Landsbanki Guernsey depositors ‘can expect most of their money back’
Saturday 9th May 2009, 2:29PM BST.
LANDSBANKI Guernsey depositors can expect to receive most of their money back, according to the administrators.
The administrators of the collapsed Icelandic bank announced their second interim report last night.
Rick Garrard, joint administrator and Deloitte partner, revealed the news.
‘Based on the information available to the administrators, we expect that the recovery rate for depositors and creditors will be in the range of 68 pence to 89 pence in the pound,’ he said.
‘We currently believe that the most likely return to depositors and creditors is between 70 pence to 80 pence in the pound.’
He outlined the dates on which he expected to be able to return the money.
‘Significant realisations of loans have been made and we are targeting making a second payment to depositors and creditors of between 15 pence and 25 pence in the pound in August 2009.’
There were still considerations though, he said.
‘However, this payment is dependent on further recoveries being made on the loan portfolio and the receipt of the initial 15 pence in the pound payment from Heritable Bank.’
This second part-payment is in addition to an initial part-payment of 30 pence in the £1 which has already been made to depositors and creditors.
Rick Garrard and Lee Manning of Deloitte, the business advisory firm, were appointed as Joint Administrators of Landsbanki Guernsey Limited on 7 October 2008.
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Landsbanki Guernsey depositors ‘can expect to LOSE some of their money’
Rick Garrard, joint administrator and Deloitte partner, revealed the news.
‘Based on the information available to the administrators, we expect that the LOSS rate for depositors and creditors will be in the range of 11 pence to 32 pence in the pound,’ he said.
‘We currently believe that the most likely LOSS to depositors and creditors is between 20 pence to 30 pence in the pound.’
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Good grief, won’t you lot ever stop going on?
I’d say only losing 20% on what was a high risk investment is actually pretty good.
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Mrs P, excellent comment.
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UK homeowners who have seen property prices collapse by more than 20% and those who invested in stocks or had to save in private pensions, which have generally lost at least a third of their value, would breathe a sigh of relief to know that their final exposure could be only 20%….high return usually means high risk…investors have to accept this.
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Good news for the Llandsbanki depositors then.
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To the last three posters on this thread.
How can a bank be classed as ‘high risk’compared to other establishments. I bet you’ve got money in a bank, you’ve been bailed out recently when many large banks nearly collapsed, you probably havn’t given a thought to the UK public’s money that has gone into rescuing your deposits. Landsbanki customers did not play the stock market, invest in pension funds etc.
The interest rate was equal to other banks at the time, in fact, lower, have you researched that? All those people who had money in a building society had no choice when Landsbanki took over.
Before posting inaccuracies please do some research.
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Islander. I think you are making inaccurate assumptions not just about me but about many others that actually care and take an interest in how our cash is used.
Further more;
I have money in a bank that was not bailed out.
I do not need to do any research as unlike you I was more than aware of the problems with this and other similar institutions at the time.
“How can a bank be classed as ‘high risk’?” you naively ask. Well comparing an institutions CDS rate with its peers will do just that. Everyone that could read the FT knew a long time in advance that Iceland was not a place to deposit money.
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Islander
Those who did do their research would have been aware as far back as march 2008 that Iceland and icelandic banks were seen as considerably rishkier than others.
The CDS figures for the Icelandic banks in March april 2008 were screaming out warnings. The UK banks that later got into trouble suffered from higher CDS levels some time later.
The canny researcher would have looked beyond comparing interest rates.
However, Islander you are in good company. The GFSC were also apprarently unaware of the significance of the additional risk carried by the Iceland banks.
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Islander…My savings attracted a modest return (roughly half of Landsbanki’s advertised rates), deposited in a high street bank that did not require any handouts. I took personal responsibility for my money, I chose my bank, the type of account that best suited my needs etc, but even after researching these things there’s still an element of risk…if it had gone pear shaped, heaven forbid, I would have accepted some liability.
