Crisis broke the block on protection
Wednesday 15th October 2008, 4:30PM BST.
FOR those who invested in Landsbanki Guernsey, the two most important questions are how much of their money they will recover from the wreckage of what was the world’s 177th top banks and when they will get it.
The answers are also of crucial interest to Guernsey plc. The mauling this island’s reputation has taken from Landsbanki’s decision to go into administration and its lack of a depositor protection scheme cannot be overestimated.
Nor, too, can the ‘serves them right’ attitude coming from opinion formers in the UK. After all, if wealthy people want to risk their (probably ill-gotten) cash in a dodgy tax haven, then they’ve got whatever’s coming to them.
Yes, that stereotype is wrong – and objectionable – on so many levels, but it does not stop even people who should know better from believing it.
So a speedy return of all cash to all investors would be the best possible outcome, not least because it would help to stem some of the wilder comments being aimed at this jurisdiction. In turn, that would enable the focus to switch to who should bear ultimate responsibility for this tremendous damage to Guernsey’s entitlement to be described as a well-regulated and secure financial centre.
Much is being made of the role of the Guernsey Financial Services Commission but the reality is that no matter how closely it had scrutinised Landsbanki here, it could have done nothing to control Iceland and its four national banks, which ultimately triggered this collapse.
Indeed, when the administrator completes his task, it is likely that the speed with which the regulator and others reacted to large outflows of cash from the bank and the rapidity with which it went into administration will emerge as a material contributor to the amount of money investors get back.
In other words, the regulation worked. What has not worked – because it is not there – is the other essential element of regulation: a safety net.
And the absence of a Guernsey protection scheme is down to politicians and the institutions themselves failing to listen to the repeated requests by the GFSC to put one in place.
In this case, it has taken a crisis to break the logjam.
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I am surprised about your comment that the lack of a Guernsey depositers’ protection scheme is down to the politicians and institutions themselves for failing to listen to the repeated requests by the GFSC to put one in place. This is not substantiated by facts. The facts are that there have been calls for a depositers’ protection scheme for about 20 years now and the need for one was shown by the local Barnet Christie collapse. The later situation in respect of BCCI and the then States Electricity Board only further highlighted the need and also for more strigent financial policy.
The GFSC has actually ignored calls by politicians, ( and I was one of them ) and others for a very long time. They have preferred to put their time and resources into other matters and many consider they have had their priorities wrong. We still have other important areas where the GFSC have dragged their feet on financial legislation and on these issues we are still waiting for action. Hopefully this inaction and prevarication will not give Guernsey further poor international publicity.
The example of money laundering legislation in respect of estate agents and advocates is just one example of issues which have been put ahead of depositers’ protection.
The GFSC has ignored those politicians who called for depositers’ protection with their we know best attitude and it is unfortunate that leading politicians did not stand up to them and direct GFSC policy instead of allowing the GFSC to direct themselves.
There may be some truth in your allegation that the institutions being to blame, because the impression in the past has been that they have hardly been pushing for it. The truth I think is that the GFSC told senior politicians that the banks were not keen on the idea, but why not when the GFSC should have told the politicians it was essential to proceed and they clearly didn’t. The blame for this has to lie squarely with senior GFSC officials and the GFSC Chairman and Commissioners who have a duty of good governance to fulfill.
It is true that more recently a reluctant GFSC has been pressurised into bringing in a Guernsey depositers’ protection scheme but their answer was to commence a slow moving consultative process which only concluded in August. If they were so aware of how much we needed a scheme why didn’t they advise the States to bring in a scheme equalling the UK’s initially, with perhaps further improvements to come later.
Even when the Landsbanki crisis errupted the GFSC witheld information from States Members and we still don’t know the whole picture of when they became aware and exactly what actions they took after that.
Your comment further tried to defend the GFSC for their role in what happened with Landisbanki Guernsey but you provided no evidence whatsover to justify this claim.
Indeed your comment.. that focus should ultimately be put on who should bear the responsibility… is far more spot on and appropriate.
We do not have the information of the lead up to events in Guernsey and there is a need for an official investigation into what happened and the actions taken or not taken by the GFSC and others closely involved with these.
We must have learned by now that continual spin trying to make out our regulators are wonderful and that we have no financial legislation matters to resolve is just not believed anymore.
Now is the time for honesty, for admitting we have faults, for decisiveness in getting our act together and for leadership in restoring our very damaged reputation.
