UK regulator kept mum over Iceland
Saturday 4th April 2009, 2:29PM BST.
GUERNSEY’S financial regulator was kept in the dark by its UK counterpart about the full extent of the unfolding Icelandic banking crisis that led to the collapse of Landsbanki Guernsey, it has emerged.
And that may have impeded its ability to safeguard the island’s financial system.
As part of its ongoing inquiry into the banking crisis, the Treasury Select Committee released its report on the impact of the collapse of the Icelandic banks.
It confirmed the long-held view that the UK should not compensate depositors with money in Landsbanki Guernsey, but did recommend more talks between the authorities.
Savers have so far been offered 30% of their money back by the administrator and work continues to increase that.
The report followed a hearing at which Guernsey Financial Services Commission director-general Peter Neville raised concerns that the Financial Services Authority believed ‘it could not and should not have passed us more information than it did in terms of the changed liquidity situation, the dependence on the parent and on the action it was planning to take’.
He was therefore concerned that there was limited information being given to the GFSC and that it did not know the FSA was limiting it.
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This must be one of the truly pathetic articles of all time.
The comment to the Commons Committee by Peter Neville that FSA “didn’t tell us” raises questions about the worth of the GFSC and the salaries paid to its employees.
If they were just copying the FSA then why spend so much money on the GFSC? If the GFSC was so reliant on the FSA why,especially given the earlier problems re Northern Rock and the well known view that the FSA was useless?
Why did the GFSC fail to be aware of what the outside world knew about the fragile nature of the Iceland economy and its banks?
What chance of the GFSC being awake when the next crisis occurs? or will theyh rely on the FSA once again?
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It is, of course, inevitable that the GFSC is going to try and blame someone else for its regulatory failure.
One wonders what more information the GFSC needed, given that they were prescient enough to require Landsbanki Guernsey to take its upstreamed funds out of Iceland back in May 2008 — and were then daft enough to allow it to put those funds into another subsidiary of Landsbanki! Doh!
As they decided that Landsbanki was high risk enough to mandate that LG reduce its exposure to them, then they should have required LG to move its funds outside of the group altogether, not move them to another egg in the same basket!
The GFSC have demonstrated a complete failure of common sense in believing that any problems with the parent wouldn’t affect the entire group, as has been dramatically proved. They can’t blame the FSA for this stupidity.
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The saga continues..
There is an age old saying.. Which is quite applicable here I would say.
“It will all come out in the wash..”
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The FSA and the UK deserve their share of the blame in the Landsbanki scandal, as testified by that report and I hope this will encourage the UK authorities to be more proactive about talking to Guernsey on solutions to sort out this mess.
However, the fact remains that Landsbanki Guernsey was regulated by the GFSC, which chose to rely too heavily on the FSA and this caused it to fail in its mission.
The sooner the GFSC and Guernsey come clean on this issue and acknowledge their responsibility, the better.
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Revisting the headline post and the claim that the FSA failed to tell GFSC “about the full extent of the unfolding Icelandic banking crisis that led to the collapse of Landsbanki Guernsey” sugests a half of one eyed look at the situation by Nick Mann.
The Treasury Select Committee also said there was a mass of information that should have warned those dealing with Icelandic banks of their “fragility”.
Whilst much of this was in criticism of Local Authorities, surely an even higher level of care would be expected of a regulator such as GFSC?
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oh my, Mr Neville. The big boys did it and ran away?
Do you honestly expect to insult the intelligence of the average islander with such facile platitudes and get away with it? I don’t know which I feel more, insulted or angry.
It is the GFSC’s JOB to know what is going on within the industry, that’s why you all take such a large amount of our hard earned taxpayers money home each year!
Never mind, you’ll undoubtedly have an early retirement or perhaps move into local politics.
My suggestion would be you move to a career more suited to your talents, namely children’s fiction.
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