Other misconceptions the GFSC wants to rectify…
Wednesday 26th November 2008, 2:00PM GMT.
1 Depositors were not aware of the takeover of Cheshire Building Society’s Guernsey subsidiary in 2006 – incorrect.
They were all written to individually in the summer of that year and a notice was placed in La Gazette Officielle.
2 The GFSC was wrong in permitting LIhf to take over Cheshire Guernsey – incorrect.
LIhf was a top 500 bank – ranked 397 in the world at the time of permission being given to the takeover. By July 2008 it had moved up to 177.
It met all the standards required and the acquisition also gave the Guernsey bank a future, which was otherwise in doubt.
There was also a very strong letter of comfort from the parent company and there had been some very strong stress testing done at the time. It was also the strongest of all the Icelandic banks at the time.
3 The GFSC should have prohibited all upstreaming after the Northern Rock Guernsey incident – incorrect.
Guernsey’s banking model is partly founded on the basis of upstreaming.
There would also have needed to be a clear threat to depositors to stop it and, if the GFSC had taken such an action, it believes it might have caused a crisis and been accused of being uncommercial, overbearing and heavy handed.
4 The GFSC has not been taking enough action since Landsbanki’s collapse in getting depositors’ money back – incorrect.
On 13 October the GFSC wrote to the Icelandic regulator calling on LIhf to honour the commitment given in its public undertaking to make any payments Landsbanki Guernsey could not make. This covers both the £12.75m. owed by LIhf and the £36.3m. owed by Heritable. This letter has been followed up on several occasions demanding a reply.
In addition, joint administrators Rick Garrard and Lee Manning have continued to take the appropriate steps and Chief Minister Lyndon Trott has also written to the minister of finance in Iceland calling on the Icelandic Government to make sure LIhf honours its obligations.
All these calls to honour the obligations are now with the Resolution Committee set up in Iceland to resolve the banking crisis. The UK Government is also representing Guernsey’s interests and those of the Landsbanki Guernsey depositors in negotiations it holds with the Icelandic Government.
5 The GFSC did not protect depositors because it confused its regulatory role with a promotional one – incorrect.
The GFSC does not have a promotional role at all. GuernseyFinance has promotional responsibilities for the island.
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Most Landsbanki Guernsey depositors agree and accept that they were informed about the take over of Cheshire Building Society’s Guernsey subsidiary by Landsbanki, but since many depositors had fixed term bonds, they were unable to move their money elsewhere.
The strong “letter of comfort” referred to was worded on the letters to Landsbanki Guernsey depositors and on promotional material as follows
“Landsbanki has given an undertaking to discharge those liabilities of Landsbanki Guernsey which Landsbanki Guernsey is unable to discharge from its own assets, whilst it remains a Landsbanki subsidiary.”
This appeared and was presented to to depositors as if it were a “guarantee”, thereby leading depositors to believe that their savings were secure, even up until the morning of October 7, 2008, when this same “guarantee” still appeared on the Landsbanki Guernsey site, and when Landsbanki Guernsey was placed into administration.
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Strike out for legal action! The writing is now on the wall. Now is the time to take action.
Maybe the investors are afraid to?
Lets see?
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Concerned depositor
You will find that many financial institutions on the island have a parent bank or building society in the UK , who give exactly the same undertaking as Landsbanki Guernsey gave.
Now even I know that there is no problem unless the parent company collapses, surely this was also understood by Landsbanki Guernsey depositors, or were they blinded by the higher interest rates..
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Presumably Landsbanki gave the same “guarantee” to Icesave depositors, who are now being compensated in full at the instigation of the UK authorities. Would GFSC please comment on the effectiveness or ineffectiveness of their own urgings and the support of the UK government on behalf of the Landsbanki Guernsey depositors?
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