," he said.

He also said the Government had ensured that societies like the PMS were tied to the FSA in England but had " failed to achieve that object concerning Northern Ireland".

A spokesman for the FSA did not deny Lord Trimble's claims.
"Any Industrial and Provident society regulated with the FSA in Great Britain has an obligation to send annual accounts to us on an annual basis," he said.


There is also the question as to whether DETI lived up to its responsibilities as registrar. The FSA told the TSC that it appeared there may have been unlawful banking going on after only looking at the last PMS annual return and its rule book. This prompted the FSA to do a full investigation... prompted by info DETI had at its fingertips.

DETI was responsible for authorising the PMS rule book to ensure it was legally properly registered as an industrial and provident society. Yet the PMS annual accounts appeared to show glaring conflicts with the rule book, said the FSA.

As for the findings of the Treasury Select Committee being "just" that of a parliamentary committee....

Just because an interested party has not yet got into the position to sue DETI does not mean DETI would easily escape a legally binding adverse finding with regards to maintaining a proper regulatory framework and properly discharging its responsibilities as registrar.

It is also worth noting that DETI has not been slow to make sweeping changes in related regulation since PMS's demise.

But not because of any regulatory gap you understand....



T&B

joylikes2shop

http://www.bbc.co.uk/blogs/ni/2010/11/presbyterian_leader_admits_to.html

Toastandbutter

Derek Lynn gives a comprehensive reply to David Sterling on letters page of today's News Letter.


(He argues that DETI had a statutory responsibility to ensure that PMS was acting within its rulebook).