Landsbanki Guernsey Depositors’ Action Group spokesman Neil Dickens after yesterday’s meeting with Chief Minister Lyndon Trott and Treasury minister Charles Parkinson. (Picture by Peter Frankland, 0698813)
Landsbanki depositors left a meeting yesterday with the Chief Minister with the impression that they were unlikely to get all their money back.
Landsbanki Guernsey Depositors’ Action Group spokesman Neil Dickens said the meeting with Lyndon Trott and Treasury minister Charles Parkinson had not been particularly constructive and described the politicians as having been evasive.
‘It is very deflating. The conclusion we have taken from the meeting is that there are great doubts about getting 100% of our money back,’ he said.
He added that Deputy Trott had ruled out using public funds to make up any shortfall.
‘He said he would not dip into taxpayers’ money - this is primarily as a result of the Promontory Financial Group report on the Guernsey Financial Services Commission that has just come out.
‘He no longer feels a moral obligation, his argument being that if the regulatory body was found to not be at fault, then why should the States pay?’
Mr Dickens insisted that the action group had never proposed to fund any shortfall by using taxpayers’ money.
‘The minister also said there had been insufficient appetite, politically, to proceed with the creative financial solutions proposed by the group, all of which were distinct from dipping into taxpayers’ money.
‘What was clear was that the States is very much looking to the work of the administrators to recover our monies.
‘We were also told the Guernsey government is making sure the depositors are being represented as fairly and equally as all other depositors in Icelandic banks - they are holding the Icelandic government to the parental guarantee.’
Mr Dickens said there was no sign that any progress had been made with the Icelandic finance minister.
He also asked the Chief Minister for a reaction to December’s Justice Committee hearing in London, which he said had been a significant development.
‘The hearing brought into question whether the Ministry of Justice, which is responsible for administering the constitutional obligation of HM Government in representing Guernsey against external threats, was doing its job properly.
‘We put this to the minister and his response was that the Policy Council was unable to comment.’
The group was also told that no claims for benefit had been submitted as a response to the situation, said Mr Dickens, and the Chief Minister told them the reputation of the island had not been significantly harmed.
‘With regard to Guernsey’s international reputation, he seemed keen to give statistics on increases of banking deposits - deposits have gone up, so he isn’t worried.’
They were also told that the depositors were believed to have received initial payments earlier than those in similar positions in the UK or the Isle of Man and that some depositors would already have received much more than they would have done under a compensation scheme.
The parties will meet again in February following a Treasury Select Committee hearing in London, at which Mr Dickens said he would be representing the group.
Article posted on 8th January, 2009 - 1.00pm
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63 Article Comments
What I would like to know is how many meetings the Landsbanki Action Group have had with the Icelandic authorities, and an answer to a question I put on another article ie, how many letters or comments have been written and published on Icelandic media concerning the demise of the Icelandic Bank, and the loss to the depositors.
Please can someone advise.
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Perhaps this article should be re-titled:-
‘Credibility of Guernsey as a safe financial centre slips away’.
This just goes to show that Mr Trott & Mr Parkinson cannot be trusted. For the last 3 months they have been saying they have been working to ensure the return of depositors money when in fact they have been doing the exact opposite and blocking any attempt to find a solution.
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Glyn
You do yourself and your cause no help at all with such comments.
The amounts of monies you receive has nothing to do with either of Deputies Trott and Parkinson.
Sadly, the linking of the inability to help and the expected whitewash of the GFSC by an “independent” person, appointed by the GFSC to examine the actions of the GFSC, is not the cleverest of moves.
If the media reports are right then the LG depositiors have been handed a stick to beat the States.
Why on earth did they not rely on the plain facts that the Administrator is responsible for the recovery of monies?
Might be a case of act in haste and repent in lesuire.
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No Glyn, they have been concentrating on seeking to recover it from the parties who are actually responsible for the bank’s collapse, rather than negligently using Guernsey taxpayer’s money for something that Guernsey has been found to be responsible for.
Your deposit was not with the “National Bank of Guernsey”. The States of Guernsey was not the guarantor of the obligations of the bank, it was only responsible for regulating it. As the regulator was not responsible for the collapse, precisely what do you thing Guernsey was liable for ?
It is entirely appropriate that Guernsey continues to pursue the Icelandic authorities and any other blameworthy parties.
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Glyn, I don’t think you are correct there, as in todays Guernsey Press it states ” Deposits up £ 5bn during Landsbanki crisi month ”
It appears that it’s just wishful thinking by yourself and other depositors that the island will go down the pan but the facts prove otherwise.
Glyn can you give me any information on my previous comment.
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This is a disgraceful state of affairs. It is our money - we want it back - it is as simple as that. Shocking!
The States of Guernsey must stand up and be counted.
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Since the Administrators took over very little has been given by them of what they have been doing. I would like to know what has been achieved to date and what costs they have incurred as up to 31st December 2008. I would like to have a detailed account of the assets and liabilities as they must have these available to distribute by now. I don’t mean a summary but a detailed inventory of the assets so that we can see what the actual situation is and not waste time allowing this current position to be extended giving the Administrators carte blanche to keep charging.
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I am not a Guernsey citizen. I believe that the Guernsey Government could have done and could be doing a lot more to assist the recovery of funds without incurring any significant costs.
In my view it is failing its own citizens who have been so badly hit by this disaster.
I always held the view that the Channel Islands might be a great place to live. Not any more. Nor would I invest in Guernsey or recommend anyone else to do so - not while the Government takes this stand!
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Chief minister Trott has shown that he has no intention of helping the Landsbanki depositors recover their savings, and never has had despite hollow claims to be working behind the scenes.
The states of Guernsey CAN afford to act directly without cost to the local taxpayers. If it is the strong safe financial centre it claims to be then it should take a lead from the Isle of Man and act accordingly in a responsible and honourable manner.
Up to now we have believed Trott and have been patient in the belief that he was actually doing something. Now it is is clear he has been hoodwinking us all and I fear that many Guernsey based depositors are keeping quiet when they might be putting pressure on their deputies. Now is the time to act.
However much Trott and Parkinson play this down it cannot be good for the island in the long term.
