THE States deserves criticism over Landsbanki Guernsey’s collapse and should be prepared to apologise, a poll-topping deputy has claimed.
Matt Fallaize (pictured), who has spearheaded several campaigns since polling the most Vale votes in April’s general election, said Landsbanki Guernsey customers had every right to feel aggrieved and angry at the lack of protection for their savings.
He said the States had failed them. ‘As a people’s deputy, I do not hesitate to accept my share of what is perfectly justifiable criticism from the public,’ he said.
‘States members are elected to represent the interests of those who put us there. And every one of us is part of a government that has failed to act as promptly as our constituents have a right to expect. After years of consultation with the industry, it is simply not acceptable that Guernsey is still without a depositors’ protection scheme.
‘It is a failure of successive States. I have been in office only since May of this year. Nonetheless, this House has had enough time to put right the complacency of its predecessors on this issue and we have not done so quickly enough. For that, an apology is perfectly in order.’
Article posted on 14th October, 2008 - 1.00pm
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20 Article Comments
A deposit with an institution paying well over the market begs the question: Why?
Additionally, it’s common knowledge that there are no protection schemes in the Channel Islands.
Hopefully, people will get their deposirs repaid.
If not, sadly it’s their own fault.
I am delighted to hear someone in the States finally acknowledge the almighty mistake the island has made. My respect goes to Matt Falliaze but I am alarmed if he is a lone voice.
As other jurisdications such as IoM called emergency Parliamentary sessions to improve investor Protection when the failures first started; Guernsey’s finance minister ponced off to China on a promotional jolly.
I cannot see a single reason for savers, local or international, to trust Guernsey to look after their money anymore. I do fear this is a major turning point in Guernsey’s history - with far worse ramifications than the loss of the tomato and tourism industries.
Is the failure to act in the face of this massive turmoil down to arrogance or lack of understanding how quickly money can cross borders? I am sure the islands bank desposits will shrink rapidly now in light of the lack of protection.
I have worked in finance for 21 years across the globe and I have always promoted Guernsey but for banking at least I can see no reason to consider the island for my clients after this failure.
Trott needs to get on the first plane back and earn his States salary and the islands trust again.
Ben Bennett
Guernsey officials are looking like clowns in a circus act at the moment as they still have not formulated any sort of strategy on how to support the depositors claiming back the money lost - whereas Isle Of Man at least agreed increasing the deposit protection limit and to follow the UK in pursuit of Icelandic assets - this took about 48 hours whereas it is now over a week since Landsbanki stopped doing business in Guernsey, since when a lot of funds have been moved away from Guernsey to other locations
Matt has set a fine example in apologising but he has done his best in the circumstances. He has acted in good faith but been let down by the GFSC and leading politicians.
What is important is that Matt and other like minded States Members continue to press for real positive action immediately.
This issue shows that the GFSC should have been monitored in what it was doing and still no one is regulating the regulators. The GFSC have been like a rudderless ship with no control and direction of policy.
The States must now exercise firm leadership in financial policy for Guernsey and there needs to be a Minister directly responsible.
So far we have had the GFSC doing its own thing for years clearly getting its priorities wrong, and Treasury and Resources and Commerce and Employment and our Chief Minister and Policy Council seemingly having a say, but just letting things get out of control and events running themselves.
The comment that the damage this issue has caused it potentially worse than what happened with the demise of the Guernsey Tomato industry is so true.
Our financial sector has been proud to be promoted as being in a politically capable, well managed and secure jurisdiction. All that has gone out of the window because of pure stupidity in how this crisis has been dealt with.
There should be a thorough investigation of what has happened and it may be appropriate and proper for those responsible, both political and public servant to go.
As for the past States I was a member for between 1991 and 2004 and I know I have long been pressing for a depositers’ protection scheme as indeed improved legislation on other financial areas, which we are also still waiting for. States Members who did nothing do need to apologise, but what is important is that the States wrongly just left the GFSC to their own devices and should have been seriously scrutinising what they were doing, or for that matter, not doing. The GFSC Chairman, Peter Harwood, and the other Commissioners were appointed to do a job of good governmence by the States. They should be held accountable for what has happened. Where is the apology from them.
Tony Webber
Where are all the senior finance directors who used to regularly write into the Press saying how ‘Rosey’ the garden would be if only they could run the island, unlike civil servants?
The silence is deafening……. Perhaps their snouts are stuck in the corner of the troughs, as they ferret about for the last few cents!!!
Dear B.L Cummer,
I know of a 93 year old widow who had all her savings in Landsbanki and relied on the interest for her living costs. She has now lost everything.