Whilst I sympathise with those that have been caught up in this fiasco I’m also alarmed at some posters who seemed surprised that banks are not “safe houses” immune from the consequences of their actions. Banks have never have been guaranteed sure fire bets, it’s just that we have grown so accustomed to their resilience over the past couple of decades that we have forgotten that they are all just commercial businesses, playing the markets with your deposits, some will do it well and remain viable, some will make big mistakes and fail.
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So many clever folk and sea-lawyers in hindsight, eh?
This isn’t an Icelandic bank, and never was. Not even a branch of an Icelandic bank.
It was a Guernsey company – that is, for anyone who’d done any research (read the brochure, even). Based here, regulated here, bust here and now being liquidated here.
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Islander
Last August I approached my bank and complained that I was getting only 5 % on my savings whilst other banks ie Landsbanki were giving over 7 %.
I was advised that any bank offering that high rate was deemed to be desperate for the cash, and therefore couldn’t be trusted.
I heeded that advise and played safe rather than take the risk.
Now why did others far more knowledgeable than I take the risk.
Simples really, one word say it all, Greed.
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The last dregs of sympathy for Landsbanki Action Group must surely now be gone with this latest round of whinging in response to the administrators news
What more do they want – 120% of their original deposit delivered by uniformed courier to an address of their choice?
You made a poor choice of investment – live with it and look forward, not back!
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Muzeek
Hardly think that being locked into a bank who took over Cheshire Building Society can be called greed!! And you trust the GFSC to regulate your bank?? PS If you do bank in Guernsey, which I don’t,it’s probably best to bank with the lowest rates according to your words of wisdom.
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Bob. Seriously.
A Guernsey bank?
Really?
Oh yes it has such a traditional Guernsey name fits in well with other large businesses over here like Creaseyski, Norman Pietteski, Specsaverski etc.
It’s has nothing to do with being a ‘sea-sayer’ (sic) all the information and warnings were there at the time. If you let greed get in the way of common sense that is something else entirely and only your fault.
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With hindsight I am now rather glad the people of Guernsey did not dip into the public coffers to compensate Landsbanki depositors.
I feel that much of the (understandable) anger they felt was misdirected in a campaign which, at times, turned into a personal diatribe against our Island. As a result of this many of Islanders lost sympathy with their cause.
If we had paid compensation, I wonder how many of the depositors would have refunded the money back to us (or at least part of it) now it seems they are to get most of their cash back from the administrators?
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Mrs P
It stikes me that with your wisdom you should have applied to be a member of the GFSC (or perhaps you were). Perhaps Guernsey would not be in this sorry state now!
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Islander, thanks for the vote of confidence!
If you like I can send you my paper on why Guernsey shouldn’t borrow money but that’s another story………….
But back to Landsbanki, thing is there are plenty of us that attention to the institutions where we choose to place our hard earned ca$h. Google for articles about Icelandic banks dated well before our local branch did a backflip, you really will find that all the info was out there for you.
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Islander
You state: “All those people who had money in a building society had no choice when Landsbanki took over”. Utter rubbish. If you hadn’t wanted to keep your cash with Landsbanki you could have moved to any one of a number of alternative banks here. Are you seriously trying to say that Landsbanki was the only bank taking deposits at that time ? I suspect they were the only ones offering above-average interest rates and that you had to stay with them if you wanted such good rates.
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David
Perhaps Islander is referring to bonds for a specific time?
However, even if people were locked into bonds, it was quite some toime after the takeover of the building society that LG went to the wall. That shouldd have given most depositors time to seek another home for their cash.
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David and Stephen John
As a Guernsey registered bank with assurances from the GFSC, why not bank with them? PS Not all accounts were ‘high’ rate!!(whatever that may mean).To introduce a depositors protection scheme after the event surely speaks volumes.Guernsey government working on behalf of a collapsed bank that they were happy to collect taxes from!!!??
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Mrs P
For the umpteenth time, Cheshire / LG savers did not make a “high-risk investment”. They deposited (not invested) in a UK building society.
“Iceland not a place to deposit money” – totally agree. That’s why the money was deposited in Guernsey, in a GFSC-regulated bank.
pyer
Cheshire savers are asking for 100 repayment of their deposit (not investment). Certainly not 120 per cent. Don’t know where you got that from.
