It’s fairly unanimous: Most experts today pin the blame for the current financial crisis on banks doling out too much credit for high risk mortgages. And these so-called ‘sub-prime’ mortgages were often shunted into offshore banks where financial regulations are loose or virtually non-existent.

At the same time, these shaky loans increased the risk to these banks’ stability, with devastating consequences for the host economies: banking systems in general--whether off- or onshore --are often disproportionately large in comparison to the national economies.

And for the first time since the 1930s, depositors have a real reason to worry.  

“Investments go up and down but we haven’t seen this for deposits before,” said Ian Parfitt, a British expatriate who lives in the Netherlands.

Parfitt lost his life savings when he deposited a lump sum in Kaupthing Friedlander & Singer Isle of Man (KSFIOM) bank last year, money he intended to use to pay his children’s university tuition and buy a home in the UK.

“Before you put money in a bank in the future, you need to know what will stand up in court if the bank goes bust, what you can legally get back,” he said. “You are risking your deposit now, which is new – everything in excess of what you can legally get back.”

“I had an agreement with the bank, under the jurisdiction of the Isle of Man, that they would look after my money,” he added. “They haven’t fulfilled their side of the bargain.”

Discriminating practices

Parfitt’s complaint goes beyond losing his money when the Icelandic bank crashed. He accuses the UK of discriminating against offshore depositors, taking an action that he and the other members of the KSFIOM Depositors Action Group believe is the real factor behind the bank’s crash.

“Our bank crashed because some one somewhere high up in the food chain in government decided in early October to move 550 million pounds out of the bank to the UK for ‘safekeeping’,” Parfitt said. “This money then became part of the liquidation of the UK arm and has been used to bail out British residents on the mainland.”

Parfitt heard only last week that the Isle of Man government will pay back the 50,000 pounds that is guaranteed, considerably less than his deposit.

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