You said: “sadly it’s their own fault”
How is it her fault? Why should she have to be a financial expert like you to enjoy security? She trusted the rates offered by the GFSC regulated bank - can’t a lay-person trust the regulator to protect them? They why have the the regulator at all?
regards
Ben Bennett
Ben
You are so right, I must say that who would have thought for a minute that the islands Finance Industry was so vulnerable. I for one didn’t, so I do sympathize with the old lady.
This will harm our reputation for a very long time, and there are going to be a lot of changes to our lifestyle, me thinks.
I sadly have to agree with B.L.Cumner. The question I’ve still not heard answered is why people would want to deposit off shore. For many, it’s to cynically avoid paying tax. Other times, it’s because of the very high returns on offer - which should raise suspicions, since nothing in life is free. Personally, I invest in “safe” deposit accounts paying slightly above the average.
Depositing offshore is done for a number of reasons by those wishing to manage their tax affairs efficiently e.g. those working overseas and receiving income gross. The majority do this legally and correctly so it is wrong to tar all offshore depositors as “tax avoiders.”
Whilst the case of the 93 year woman is sad you have to ask questions when a deal looks too good and never place all your eggs in one basket. Look at the institutions that have had trouble, bad business models or paying over the odds. Halifax gladly advertised 5% on a current account and 10% on a deposit account, Northern Rock locally was always paying way above market rates.
The islands industry isn’t that vulnerable, it is diverse and has shown the ability to adapt, one bank having a problem because their parent in Iceland gets into difficulty does not mean that banks as a whole are going down the pan.
The regulators role is also to ensure the banks here do their jobs properly how can they be expected to police the activities of the Icelandic finance system?
You also have to smile at those demanding all of their money back because they backed a bank and not a horse, even if a deposit protection scheme had been in place they would have only got back the protected value and lost anything above that level.
Ben Bennett hit the nail on the head by saying that to restore our damaged reputation we need a deposit protection scheme ASAP.
Guernseyman
I think you menant tax evasion (illegal) and not tax avoidance.
Clearly the high rates of interest offered by Landbanki Guernsey was a major decider of making deposits. High returns but no protection in the event of a storm.
Looking at the Questions and Answers on the LG web site a few minutes ago, the offer of interest without the deduction of tax must also have been a major decision maker.
The Questions and Answers are illuminating not for what they say but for what is not said in some of the answers.
What is surprising is that the GFSC didn’t seem to be concerned with some of the ambigous statements made by LG, especially when the bank was generally seen to be vulnerable.
I’ve been banking in Jersey & Guernsey for over 25 years. It’s about time these so called leaders gave overseas depositors the confidence they ask of us, not vice versa. After all, it’s because of us, the locals have jobs, by us supporting your banking industry!! If foreign depositors remove their savings on a large scale, your states economy will be in a very poor shape.
Because of racial, arrogant and selfish remarks I have recently read in local newspapers made by the local Islanders towards foreigner depositors, I have moved my hard earned cash to safer places and will never use these Islands or promote Channel Islands banking system again.
The lack of insight and response to this crisis and failure to offer foreigners or locals any form of protection is simply criminal. Foreigners are not on the planet to finance the rich kids of these states.
T - you are a bit slow on the uptake I am afraid - all Guernsey has ever done is milk the finance industry for all it is worth.
Take the tax
Take the rent
Give them short term licences
Benefit from their OE skills
Use their experience
And what happens to the people who live and work in Guernsey? They get told to go thats what.
I have no sympathy for the local folk who invested in Landisbanki, or who have taken out self certified mortgages (of which there are MANY).
It’s all about greed and not sound investing.
I can see why you would feel sorry for a 93 year old who lost all her money - but how about the hundreds of people who have to leave Guerney every year, having worked there for 3, 5 or 7 years and missed out on the rise in capital in the housing market as they had to rent (because they were given exorbitant GV’s by the States so they were unable to buy) for 5 years or so - this is a loss of over £200,000 in some instances and Guernsey folk have the nerve to moan.
Get real people - we made our own bed so we should lie in it.
I hope the banks pull out and give us a reality check.
Richard, Thanks for your comment but can you please clarify what you mean by “slow on the uptake”? I assume you mean, it took me a while to realise Guernsey is not the safest or best place to bank?
If my bank was thinking of it’s depositors, they would have pulled out of the Island long ago.
Thanks
T.
T
It wasn’t the realisation Guernsey is not the safest or best place to bank.
The error you made was in choosing and staying with one where there were well documented concerns, both about Iceland, and its banks.