Now that the two thousand plus depositors are becoming more frustrated and angry so more energy will be directed at spreading the word that Guernsey cares little for its retail depositors and is plainly
not capable of controling its financial institutions. The Landsbanki depositors have been treated very shabbily by Trott and the Guernsey government. The time has come to take the gloves off and for the residents of Guernsey, depositors or otherwise, to make their voices heard.
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I have a Parental Company Guarantee from Landsbanki bank stating that my savings are safe in Guernsey. This written guarantee was authorized by the GFSC.
As the regulating body in Guernsey it is the GFSC’s duty to ensure that this guarantee is honoured.
What are they doing to ensure that Iceland will honour this guarantee?
The GFSC cannot leave the individual depositors to pursue the Icelandic government for their lost money. This is the role of a regulating authority.
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So the States of Guernsey are the only ‘country’ in the World not to come to the aid of depositors in a bank operating and regulated in its jurisdiction.
I am not suggesting that Guernsey are liable for anything, but the Administrator of Landsbanki has put several proposals to the Guernsey authorities that would cost little if anything but would allow people who deposited money in good faith in your ‘wonderful’ island a speedy return of their funds. Both of whihc have been turned down.
But as long as people continue depositing money on the Island who really cares because it seems thats all that really matters to many of the people on Guernsey.
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May I draw everyone’s atention to the stability of Malta where the local banks have alwsys had sensible protection. Not high interest rates in fact low at the moment BUT deposit holders have the first €100,000 protection. In place. Now, Chief Minister Trott is obviously too scared of his own back to come out fighting on behalf of a pathetic few pensioners who with a bit of luck will soon die. Remember there’s been rumblings of Guernsey wanting to be completely indepen- dent of UK, where does the Chief Minister stand on this?
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Landsbanki operated in Guernsey, was regulated by Guernsey and paid taxes in Guernsey. Guernsey is the only country in the world where the authority has refused to compensate depositors who have lost money due to a failed bank.
On the very day before the bank went under, LBG was still posting messages on their website saying how strong the bank was and that LBG was a good and safe home for depositors money. If the Guernsey regulator did such a great job, then how could they have allowed this to happen ? Were they so far detached from reality ?
The vast majority of depositors who lost money are pensioners. They have indeed lost virtually ALL of their life savings in many cases and face a life of poverty as a result. They NEED the help of the Guernsey authorities who are morally obliged to provide it.
The plain facts are that much of Guernsey’s GDP is derived from banking activities. If the States continue to behave in this disgraceful manner towards depositors who lost funds in Landsbanki, then individuals and corporate entities will no longer bank in the channel islands and the “golden days” of the last 20 years will be well and truly over.
My financial adviser is already making plans for his clients to transfer funds out of the Channel Islands and i’m sure others will do the same. The recently introduced depositor protection scheme in Guernsey does nothing to inspire confidence. Once the trust has gone, it’s hard to win it back.
The Isle of Man has gone out of its way to find a solution to the problem with KSF, but Guernsey continues to do nothing. Guernsey has made huge sums of money from its banking activities in recent years and now it’s time to stand up and be counted, it is nowhere to be found. This is a disgraceful situation that has been badly handled by the Chief Minister and sadly Guernsey will get precisely what it deserves as a result.
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The Administrator has proposed a PDCS (Phantom Depositor Compensation Scheme)to help the savers in Landsbanki Guernsey. It has been shown that this would not cost the States of Guernsey or its residents ANY money, so why has the Chief Minister not supported this proposal? This would enormously help the 793 savers in Guernsey and their families, many of whom are elderly or retired, some of whom have said they fear they will not live long enough to see their savings returned! In turn, it would be excellent for the reputations of the Chief Minister, the States of Guernsey and the financial services industry in Guernsey to support this proposal and thereby its residents.
The only reason I have seen so far for the Ministers refusing to support the proposal is this quote from the Chief Minister/Treasury Minister earlier this week: “the marginality of the benefits would be exacerbated by the political landscape in Guernsey, where there is clearly an insufficient appetite for a Phantom Depositor Compensation Scheme.”
In other words, why should they bother to make any effort at all, even if it will not cost them anything, if the other residents of Guernsey aren’t bothered about supporting their fellow residents in this way. So if Guernsey residents will speak up and loudly express their wishes that this proposal be accepted, then the States just may listen.
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I can’t believe the savers are still wishing to pluck away in the hope that it will touch some heart strings. Sympathy is a word that is just that. A word.
You people need to force action. The authorities that should have protected your savings and interests have let all of you down.
Is any legal action going to commence then? If not all of you can write off the remaining 70% and simply kiss it goodbye.
The authorities could not give two hoots. The GFSC’s chosen independent reveiwer has ruled in its employers favour. Who honestly would have expected anything different.
The last option left now is for the savers to take their cases, collectively through the consortium, to a court that is not in Guernsey.
A local court will just go through the motions and fob the case off to reduce liability to is own constitution and regulation auhorities.
Moaning is not making anything happen. It is just falling on deaf ears. Our CM first stated its schols and health. He then came out with his never say never. He is now saying never ever.
Without any pressure it will be never forever!
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Perhapas the LG depositors should concentrate on the quote in the article “He said he would not dip into taxpayers’ money - this is primarily as a result of the Promontory Financial Group report on the Guernsey Financial Services Commission that has just come out”.
If this sis what was said I wonder what would be said if the LG depositors had a truly independent person to assess the role of the GFSC and its Chairman, and came to aconclusion that was contra tothat of the consulant hired by the GFSC.
It seems from the report by Mr Thoms that it would be reasonable of the LG depositors to assume they would have had help from the States if the Foot report were criticsl of the GFSC.
I wonder what the outcome would be if the LG depositors obtained their own report on the conduct of the GFSC, a report prepared by someone who would be seen as truly independent assessor.
The report also begs the question that if the ministers relied so much on the Foot report why didn’t the States commission a truly independent report?
Perhaps Mr Thoms who wrote the report will confirm the quotes re Promontory Financial Group.
