Approximately £94m from Isle of Man government reserves will fund larger early payments to Kaupthing Singer & Friedlander Isle of Man (KSFIOM) depositors, according to a local Isle of Man newspaper.
The Isle of Man's government, Tynwald is expected to approve an extension to the early payment scheme so depositors will receive £10,000 for each account holder.
KSFIOM depositors have currently only received £1,000 for the first tranche of early payments, accounting for £11m from reserves. The rest of their savings are still outstanding since the bank collapsed in October last year.
The money comes out of £150m the treasury says would be needed to part fund a proposed scheme of arrangement. The aim is to be repaid from assets recovered from the collapsed bank.
If the early payment scheme is backed by the high court next week, it will guarantee KSFIOM depositors will be paid back at least two thirds of their savings within two years.
Earlier this week Treasury minister Allan Bell was questioned about whether the banks are fully signed up to part-fund the planned scheme of arrangement. Bell said the maximum contribution for each bank will be £350,000 a year over a period of three years at the most.
He told parliament there is 'agreement in principle' from banks but if they do not support the scheme of arrangement, 'clearly it would fail' and the depositors' compensation scheme (DCS) would be activated instead.
MPs from various parties are concerned it is premature to seek 'such a huge amount of taxpayers' cash' without definite support of the banks. If the high court rejects the scheme of arrangement on 19 February, £150m will still be needed to fund the DCS which will be triggered.
Bell told Isle of Man Newspapers, the £94m is effectively a payment in advance of any return of assets from KSFIOM but the net cost to tax payers is not yet known as it will depend on the return of assets from the collapsed bank.
While the initial £1,000 early payment was an emergency measure, Bell believes the £10,000 payment will make a 'real difference' to depositors.
To promote 'long-term investment'
Switching 'hard and expensive'
Smaller funds still packing a punch
To drive progress