The fact that you failed to see any of this is sad, but at the end of the day the depositor must accept some responsibility for his / her action, or inaction.
Richard, Stephen, Not sure how you interpreted that I lost at Landisbanki. I have not banked with them and lost nothing but have moved my account out of the Island from a different bank which so far is unaffected by this financial turmoil. My reason for moving out is because of the attitude of the so called regulator not giving any guarantees. I am not prepared to financially support such nonsense, it goes without saying that peoples money should be safe anywhere!!
I keep hearing Guernsey needs a scheme but who pays? the banks?, the people of Guernsey? So many people want protection but no-one telling us who pays…
All banks in Guernsey were protected by their parent but as the parent went bust…who could have predicted that!!!!
Landisbank was one of the smallest banks in Guernsey with 2000 customers…what if one of the major Guernsey banks went bust…no protection scheme would really help and Guernsey would be seriously in trouble as 200-500 people would suddenly be without a job!!!(knock on impact to economy massive)
On the news today, the UK Goverment announced without taking into account the Global crisis the Biggest goverment debt in 10 years…what if they could not afford….
Note to myself to spend savings on matress with built in safe!!!
The talk about “fault” and choosing a “safe” bank are it seems to me missing the point.
In the current crisis, Guerney and the IOM, so far as I am aware, stand alone in not fully protecting deposits (although the IOM did retroactively increase its depositor protections, but any amounts above the threshold are not protected). In the UK (and in all other jurisdictions) while the government was not legally obliged to protect all savings, it did so nonetheless.
Presumably the concept of a “safe” bank would not include any of the following, although in each case depositors have lost nothing:
-northearn rock: nationalised
-Abbey and Alliance and Leicester: bailed out by Santander
-Bradford and Bingly: part nationalised, part bought by Santander
-RBS: part nationalised
-Lloyds: part nationalised
-HBOS: basically bust but ultimately will either be taken over by Lloyds or be nationalised
-Barclays: teetering towards part nationalisation
-ING: recent beneficiary of Dutch bail out
-big six Irish Banks: saved by government guarantee
-Lansbanki subs in the Uk: bailed out
-and the list goes on…
The reality is that we are living in times the likes of which have not been seen since probably the Great Depression and banks the world over are in difficulty. The real lesson in all of this it seems to me is that a bank can only be considered “safe” if it is based in a jurisdiction which is willing and able to bail it out in times of crisis.
This bodes ill for jurisdictions like Guernsey and Jersey who have clearly demonstrated their inability to step in if required to protect depositors.
“We are living in times the likes of which have not been seen since probably the Great Depression”
Way to jump the gun. It is scare-mongering like this that further affects confidence. The Great Depression featured widespread unemployment and destitution. Not quite the picture in Guernsey. Yet.
As always, a minor crisis has been blown way out of proportion by Guernsey at large. What is needed is not a blame-game or “OH MY GOD THE STATES HAVE FAILED US” slanging match. We don’t need any self-righteous Mr T’s telling us we’re all bigotted and short-sighted either (which I think was grossly unfair, thanks very much).
What is needed is decisive, canny action. We have long known that we can’t support the finance industry in Guernsey for ever (think of the tax black hole). The most popular subject for Higher Education students going away to study are now Creative Arts. Survey results have recently shown very little interest in the finance sector from Higher Ed students.
Support the finance industry while it’s still alive, but shift focus to a new industry that fits in with the skills and qualifications of local graduates. This will encourage them to return, reduce the brain drain, and help to halt the widespread misery that finance brings to our lives.
Ellie
Quite right to suggest that we consider diversification, but for the past 5 years nobody has come even close to identifying a viable alternative to finance. High labour costs and the inability to freely import skilled specialist labour for new industries is one deterrent, another is the ridicuously high cost of importing raw materials and shipping out finished goods which rules out physical manufacturing. There isn’t much else which gives us a USP in global markets and before anybody suggests Specsavers as a model, bear in mind that if the company was ever sold to the likes of Boots or Vision Express then the very first thing that they would do is shift all the local jobs to somewhere cheap like Wales and save an average of probably £15k per head in salary costs. Thankfully the Perkins family seem unlikely to sell but don’t be kidded into thinking that it can be replicated in terms of creating 400-plus jobs by any organisation without the same degree of fantastic loyalty to its family of Guernsey employees which many take for granted.
Tidal energy has a chance but only if we enter into massive partnerships with major energy companies as the huge infrastructure costs would be far too big a risk for Guernsey to fund.
Ellie
So we are sending our brightest pupils away to study Creative Arts
If we want them to return to the Island we had better open a MacDonalds PDQ