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Typical Politician - what happened to the contacts Mr Trott had made with the Icelandic FM back in October. Whilst the Chief Minister has made it clear he sees no reason to assist the savers in Landsbanki Guernsey he has made sure also that the Guernsey Government is first in line to recover its 100% from the bank as a preferred creditor - Lyndon Trott fiddles whilst capital flies!! Well done that man
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Some of these comments regarding Guernsey’s “obligations” are ridiculous. Depositors in Landbanki were not investing in a government bond issued by the States if Guernsey, for which the States certainly would be liable to repay. If the States of Guernsey is liable for the commercial liabilities of a failed bank when there has been no negligence by the Guernsey regulator, then we may as well close all banks because the nature of the relationship between banker and customer has clearly changed. Banks would be able to offer whatever reckless over-the-top rate they liked, knowing that if the bank fails good old States of Guernsey would bail them out in their obligations to depositors. Sorry, but that’s not how it works and is not how it has ever worked.
Depositors seem to think that the States of Guernsey is liable for guaranteeing the obligations of the Icelandic government. No it isn’t. It is merely responsible for using its best endeavours to ensure that the Icelandic guarantee is honoured, but it doesn’t have a default obligation to step into the shoes of the Icelandic government if that proves unsuccessful.
People who think that Guernsey’s reputation as a banking centre for expatriate and retail depositors will be destroyed and the island’s economy will fail are simply wrong. Retail depositors of the Landsbanki type only make up a tiny percentage of the island’s bank deposit base and the revenues and jobs generated by the island from that particular sector of the finance industry is very small.
I fully understand the frustrations of the Landsbanki investors but their ire is aimed at the wrong parties. Try aiming at Alistair Darling for using the UK’s terrorist legislation (!!) for freezing the funds placed by Landsbanki Guernsey with its associated Heritable Bank. That action by Darling is what caused both Landsbanki and Kaupthing to collapse. Both offshore banks were solvent until that unjustified action was taken, and the regulators in Guernsey and the Isle of Man were not guilty of poor regulation.
What the States of Guernsey have to do is keep pressing the right channels for the honouring of the Icelandic guarantee. How hard they can push the UK government is a different matter, for obvious political reasons, regardless of the rights and wrongs of that situation.
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Guernsey promised our money was safe. Landsbanki promised ‘to honour all the obligations of Landsbanki Guernsey.’ They both lied and lied. Guernsey Deputies - by their own admission -knew early in 2008 that LG was failing.They did nothing to correct the situation or to warn depositors. Landsbanki reneged on its written promise. Another form of lying. Governments failed the LG depositors, fobbing us off with more lies and false promises.
If someone had been robbed in the street in broad daylight they would have had a better chance of being aided in the few moments that the robbery took than we have had over the period since October 7th.
Shame on Lyndon Trott, Shame on Brown and Darling. Shame on Landsbanki and the Icelandic government. Most of all shame: on anyone who has stood idly by while this theft was perpetrated.
I am no ‘fat cat high roller’ I am a working man who lost his life savings to thieves. Please do not try to paint this picture in any other colours, adding insult to grievous injury.
Neil Brough
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Although we have never asked to fund any shortfall using taxpayers’ money you might want to bear in mind that all LG depositors who are based in Europe (by far the majority of the us) have paid 25% of the income tax on our interest to the Guernsey government.
Surely this makes the majority of the depositors Guernsey tax payers anyway!!
Don’t fool yourself into thinking that if the Guernsey government stood up and offered the basic financial support of a compensation scheme that all other governments have (including The Isle of Man, who don’t forget increased the amount of their scheme after this event) that this would take money away from services such as education, health or other public services. All governments and councils have huge contingency funds (anything from 10’s to 100’s of millions of pounds) for just such a situation - as can be seen by those UK councils who are managing perfectly well having lost millions in Iceland. Funds that they will rarely admit to having in public but be assured they all do.
All the depositors hope and expect the Guernsey to do is to act in the same way that all the other governments have done worldwide when a banking insitution goes into administration.
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Neil
Landsbanki didn’t lie - they went bust ! It happens from time to time in the commercial world and nobody goes bust deliberately.
Guernsey didn’t lie - it never guaranteed your deposits. It undertook to regulate the Guernsey bank and that’s exactly what it did. The Guernsey bank didn’t fail because of the Guernsey regulator, it failed because of the UK Chancellor’s actions and because the rest of the Landsbanki group went bust along with the rest of the Icelandic economy which rendered its parental guarantee worthless. How is Guernsey financially responsible for those actions ?
Its natural to want to blame somebody but how on earth can blaming Guernsey for actions taken by others in the UK and Iceland be justified ?
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Guernsey takes the money in good times and hides away when times are bad. Guernsey is the only place on the planet that did not feel the need to come to the rescue of its local depositors, even when it involves solutions not costing them a penny but only requiring a bit of effort (see administrators’ proposals).
Guernsey leaders have no sense of duty whatsoever and, no doubt, it will back fire. There is a justice in this world, in the end.
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So, the States do not have any moral obligation to help depositors. Let’s see:
1. It must be one of the few places where there was no compensation scheme in place. Such a scheme was rushed through following the LG scandal but they lacked fair play in failing to apply it retroactively.
2. I understand that the idea of a compensation scheme was discussed over the last decade but due to dithering, no action was ever taken until it was too late.
3. Guernsey is, to my knowledge, the only State on the planet which did not deem necessary to come to the rescue of its local depositors.
Based on the above, what sensible person would say that the States bear no responsibility whasoever for the LG debacle?
And I am not even talking here about the GFSC and its self-commissioned review.
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David
Yes, but precendents were set by the UK, which bailed out Icesavers, and the Isle of Man which pledged £150m of public funds to rescue stricken KSF savers.
Even the tiny Faroe Islands, with a smaller population thatn Guernsey, stumped up $56m to help Iceland.
If Guernsey is not in the same league then it shouldn’t be running an international finance centre attracting savings from far and wide.
Clearly, Guernsey cannot afford to help - but it equally cannot afford not to do so for the sake of its battered international reputation.
Nothing personal against Guernsey, which I have visited and like. That’s just the way it is.
Make sure savers do not lose a penny or diversify your economy and stop attracting unsuspecting savers if you refuse to help them if something goes wrong.
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It might be worth the while of LG depositors to read the Foot Report.
