Landsbanki lessons to be learned
Monday 20th October 2008, 2:30PM BST.
WHEN the States meets next week, a group of deputies will seek to question government’s handling of the Landsbanki Guernsey affair and, in particular, why this island does not yet have a deposit protection scheme for investors.
Clearly there are a number of answers needed about the authorities’ handling of the matter.
The first, certainly for those who currently face losing 70% of their life savings, is what moral responsibility – if any – the States will take for their missing money.
There is a clear acknowledgement that some form of safety net is an absolute. The States recognised that decades ago with the legislation introduced to regulate the then expanding financial services sector and as early as 1969 registered a protection of depositors law.
What none of that does, of course, is to guarantee any return of cash in the event of a banking or other institutional crash. Yet just how crucial such schemes are to confidence in a crisis was illustrated by Jersey’s chief minister providing his savers with a guarantee that money deposited by locals is safe.
In turn, that has focused attention locally as to how the Landsbanki affair has been handled here.
And invariably, the question islanders ask is, where was the political leadership?
Jersey’s promise of a guarantee might be questionable, but it was a clear statement designed to try to restore confidence – and appears to have worked.
Here, Guernsey’s chief minister has attracted criticism for leaving the island at a critical time to enjoy a ‘jolly’ in Shanghai. While trade delegations are invariably grindingly hard work and anything but jolly, the question remains whether the chief minister was right to go. From a PR point of view, definitely not. In terms of ensuring the success of the delegation? Certainly. In other words, whatever he did would be wrong.
What is unarguable, however, is that in his absence there was no sense of leadership, for all that the Treasury minister and regulator have done.
And that is why a group of deputies can legitimately complain about the information vacuum during this crisis.
To use a favourite States expression – there are lessons to be learned from this.
Campaigns
Voice For Victims
Voice for Victims is a campaign aimed at promoting the rights of those affected by child sexual abuse.
This is Guernsey
Guernsey Press
Your Comment rightly focussed on two key points for Guernsey to address… Confidence… and
Leadership.. and it is not surprising that the former is brought about by the latter.
If by the States Meeting next week the political leadership is still lacking and nothing decisive is announced, then the Confidence will further detiorate.
It is essential for the Policy Council to address two immediate issues:
1.) State what Guernsey’s definate plan of action is to restore confidence in Guernsey as a reputable financial centre and when a full depositer’s protection scheme will be commenced.
2.) Set up a Panel of enquiry into the Landsbanki situation made up of independent politicians and other capable individuals who would be charged with investigating the roles of all those concerned, GFSC, senior politicans and public servants.
Who would have thought we would be in the position today of ever questioning the capabilities and actions of reputable institutions and politicians previously seen as beyond possible reproach, but we are.
A dark day for Guernsey now, but a grim future tomorrow if we aren’t prepared to do what is right.
Tony Webber
Report abuse
Paul
I think the question now is are we more greedy than we are needy?
Up untill now confidence has not really been an issue. How much have we benifitted from finance in taxes as well as money filtering down into the general economy?
Lots. If we wish to keep t this way the depositors need their minds putting to rest and all the greed needs to stop.
Who is to blame?
Probably lots of people and organisations but most definately not the savers, it is these people that keep the wheels turning!
Report abuse
The GFSC have been smart in trying to take control over the “independent inquiry” of the Landsbanki Guernsey mess, This is understandable, but must not be allowed to happen. The GFSC is a major player in this drama as well as being open to mounting criticism. As such should not decide who will investigate it, That is a function for the States and will ensure the some credibility of any inquiry.
The following are just some of the questions that a strong, independent questioner should ask of the GFSC. The independent questioner should have the ability to ask supplementary and more searching questions where these are needed. Belief should only come with evidence, and not just the words of those whose, natural instinct, would be the preservation of any reputation they might have.
I would also feel the issues are important enough for the evidence to be under oath.
1 GFSC is believed to have asked LG to ensure more asserts were transferred to LG.
Why was this necessary?
Were sufficient additional assets transferred to Guernsey?
How did GFSC ensure that ongoing day to day assets of LG were sufficient?
2 GFSC were aware by August 2008 of the dangers of upstreaming. What did the GFSC do to ensure that the levels of upstreaming at LG did not endanger LG as an ongoing business?
3 Did GFSC have LG on a special watch as a bank which was regarded as risky?
4 If not, why not?
5 If GFSC did have LG on a special watch how did the bank manage to find itself needing to rush into administration?
6 Why did GFSC tell the Chief Minister of Guernsey at lunch time on the day LG sought administration that the bank was in difficulties?
7 Did the GFSC receive any advice from the law officers to the effect that it could disclose this information to the Chief Minister.
8 Who else did the GFSC share this information with prior to the application of LG to seek administration?
9 Was the GFSC aware of the Policy Council assurances of the Friday prior to the collapse of LG that Guernsey banks were sound?
10 Is it credible that on the very next working day after the Policy Council assurances a meeting takes place between deputies and GFSC on bank deposit protection, and the question of the standing of Guernsey banks, was neither stated explicitly or implied?
11 Was the GFSC aware of the fact that the statement by LG that it was “. It is rated by two international credit rating agencies, Moody´s and Fitch”. Is capable in law of being regarded as a half truth and therefore a misrepresentation in contract law?
12 If the GFSC was aware of the existence of the statement ““. It is rated by two international credit rating agencies, Moody´s and Fitch”.why didn’t it ensure that the downgrading by credit rating agencies were not entered on the LG web site?
13 Was 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
14 Was GFSC aware that early this year 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, acredit analyst at Barclays Capital in London interviewed by Bloomberg.
15 Was 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.
16 Was GFSC aware that Icelandic banks were no longer required to include obligations at foreign branches when setting reserve levels.
17 Was GFSC aware that the implication of this was that “It can be expected that this change will considerably lighten the reserve requirements of those banks that operate branches abroad,” the bank said”
Source Bloomberg 25 March 2008
These few questions are sufficient to require a proper independent inquiry and one commissioned by the States, and not one of the bodies whose own conduct is subject to searching question.
Report abuse
Stephen,
Completely in accord with the questions you feel need to be asked in respect of an independent enquiry, which you agreed should not be under the control of the GFSC. There are other questions as well,and such an enquiry would be better undertaken by an investigating panel/committee rather than one individual.
I hope a politician/s will make sure all this happens.
Report abuse