“made poor choice of investment” Again, it wasn’t an investment; it was a deposit in a simple savings account.
CD
Not a “personal diatribe” against either the island or the good people of Guernsey. Savers merely asked the States to do what every other country in the world – even the Isle of Man and tiny Faroes – did. Funds recovered from the admin. would then have been returned to the States.
Finally, Gsy Finance should not be promoting itself as an affluent international finance centre in China and elsewhere if the reality is quite different.
“Google for articles about Icelandic banks dated well before our local branch did a backflip, you really will find that all the info was out there for you.”
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Despite the perception that has built up since the 1930s, banks are just another type of financial institution and are not inherently cast-iron safe (regulation does not guarantee protection – just look at BCCI). So to that extent, putting your money in a bank is not risk free. It may not be an investment in the sense of buying shares but neither is it guaranteed.
Many jurisdictions introduced depositor compensation schemes. EU countries were required to do so. Guernsey wasn’t and didn’t. Whatever the arguments about whether it would have been good for Guernsey to have done so many years ago, the fact is that it did not have such a scheme at the time of the Landsbanki problem. So banking in Guernsey was, therefore inherently higher risk at that time than using a bank elsewhere.
Since the credit crunch, many banks have been bailed out, way beyond the amount covered by depositor protection schemes. But the reasons why governments such as the UK have done that needs to be understood. The UK government did not bail out RBS because they felt that each depositor had the right to keep 100% of their deposits. They bailed them out for wider economic reasons. For the UK economy, a collapse of the banks would have been catastrophic.
The issues that the States has to consider are different. The wider economic and political reasons for bailing out the banks here are not the same. The costs of doing it, proportionate to the income of the States, would be prohibitive. A lot of the benefit of doing so would be felt by depositors from outside the island, whereas the UK is really just looking after its own citizens, and thereby its own economy.
The Isle of Man has decided for its own reasons to take the action it has taken. But their decisions do not change the fact that depositors in Guernsey did not have a right to expect their money to be underwritten by the States when they put their moeny in their respective banks, and no such reason to expect that has arisen since.
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Islander
You ask “As a Guernsey registered bank with assurances from the GFSC, why not bank with them?”
A good question. If banks were regulated by looking at what was in boxes, rather than just ticking of boxes, then depositors would have been better protected.
Sadly, the GFSC were waiting for guidance from the discredited FSA and surprised when LG collapsed. This admission in itself is amazing from the highly paid and highly opinionated people who staff the GFSC.
Today’s Institute of Economic Affairs report shows just how uselesss the regulators were. Similarly, the Commons Select Committee report (and the Guernsey evidence within it) confirms the failings of the regulators and the spend, spend, spend approach of Pa Broon and GW Bush.
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MJA – “for the umpteenth time?”
I can’t ever remember talking to you at one of my ladies tea parties so you must have me confused with someone else.
If somebody wants to correct me about the time-scale of all this feel free but as I remember Landsbanki bought Chesire sometime in summer 06, that means even if you were tied into a 1 year bond and were petrified like I was of the implications of Nordic speculation there was still more than enough time to get your money out.
Unless maybe you decided to take the risk and liked the return of having Icelandic savings?
I cannot in my mind separate the terms ‘deposit’ with ‘investment’ both involve giving others control of your money for YOUR PROFIT.
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Islander
You made the statement that you had no choice but to bank with Landsbanki when it took over the Cheshire Building Society. You now say “why not bank with them” ? But that’s not the question. I’m intrigued to know why you say you had no choice. I’m sure that HSBC and any of the high street banks, not to mention various other banks and building societies, would have taken your money.
Stephen
I agree with you. It could well have been because it was tied to a bond. But why be tied to a bond ? Why would a bank use a bond rather than a deposit except perhaps to tie investors in even further ? Why would the bank need to do that unless they were desperate to prevent depositors leaving ? Does that not ring alarm bells ? How many other banks were issuing bonds rather than simple cash deposits at that time ?
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Mrs P
“Google for articles about Icelandic banks dated well before our local branch did a backflip, you really will find that all the info was out there for you.”