The Foot report reads like an academic tome that ignores much of the reality it should have investigated. It seems a convenient way to avoid the unpleasant realities.
But,it is the unpleasant realities that need examination.
Just a few comments
Whilst the Foot Report spends much time on the LG acquisition of Cheshire BS and the due diligence aspects such as rating agency assessments at the time of LG entering the Guernsey market there seems a dearth of investigation of events between April and September 2008. I would have expected specific discussion on some, if not all the following issues:
Was the GFSC aware that Credit insurance for debts at Iceland’s biggest bank, Landsbanki, was priced at 610 points while that for Kaupthing is priced at a hair-raising 856.
Given that these two have taken billions in UK retail deposits, it may be a sobering thought for savers to consider where they are putting their cash. These banks are now seen as the most unsafe in the developed world. (source Iceland’s banks top ‘riskiness league’ by Simon Watkins, Financial Mail 16 March 2008, 12:36pm http://www.thisismoney.co.uk/investing-and…amp;expand=true
Comparable figures for UK banks were
HBOS was 235
Alliance and Leicester was 342
Barclays was 170
HSBC was 145
Was the GFSC aware that early in 2008 commentators were warning that “Credit spreads are implying there’s a chance of default over the next five years. Not a probability, but a real possibility.” Source Matthew Hegarty, a credit analyst at Barclays Capital in London interviewed by Bloomberg.
Was the GFSC aware that the central bank of Iceland took steps to boost bank industry solvency as a global credit crunch makes access to funding difficult.
Was the GFSC aware that Icelandic banks were no longer required to include obligations at foreign branches when setting reserve levels.
Was the GFSC aware of the downgrading of Landsbanki in early 2008 by the Rating Agencies.
Were the GFSC aware that the references to credit agencies on the LG web site were capable of misleading depositors.
Somehow this period of industry seems to have been ignored. Yet these warnings, and the regulator response, seem to be critical to the assessing of the competence or otherwise of the regulator.
Then there is the suggested comfort clause “XYZ Parent Bank Limited has given an undertaking agreeing to discharge the liabilities of XYZ Guernsey Bank Limited in so far as XYZ Guernsey Bank Limited is unable to discharge them out of its own assets while XYZ Guernsey Bank Limited remains a subsidiary of XYZ Parent Bank Limited.”
Problem is that letters of comfort are seen as a moral and not a legal responsibility. The leading case of Kleinwort Benson v Malaysian Mining Corp 1989 makes clear that the wording must include the clear intent to create legal relations. Otherwise, as in the wording provided to the GFSC and in the suggested wording in the Foot Report the wording will merely reflect the intent the words were written and not a legally binding contract. The words “creates a legally binding contract” should be inserted to ensure the legal binding of a letter of comfort.
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MJ Ashbey
But both the Isle of Man and the UK already had compensation schemes in place and so were legally obliged to pay out. The point is that Guernsey did NOT have a compensation scheme in place and depositors knew that to be the case before placing funds with Landsbanki.
Luke Becham
1. Correct - but depositors were aware of that. Its not a question of “fair play” by not making it retrospective - no misrepresentation occurred.
2. If anything that’s the one thing that Guernsey rightly should be criticised for. But it doesn’t change the fact that Landsbanki depositors still chose to place funds in Guernsey despite knowing that there was no scheme in place.
3. Maybe so - but other jurisdictions were obliged to do so by already having protection schemes in place. They would rightly have been sued for not paying out.
Its true that Guernsey probably should have had a compensation scheme in place before now but it didn’t and nobody claimed to Landsbanki depositors that it did.
I invested in a portfolio of shares last year and lost 30%. Who can I sue please ?
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It was common knowledge that depositors’ funds lodged with banks in Guernsey were not protected by the state.
It is unfortunate that these people appear to have lost some of their savings, but they have no more right to expect state compensation than (say) a passenger booking a seat with an airline which goes bust leaving that passenger out of pocket.
Mr Ashbey and his campaigning colleagues have been telling us for weeks now that custom is leaving Guernsey as a direct result of the Landsbanki demise. If that indeed that is the case and I have no reason to doubt him, throwing good money after bad in the form of State compensation to Landsbanki customers would be foolish indeed.
Mr Ashbey, I hope that you do recover all your funds but at the moment you appear to be barking up the wrong tree.
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Two intereting paragraphs from the Foot Report
59. GFSC continued an active dialogue with FME and the bank and, after renewed adverse press comment on Iceland in mid-March 2008, GFSC’s thoughts turned quickly to whether some or all of the up-streaming to the parent should be reversed. In the following weeks there was intensive discussion of the options with LGL and conditions were imposed upon the bank.
60. After considerable debate, an agreement was reached that effectively determined the state of LGL’s balance sheet at the time of its administration. Put simply, the subsidiary’s assets would be split approximately 10% with the parent (less than LGL’s capital), 25% on call with Heritable (the UK subsidiary of Landsbanki), 30% in the inter-bank market and 35% in loans already on Heritable’s books” End of quote.
The 25% on call with Heritable seems to have been in agrememtn with GFSC and the local mangagement.Note the wording “agreement was reached that effectively determined the state of LGL’s balance sheet at the time of its administration”
Seems to drive a coach and horses through the “Heritable stole our cash” theory.
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David,
Re. your comments on my post:
1. Yes, we were aware of this but we did not realise back then that a much better protection existed everywhere else. You tend to get this kind of information when things turn ugly and then, it’s too late. Also, we deposited our money in a high street bank in a so-called properly regulated market. At the end of the day, the bottom line is that the GFSC failed the LG depositors.
2. Glad you acknowledge the lack of professionalism of Guernsey authorities in this respect. If they did not do their job properly, then the least you would expect is that they show some willingness to repair the mess they helped create. And I am not even talking about using taxpayers’ money here. The solutions put forward would not cost anything to the States.
3. No, authorities in other countries did it because they thought that small depositors should not be ripped off. No legal obligation whatsoever. Apparently, in Guernsey, it’s accepted practice.
Re. your investments in shares, it’s part of the game; we all know this and you can consider yourself happy not to have lost more. I lost money on my shares, too, and I do not complain about it. When one deposits money with a high street bank, it is because it is meant to be safer than keeping it under one’s mattress. It’s not an investment but a deposit.