Tony Webber
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Tony do you not feel that your long-running personal battle with the GFSC might just be tainting your stated views here ? It can hardly be said that you don’t have a vested interest in relation to your views.
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I was just going to say that I would have liked to see David’s take on Mr Webber’s post.
Sorry that the post was so short and did not address the issues raised by Mr Webber.
I would have liked to see David provide a detailed critque.Perhaps he will as I am sure I would welcome his comments on the detailed criticism posted by Mr Webber
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Stephen
I don’t know enough about what has and has not been said between politicians (past and present) to the GFSC to be able to comment. I also feel that its very early in the process for anyone to be focusing on blame for Landsbanki. Surely the first step is to get the depositors’ funds back.
My overriding point is that Tony has been fighting a long and so far losing battle with the GFSC for many years, all reported in the media, and so it is not entirely suprising that he may take this opportunity to slate them. In that context I am not sure how much weight should be placed on some of his criticisms. He may well be right, but it wouldn’t seem that his views are untainted by other factors.
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The more the dust settles I think that the GFSC cannot really be blamed. Their job, as has been highlighted elsewhere, is to make sure we are regulated to international standards. I think they have performed well within their remit.
My personal ire is that if they have made it known to senior politicians that things ‘may not be quite right’ with a particular operation and then those senior politicians do not relay that information to the public’s elected representatives to disseminate at their discretion, probably with a mild blanket statement to the public to be wary of a certain type of ‘deposit investment because of the current global financial crisis’, it asks the question; what are our senior politicians for?
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David has mentioned I have been in a long running dispute with the GFSC which is true. However, it is because of this that I have experience of how the GFSC has worked and its shortcomings. I believe a major fault in the situation with the GFSC is that they had been allowed almost by default to become an institution who were not allowed to be constructively criticised. No one in the industry would dare to make any comment about the GFSC because they were worried that it would go against them. This, I believe, is unhealthy. We had a different problem with the politicians because too much confidence was placed by them in the GFSC without any form of proper monitoring of what they were doing. The policy direction of the GFSC should have been under political control but the rein on this was allowed to become too loose. The GFSC’s role should have been to get on with proper supervision and sensible regulation but things got out of control and wrong priorities were set. The GFSC Chairman and Commissioners have to take their share of the responsibility for this.
The GFSC became like some sort of ivory tower.
It does, and did have many good points,and I was very aware of this. My ex wife was one of the only officers at Advisory and Finance before responsibilities were transferred to the new GFSC. She was a respected senior officer for some years before she became ill and had to retire. I was very supportive of the GFSC and regulatory initiatives during my 13 years as a States Member. In that support I was one of the few politicians who spoke up on regulatory matters. It was thanks to people like myself that the Fidicuary Laws were changed before being returned to the States to be passed. I was amongst those pressing for protection of depositers, and the long delays on this I believe can be blamed on the GFSC who were charged with this responsibility.
If being a former Deputy and Conseiller with 13 years of States experience, and many years in the financial sector including fund administration, offshore broker work, managing an insurance operation, and running my own financial services firm, do not give a qualified right to give viewpoints on this issue, then who should be doing so ?
I will admit that it irritates me that all my company wanted was 6 months free of licence supsension in order to comply with GFSC requirements and they effectively put me out of business,( when there were no money laundering, or improprieties, financial or otherwise, and I never handled any client money), yet Landsbanki have been allowed to take thousands of pounds of people’s money and there has been great risk. So I believe I have every right to give an opinion.
He must surely accept that we now have to be more honest with our public relations and set about putting our house in order. If any of our politicans or public servants, including the GFSC have been at fault in any way, they must be held accountable. A full investigation is urgently needed and Guernsey needs to do much more now to restore our reputation.
Tony Webber
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One of the things about working at the College of Further education was that students frequently told you what they perceived reality to be in the finance industry.
I have to say that even allowing for an amount of bias from Mr Webber many of the points he makes, especially in his first post, ring a bell with my own observations and comments of those working in finance.
The comment about people being afraid to criticise the GFSC certainly rings true. It was something I heard more than once..
It would be sad to be dismissive of most of the comments made by Mr Webber because of his well publicised spat with the GFSC.
The historical appriasal in Mr Webber’s first post seems to be close to the truth.
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Stephen
Isn’t it the Gernsey way to be massively offended to ones face.
OK to do it behind ones back though.
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