Sorry, I pasted that above and then forgot to add my comment, which is: if you were so sure about this, why didn’t you warn the GFSC and write to the Gsy Press to warn savers. It would have saved a lot of heartache.
I meant for the umpteenth time on the Gsy Press online forum. Most stricken savers deposited (not invested) in the Cheshire, which was considered far from high risk at the time as the rates were comparable with the other BSs on the island.
TL
“So banking in Guernsey was, therefore inherently higher risk at that time than using a bank elsewhere”
It still is. That’s why you said you would withdraw some of your savings from the Skipton / Scarborough – you would only get a quarter of your £50,000 back if it went bust due to the shortcomings of the deposit protection scheme.
Cheshire savers were fooled by the parental guarantee and GFSC authorisation. Am glad you are not fooled by the new deposit guarantee scheme.
“A lot of the benefit of doing so would be felt by depositors from outside the island”
Wrong. The largest group are composed of Guernsey-resident savers, mostly pensioners.
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just to add my two pence worth
RBS could just have easily cut ties with their local branched and hung acount holder out to dry if they had gone under.
If RBS hadn’t been bailed out and had collapsed peole with accounts and natwest offshore would have been in the same situation even though their UK counterparts would have got a large chunk of their money back.
Keeping your money in a guernsey bank (until the new protection scheme was put in place) was a risk that people took. Putting it (or leaving it) in an icelandic bank was an even bigger risk. You pay your money, you take your choice but be aware of the risks, keep an eye on what is happening and be prepared to move your money if things start to wobble.
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MJA – I think you are confusing me with someone else. I have never banked with Skipton or discussed my banking arrangements on the internet.
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Who are you people who claim to be so knowledgeable in advance of the Landsbanski Guernsey collapse.As UK expats living in Spain, unable to open UK bank savings accounts and only being involved with Landbanski due to their acquisition of Cheshire Guernsey, where were you prior to the collapse ?.Perhaps like your Guernsey Ministers you had your heads below the parapets.
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I’m a Landsbanki Guernsey depositor. OK, we may get back a few more pounds but I lost relatively little money, so I really don’t care anymore. However, I do feel for the pensioners who are being kicked out of their old peoples homes and those who are retired and can no longer re-earn the money that was lost. Guernsey was not legally required to help, but morally yes it was. This was a simple deposit in a Guernsey regulated bank, not a stock market investment and it sickens me when people try to make this ill conceived comparison. Trott suggested he was working tirelessly behind the scenes to help with the recovery of our money. He promised meetings and much more. In reality, he has done nothing other than to travel the world looking for new mugs to deposit funds with the island. I’m sick and tired of arguing the case any longer. I am simply in the process of removing all my funds from the channel islands and moving them to the UK where there is at least a “real” DPS. Plenty of other people are doing the same. Guernsey says that retail deposits don’t matter, but if that was the case, why implement a DPS immediately after the LG collapse? If you Guernsey people end up living on tourism and tomatoes once again, then you only have yourselves to blame. The reason will be fairly and squarely down to CM Trott and his cronies. There’s a few words sadly lacking from the Guernsey dictionary…. such as Empathy, Trust, Responsibility and Accountability! For the record, the interest rate I got from LG was not high. It was a full 1 to 1.5% less than I could very easily have got elsewhere. Many of the people posting here should hang their heads in shame. I ask you…. who are the greedy ones here ? The pensioners who deposited their life savings in Guernsey to fund their twilight years or those people on this board who refuse to give back a small amount of the prosperity that banking has brought to the island ?
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Mostly for Mrs P&Co
It’s wise to know what one’s talking about, Mrs. P. Even if all LBG depositors were to write in simultaneously asking for a transfer, some of them were bound to get caught. At some point, as the transfers were being processed the cash would have run out, and the officers of the company would have been obliged to declare the bank insolvent. Trust me, Mrs P. I know, I worked in a bank.
That you, Mrs. P cannot distinguish between a deposit and an investment doesn’t imply that the distinction doesn’t exist. It does, and if you were to take time to find out what the difference is, you couldn’t have commented as you did.
And lastly, the world hasn’t come to an end, yet. Who knows, one day it may be you getting caught in something that will hurt. I wonder what your response will be.