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The self-commissioned review of the GFSC is a farce. Regardless of Michael Foot’s credentials, would you expect him to bite the hand that fed him? A truly independent inquiry is needed.
Even so, his report provides some interesting reading. Given the mess LG depositors are in, it appears that:
1 There was a serious breakdown of communication between the GFSC and the FSA, for which, in absence of contrary evidence, the GFSC should at the very least be held partly responsible.
This caused £36M being trapped with Heritable.
In section 13, it is stated that “significant Landsbanki assets were being held in the UK, so that, from the point of view of GFSC, a three-way relationship was needed between GFSC, FSA and FME [the Icelandic supervisor]”.
In section 67-68, it is stated that “we are aware that in the case of LGL certain issues have been raised, specifically:
A. the extent to which action taken by FSA prevented Heritable from sending some £36million to LGL just before both banks went into administration;
B. whether FSA could and should have said more to GFSC about the inter-relation between position of Heritable and that of Landsbanki.
… It is a matter for GFSC to determine whether it wishes to raise these matters with FSA”.
2 They let LG advertise that there was a parental guarantee while it was a mere letter of comfort.
The report (sections 84-87) refers to the GFSC consultative paper of August 08 which addressed the issue of transparency towards depositors, but clearly, this was never implemented and it was deemed acceptable practice to mislead depositors and give them a fall sense of security.
In conclusion, the GFSC and the States should clearly accept some responsibility for the mess they helped create. If they don’t, these people just do not have any sense of honour and duty and should not be in their position.
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David,
I’d like to get back to your comments on my post:
1. Yes, we were aware of this but we did not realise back then that a much better protection existed everywhere else. You tend to get this kind of information when things turn ugly and then, it’s too late. Also, we deposited our money in a high street bank in a so-called properly regulated market. At the end of the day, the bottom line is that the GFSC failed the LG depositors.
2. Glad you acknowledge the lack of professionalism of Guernsey authorities in this respect. If they did not do their job properly, then the least you would expect is that they show some willingness to repair the mess they helped create. And I am not even talking about using taxpayers’ money here. The solutions put forward would not cost anything to the States.
3. No, authorities in other countries did it because they thought that small depositors should not be ripped off. No legal obligation whatsoever. Apparently, in Guernsey, it’s accepted practice.
Re. your investments in shares, it’s part of the game; we all know this and you can consider yourself happy not to have lost more. I lost money on my shares, too, and I do not complain about it. When one deposits money with a high street bank, it is because it is meant to be safer than keeping it under one’s mattress. It’s not an investment but a deposit.
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What Trott has done nullifies Guernsey as a safe banking center. Whatever promotion Trott and his cohorts may do around the world (like in Japan and China) to bring investement money to Guernsey. The new (non retrospective) guarantee is meaningless if they are unable to pay when it hits the fan - and the Landsbanki crisis has proved that the UK will not bail out Guernsey. Guernsey stands alone.
The dubious (oriental jollying) Trott and his cohorts were allegedly behind the closure of one of the popular protest websites. It seems the UK government acting on calls from Guernsey has taken moves to close one of the Landsbanki protest websites. It is now back online, after the UK regulator took it off air for a while and it got mysteriously de-listed from Google. More here: http://real-deal-blog.com/2008/12/14/landsbankiguernseysaverscouk-landsbanki-guernsey-crisis-uk-government-cover-up/
However - Landsbanki savers will not go away. Type “Lyndon Trott” into Google and this page appears on page one: http://landsbankiguernseysavers.co.uk/LyndonTrott.html
As the much respected Daniel suggested above, it is not the responsibility of individuals to pursue Iceland for our individual monies, it is the responsibility of Guernsey, as their financial authority approved Landsbanki’s guarantee.
If it is the responsibility of Guernsey, that means the head honcho there: Lyndon Trott, must do more than act evasive as he did at the meeting chronicled in the article above.
Lyndon Trott: Bad show sir!
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Sorry, what “Heritable stole our cash” theory?
David: the Landsbanki Freezing Order did not and does not apply to the Heritable, and anyway was enacted AFTER Landsbanki had collapsed (and Landsbanki Guernsey and the Heritable went into Administration) and was not the cause of the collapse, but enacted as a result of it.
Kaupthing is another matter, which is why the Icelandic government are suing the UK for (allegedly!) bring down Kaupthing, but not Landsbanki.
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Yes, Michael R, I am now aghast that I TRUSTED a bank that gave me a guarantee that ALL my deposit would be refunded if needed. My late husband and I put our savings into a UK building society subsidiary based in Guernsey. History. So, you are saying the State of Guernsey is in the clear and won’t try to help those who put their trust in Guernsey. Of course the UK Government should be pursued for invoking the anti-terrorism Law to freeze those bank assets. What is happening to all those millions?
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Mr Ladome
Agreed that the Peter Neville nominated “independent” reviewers report is a farce.
So far as the parental gurantee is concerned it seems that Mr Foot is unaware that such understakings must state that they are legally binding.
Mac
As the person who wrote of the ““Heritable stole our cash” theory?” being scuppered, let me explain.
Paragraph 60 says “60. After considerable debate, an agreement was reached that effectively determined the state of LGL’s balance sheet at the time of its administration. Put simply, the subsidiary’s assets would be split approximately 10% with the parent (less than LGL’s capital), 25% on call with Heritable (the UK subsidiary of Landsbanki), 30% in the inter-bank market and 35% in loans already on Heritable’s books”
Look at the Administrators accounts and you will see the monies held with Heritable are 25% and importantly, that percentage was deposited with the agreement of the GFSC.
So far as the FSA preventing £36 million leaving Heritavble to return to Guernsey, this suggests the FSA was doing its job in ensuring that as much of the Heritable assets remained where they should have been. When it bacame clear that heritable was in trouble the correct thing was to protect the assets from wandering.
The upstreamed money from Guernsey was a legitimate transaction, and one monies legally held by Heritable, that were within the guidelines set by the GFSC.
