1 Crown – Isle of Man

In 2008, the Isle of Man found itself in a unique and challenging currency situation, directly tied to the global financial crisis. As a Crown Dependency with its own government and economy, the Island did not have its own independent currency. Instead, it used two distinct forms of sterling: its own local coinage and banknotes issued by the Isle of Man Government (which were legal tender only on the Island), and Bank of England notes, which circulated alongside them. This system relied entirely on the stability of the British pound sterling and the UK banking sector, which came under severe strain in late 2008.

The crisis manifested most acutely through the near-collapse of the Icelandic banking sector, which had significant operations on the Isle of Man. Savers in Manx subsidiaries of banks like Kaupthing, Singer & Friedlander (KSF), and Landsbanki faced uncertainty about the security of their deposits. While the Isle of Man had its own depositor compensation scheme, the scale of the potential liabilities threatened to overwhelm it. This sparked a crisis of confidence, with concerns that the Island's currency and financial system could become isolated if the UK pound itself faltered or if the local government could not guarantee the parity of its issued notes with sterling.

The situation was ultimately stabilized by decisive government action. The Isle of Man Treasury implemented a temporary, unlimited depositor guarantee in October 2008 to prevent a bank run and maintain confidence in its currency. Furthermore, it negotiated a £150 million loan facility from the UK government to underpin this guarantee, ensuring it could meet its obligations. These measures, combined with the broader UK bank bailouts, preserved the currency's parity and the Island's financial stability. The 2008 episode crucially highlighted the inherent vulnerabilities and interdependencies in the Isle of Man's currency model during a systemic global shock.