Sad about Landsbanki
Where is your evidence to support your claim that “The dubious (oriental jollying) Trott and his cohorts were allegedly behind the closure of one of the popular protest websites. It seems the UK government acting on calls from Guernsey has taken moves to close one of the Landsbanki protest websites”.
lets have your evidence, if you have any. You seem more than willing to dish the dirt.I wonder if you are so forthcoming is supporting your derogatory comment.
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Luke
You say you were aware that a protection scheme didn’t exist here but didn’t realise that better schemes were available elsewhere. So just how much research did you do before you invested your money or were you blinded by the 7% rates on offer when household name banks were offering a lot less ?
Sorry but a bank deposit is an investment, not a mere deposit. Of course there is risk with a deposit. The risk is the balance sheet strength of the bank. The extra interest that Landsbanki was paying was the risk premium. Otherwise why do strong banks pay loser rates and weaker banks pay higher rates ? Its the same as bonds. Triple A rated bonds pay less interest than B-rated bonds because because the risk of payment default from the balance sheet of the issuer is higher. Its not rocket science but how many Landsbanki depositors were aware of this ? If they didn’t know this then they should have been using financial advisors rather than investing without advice. Would you invest in a property without a survey to know what you were buying ?
The facts are very simple. If you wanted an absolutely no risk investment then the closest you would have got would be government bonds and if you wanted a bank deposit then one of the major high street banks where the risk of loss of capital was minimal, but never nil ! You would have received around 5% interest from those banks at the time that Landsbanki were paying 7% and that’s why.
The reluctance of people to use regulated financial advisors before making investments that they don’t truly understand is frightening. If the advisor had not properly explained the risks of investing with Landsbanki then you could have sued him and he would have been carrying insurance.
It would be very interesting to know which banks those fortunate Landsbanki investors who have other case deposits are still banking with.How many are still taking risks that they don’t actually understand ?
I once came across somebody who had invested money in Gibraltar with Barlow Clowea’ lost a chunk of it when it collapsed, and then invested the balance with BCCI ! He was blindly chasing interest rates but didn’t take advice and simply didn’t understand what he was investing in. It seems that there are many others out there who don’t understand the risks of a bank account, or at least they didn’t 6 months ago but clearly do now.
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To Sad About Landsbanki and others who seem to think it a good tactic to villify Deputy Trott and Deputy Parkinson it would seem to be a naïve and foolish tactic.
Maybe I’m missing something but it seems to me that you actually need them on your side !
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We should all challenge Chief Minister Trott to hold a TRUE AND GENUINELY INDEPENDENT ENQUIRY into the action, or lack of, by the GSFC.
It seems few of us think the Foot report has any credence.
P.S Does Guernsey have a democratically elected government or does Lyndon Trott say what goes ?
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David, all that you wrote makes sense, sad though that it is.
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Has anyone got any idea how much it cost to have a full page spread in a national newspaper:
IS
YOUR
MONEY
SAFE
IN
GUERNSEY
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Stephen John: you’ve missed the point of the question, “Sorry, what “Heritable stole our cash” theory?”. Nobody has said “Heritable stole our cash”, certainly not in this set of comments, so there’s no “theory” to scupper.
However, your last point, “within the guidelines set by the GFSC”, is spot on.
The GFSC had the great foresight to see that Landsbanki hf might get dodgy and required LG to move funds away from them - but allowed LG to move those funds to another subsidiary of Landsbanki! Doh!
(I.e. still within, as paragraph 61 puts it, “direct or indirect exposure to Landsbanki”)
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David,
Of course, with hindsight it is very convenient to try and rationalise events the way you do it. It is also easy to put this debacle on the back of the so-called greed of depositors.
In reality, LG rates were not materially greater, if anything, than what was offered by other competitive banks. It is, in any case, quite logical for savers to seek the best returns and this is what makes the market competitive. Risk control should be a given, at least in properly regulated markets.
Big is not necessarily beautiful. Quite a few large banks got into severe trouble (eg Citigroup in the US, HBOS and NR in the UK, Fortis in the Benelux) and depositors did not loose out because governments took appropriate actions. Large banks also tend to abuse their monopolistic positions by taking advantage of the small depositor’s inertia and lack of financial knowledge and the real competition comes from newcomers. It is certainly true in the UK and across mainland Europe.
As I said, depositing money on a immediate access account is not investing and, no, it should not require the use of a financial advisor to advise on how safe it is. Again, this is why all governments around the world made it clear that they would not let retail depositors loose any money. Guernsey is on its own on that one. Mr Trott wants to have its cake and eat it. Who is greedy?
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Mac
The £36 million held by Heritable is someting te Landsbanki depositors harp on about.
The Promontory report of Mr Foot looks as if the exercise was to see if the right boxes were ticked rather than examining the content of the boxes.
Apart from the absence of any real discussion on the GFSC activities between April and September 2008 there is also the absence of any discussion on whether an ordered close down of Landsbanki Guernsey should have occurred. Surely it would not have been beyond the ability of the GFSC. Seems the GFSC were a a tad late in actioning to protect the depositors, in a bank they clearly saw as fragile.
If a regulator cannot conduct an ordered shut down then why have a regulator. After all, the GFSC is legally obliged to look after both the bank and the customer. It seems lacking in ability to do both jobs.
The part of the Foot Report and the breakdown of assets at the time of acquisition is clearly designed to show how the GFSC saved 30% of LG assets.
This begs the question why didn’t they save more as it seems clear the GFSC were very concerned with the status of LG. Or has Mr Foot put both GFSC feet into the mire with his attempt to show them as competent?
A protective arrangement that agrees that 60% of LG assets could be kept at Heritable (25\% on call and 35% in loans already on Heritable’s books”
If there was concern about the amount of LG money with the parent, it s fair to assume this because of the widespread fears in the industry of the stability of the Icelandic banks.. Yet the GFSC was content to see 60% of LG assets in Heritable.
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Stephen John
Indeed, and another 10% in the parent directly, so a 70% direct or indirect exposure to Landsbanki.
Yes, we are very grateful to Mr Foot for highlighting that the GSFC made no efforts whatsoever to get those funds placed outside of Landsbanki exposure.
Further, there’s no mention in the report of what protections -if any- were in place on the funds moved to the Landsbanki Heritable subsidiary to stop Heritable then upstreaming them to the parent themselves. That was why the GFSC made LG move the funds in the first place, no? Cos they were concerned about the amounts being upstreamed to the parent?
Guernsey Financial Stupidity Commission!
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“Has anyone got any idea how much it cost to have a full page spread in a national newspaper:”
About £17000, but the newspapers will want money up front ;)
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I cannot believe how ignorant some of you Landsbanki depositors are.
All you do is slag off Guernsey and it’s politicians whom you expect to help you with your cause.
You also seem to want to bring Guernsey down, now that will help you no end eh.
As we have seen recently it appears that there are funds to be got but they are not on the island, so why are you all wasting your time and money on a lost cause here. Beats me.
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David
You well know that the UK repaid Icesavers WELL ABOVE the compensation limit of £35,000 at the time Icesave imploded.
In the Isle of Man the compensation limit was only £15,000 but the IoM Govt nevertheless still pledged £150m of public funds to help stricken depositors.
Michael
You are right: I was looking for low / no risk which is why I deposited my savings with the Cheshire BS in Guernsey.
Others
Yes, it was my fault primarily for not moving my savings the moment I was informed they had been ’sold’ to an Icelandic bank that I’d never heard of. In hindsight, it was one of the worst inactions of my life and I am paying the price for it now.
Stephen John
That was an excellent exposition above. You sound very knowledgeable. I just hope the Guernsey Govt and FSC read what you’ve written.
All
The Guernsey Govt has a moral duty to do their utmost to ensure that savers are repaid in full as soon as possible - even if they have to make decisions which may be unpopular in certain quarters.
There’s still time to salvage the reputation of their international finance centre.
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The Guernsey tax payer is not going to bail out Landsbanki depositors. Get over it.
“There’s still time to salvage the reputation of their international finance centre.”
The reputation is intact
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I can’t understand the antipathy towards those Landsbanki depositors that have lost a large majority of their savings.
The anger that the Guernsey authorities were unable to match the basic gestures of those in other jurisdictions seems perfectly natural. More so considering the language used by our politicians.
I doubt the majority of these people were ‘investing’. They were ‘depositing’. The very use of the word ‘deposit’ surely means they were expecting to pick it up again.
So a bank falls down. Nothing to do with Guernsey, that is clear, save for the fact that it was allowing advertising for deposits a few minutes before breakdown. Not in its remit, maybe, but pretty short sighted.
Whatever findings from cronyist investigators, a couple of thousand of people, reportedly nearly a thousand locals, have been stung by global mismanagement. Isn’t it possible that the same contingencies that allow us to buy a couple of boats for fuel (one good, one future good) allow us to be a bit compensatory?
I agree, no obligation (though to say it isn’t moral smacks of self aggrandisement), but the numbers needed to match IoM or whomever’s schemes cannot be that large?
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just one more Landsbanki let’s say Cheshire BS - and it will be the end of “sunny Gsy”
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Now we have available to us the Foot review of the Landsbaki Guernsey debacle it looks more and more like the LG depositors do have a moral claim against the GFSC.
It is clear the GFSC were concerned with the viability of LG but their response was to ensure that 70% of deposits were in the hands of the parent either directly, or indirectly through Heritable.
If the LG depositors feel they were being soft talked by the CM and FM into believing something could be done for them, then I would have a great deal of sympathy with their view. It might not be the case, but it certainly looks loke it.
Whilst any loss of credibility in the personal satnfing of the ministers is unlikely to lose any significant business for Guernsey, the wiole affair, post Foot, is beginning to leave a nasty taste.
Perhaps the time has come to do the right thing and look again at the proposals of the Administrator.
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Fast Robert
You say that the depositors were “depositing” rather than “investing” but that isn’t correct. A deposit is nothing other than a loan, at interest, to a bank by a depositor. The expectation is that the loan will be repaid. But it isn’t guaranteed and that’s always been the nature of banking. There is and always has been with all bank deposits an inherent risk that the bank will be unable to repay its loan obligations. It doesn’t happen very often, which is why we are all taken aback when it does happen.
As with any loan, the rate of interest payable by the borrower reflects its desperation for the money that it is borrowing and also reflects its credit status. Banks which are short of liquidity offer higher interest rates to attract more deposits. Borrowers with poor credit status are willing to pay a higher rate of interest to secure the loan.
Therefore higher deposit rates offered by a smaller bank compared with banks which are not considered to be a material credit risk invariably signify higher-than-average credit risk, and therefore a greater risk of default. Why pay higher rates than you need to in order to attract liquidity ? It was obvious to many that the Icelandic banks were in greater need than the rest of the market for depositors’ cash, and that’s why their rates were so high. Some people have said that their rates were not much higher than other banks, but an extra 0.5% is a very significant differential and there are many investors out there who will switch deposits between two well-rated banks for an extra 0.5%.
This interest premium is nothing other than a risk premium re. the return of capital, and if there is any risk of loss of capital then its an investment. Even investing in a Gilt or US Treasury Bond is an investment - the investor is at risk that the government will be unable to repay the bonds. That’s why US Treasury bonds yield far lower interest than US corporate bonds who obviously carry far more risk of default. Far too many depositors in Landsbanki seemingly still don’t seem to have a clue about the true risks of any bank deposit, let alone a deposit attracting higher-than-average rates. If there was no correlation of risk to these higher interest rates, then why weren’t the major high street banks offering 7% ? Its really very simple. They weren’t so desperate for the extra deposits to balance their books.
You cannot possibly equate the purchase of two ships with the payment of what, £130m, to Landsbanki depositors. One relates to a lifeline service to prevent the island being paralysed within days, with an asset being received for the payment and that asset likely to wash its face, even make a positive return. In contrast your suggested payment, for something for which the island is not liable, and for which it would get nothing in return, is simply reckless. If we had paid it then you of all people would have been one of the first to berate the States for not now being able to build new schools or sewage systems because we bailed out the finance industry by paying £130m to Landsbanki failed depositors !
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Of course, David, but that’s not how the banks sell their products and that is not how depositors view their deposits.
My boat quote was merely to highlight that when it suits them the States can move efficiently. When it doesn’t suit then they appear to dither. It is this perception of uncaring inaction that rankles.
The rates weren’t that unusual compared to some of the UK ISA products.
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Fast Robert
I agree that its not how banks sell their products (but may well be from now on with enhanced regulation !) and it may well not be how depositors view their deposits, but I’m afraid that ignorance is no defence. The rates were around 0.75% per annum higher than I could obtain (safely !) at the time for my fiduciary clients with banks with middle-ranking credit ratings. Depositors with Landsbanki would not have been aware of that, but for those who placed their life savings or £500k or more with Landsbanki, surely its a question that they should have put to their financial advisor ? Its a very harsh lesson indeed to have learned this way, but the public need to take proper financial advice before buying any financial product. If duff advice is received then the financial advisor carries insurance and can be successfully sued.
Would you place your life savings with an institution without doing some research first ?
How many Landsbanki depositors have claimed that they didn’t place funds with Landsbanki but with Cheshire Building Society “and then it got sold to a bank we had never heard of”. Well, surely at that point they should have asked even more questions, notwithstanding the fact that the GFSC and the FSA had no problem licensing Landsbanki to operate, and that the bank was ranked in the top 500 globally (a widely-used acceptability test). Would you buy a house of that same value without having it get checked out ?
Again re. the boat, the States aren’t going to dither re. something that they are ultimately and unquestionably responsible for resolving.
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The LG clients (no doubt someone will criticise that term) go to great length to differentiate between deposit and investment for the simple reason they feel it strengthens their case, and further differentiates them from shareholders who have also seen their investments evaporate.
In their eyes that makes them a special case.
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Yes, David, a harsh lesson that the finance industry is a bit like a religion. It relies on faith to survive. That and the support of governments.
If the little people knew what their savings were being used for over the last few years they would have run a mile.
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Stephen
I fear that your view is right, but it merely underlines that they naively parted with their money without appreciating what they were investing in and without taking advice.
Fast Robert
Unfortunately that doesn’t just apply to the “little people”.
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David’s “£130m” guesswork shows that he has no idea about LG, whose total liabilities are far less than that.
His (continued) comments against use of taxpayers funds shows that he hasn’t followed the story, as the Administrators PDCS proposal would require no taxpayer funds, indeed, shows that he hasn’t even fully read the article at the top of the page.
And his “£500k or more” and “financial adviser” comments show that he lives in a totally different world to the vast majority of LG depositors, who are *nowhere near* that wealthy, let alone have financial advisers.
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Dear Depositors
ya pays your money, ya takes ya chances.. You took the gamble to greedily grab 7% interest rate when all the other banks would only give 4.5%.
Why should I as local tax paying person earning 18k put my hand in pocket to refund your deposit ?. I didn’t make you put your money in that bank.. Did I..
I say take it up with the Icelandic goverment not us ?.
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Mac
I was “on the road” when I posted that earlier posting and it wasn’t possible to check the exact figures. The fact that those figures aren’t 100% accurate does not in any way change the nature of ny comments. Whether its £50m, £100m or £130m is immaterial to the point in question.
I have indeed read the article at the top of the page. I am well aware that the proposal was turned down. I would actually support that proposal as its the most practical and realistic one seen to date . However, that wasn’t the point that I was making and if you had read my posting correctly you would realise that.
You entirely miss my point re. financial advisors. I was expressing surprise that some of the larger depositors, who one would expect to be slightly more sophisticated investors, would have realised what they were investing into. You also miss the further point that the smaller depositors were in even more need of a financial advisor if they were investing offshore without knowing what they were doing. There are IFAs on every high street of the UK and just about everywhere else who don’t just advice the wealthy you know !
Sadly the more vulnerable and less experienced investors are the very ones who need financial advice the most without realising it or without being prepared to pay for it. Why on earth cut corners when investing life savings or hard-earned cash ?
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Mac
It’s fascinating to see how different people can read different things into the same few words.
I read David’s remark as saying that those who put all their savings or more than £500k in LG should have taken advice before investing. As I read it he wasn’t speaking of all LG depositors, but a certain category.
Seems to make sense to me.
Of course, there were many local authorities and charities that took advice, and still deposited many millions in Landsbanki.
Mac, you say that the the administrator requires no taxpayer funds. I note that Thom Ogier in the headline post in another thread, says that the Administrator required the loan of taxpayer money to be guaranteed against assets held by the bank, that have yet to be realised.
Looking at the Administrators statement of affairs there was £41million in liquid interbank assets. I suspect some £30 plus million has been used on the interim payment.
The £49 million held on Landsbanki Group placements have an unknown realisable value as do the £52 million held in Loan assets supported by UK Property security.
Not a welcome state of affairs to meet the return of the remaining £80 million or so of depositors funds
Three things suggest themselves from this.
1 there is a need for taxpayer funds, and
2 the assets that guarantee the loan have a very speculative value
3 the assets to be realised may take some considerable time to materialise in cash.
If this scenario is correct then I can understand the reluctance to make taxpayer finds available due to the uncertainty of recovery of assets.
On the other hand, as I have stated elsewhere, the fact that the Ministers seem to have used the excuse that the GFSC was cleared, as a reason for not helping changes matters considerably, as I believe the GFSC to have a lot to answer for.
It seems a retrospective ea gratia payment compensation financed by the banks could be the honourable outcome to this sorry saga
.
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Mac, Stephen John, clearly neither of you are LG depositors and so don’t have the latest report and information from the Administrators. As it’s over 30 pages I’m not going to even start to summarise it, other than to say, SJ, there are a couple of Administrators proposals.
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Mac
No I am not a depositor. I did consider Landbanki but the exposure of the fragilty of the Icelandic banks in the Daily Mail circa March 2008 was a warning that was heeded.
Further research soon threw up the professional opinions.
In addition looiking at the LG web site and the reference to its ratings and the fact the reference had not been changed to reflect the ratings downgrading, were red flags to beware of Nordic promises.
Still there were many professionals who failed to spot or to act adequately on the warnings. The professional commissioners at the GFSC also seemed oblivious of the true state of affairs.
I will try to see the document you refer to on the Adminsistrators web site.
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