Take care, and try to learn abit about the subjects you comment on.
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MJA – “why didn’t you warn the GFSC and write to the Gsy Press to warn savers. It would have saved a lot of heartache.”
Well I and many others have been warning till we are blue in the face about our States borrowing money, look how far that has got us………….
The GFSC you say?
Well I seem to remember that they did have concerns and furthermore independent of this easy to predict trainwreck had been arguing in favour of a depositors protection scheme but getting nowhere for years.
Do you really think that yet more laws and regulation are the answer here? They won’t solve anything and just add additional layers of complexity, confusion and in the end cost. Far better for people to become better educated about this subject, take responsibility for their own actions and have a more active role in their financial dealings. I personally want the option of high risk/ high reward but I also want to balance that with low risk/ low return products.
May I just repeat my earlier comment:-
“I cannot in my mind separate the terms ‘deposit’ with ‘investment’ both involve giving others control of your money for YOUR PROFIT. ”
If you can convince me there actually is a difference please carry on.
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I don’t work in finance so I’m sure someone will correct me if I’ve got this wrong but surely some posters here are being deliberately naive in order to appear victimised…. if you deposit money in a bank and expect it to grow,with interest, then aren’t you involved in “investing” or did you think that the bank just gives you interest for the privilege of stacking your pound notes in their vault?
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Snowman.
That’s quite interesting.
You worked in a bank that would have been insolvent if all the customers wanted their money back at once?
That doesn’t sound like a bank it sounds like a Ponzi Scheme. I take it you immediately informed the GFSC, the FSA, the police and left as quickly as you could to go and work for a more reputable company?
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Mrs P is quite right.
Lets also make one thing clear when you “deposit” money at a bank you are in fact lending that money to the bank which then pays you interest (on the loan) in appreciation of your generosity.
Its as simple as that.
If the bank then lashes up its balance sheet and its liabilities are greater than its assets (your money) then it and you are in the doo-doo.
In some ways what happened at Landsbanki et al was a Ponzi!
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Mrs. P:
I didn’t say Guernsey Bank – I said Guernsey company. And yes, REALLY.
Many depositors would not have seen the advertisements offering higher rates. If living abroad, they may have been wholly unaware of the rates being touted locally. Even local depositors do not necessarily take any notice of the advertisements in the Press.
I’m fascinated by the wise-guys here. Dare they sleep? Do they check their own banks’ credit-worthiness hourly, daily, weekly or monthly? Or is it just when they change banks? Or just when they are curious as to why an advertised rate is higher than the miserable rate their bank is paying – i.e. motivated through greed? Do they even get the annual report and accounts- I bet they don’t.
As to ease of switching accounts from bank-to-bank, well that isn’t as simple as it used to be. In fact it can be a pantomime with KYC, forms, transfers, breaking deposit terms and loss of interest. In fact, it is a major factor in people staying put, and may have saved as many people from getting caught as it prevented from jumping ship.
As I can see rates advertised of up to 3% today, presumably this means these institutions are going bust? hardly.
I can get bank paper in USD yielding 9% and still AA rated. Risky? you bet. But 3% in a regulated Guernsey institution? Looks safe as houses.
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Mrs P
All/any bank would go under if all the customers wanted their money back at once. It’s called a “run”.
Banks only keep a fraction of customers deposits in liquid reserves and lend out the rest. That’s how banks work.
Fractional reserve banking replaced full reserve banking, oh, about two centuries ago.
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JMG
Well done a good posting, probably the only sensible one on this thread.
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Some interetsing posts.
TL
Makes a valid point about the higher risk involved in depositing in an island that had no depositor protection scheme.
David
Ageed on your comments re bonds
Brian West asks where were you before the collapse of LG. Well Mr West certainly not invested or deposited in LG
Bob is fascinated by you wise guys. Well Bob, some of us read the papers, some of us saw the TY warnings, some saw the CDS ratings, some saw the credit ratings. Some like TL were aware of the lack of any depositor protection.
Sensible depositors I would suggest = not the derogatory wise guys.
JMG
I agree Guernsey had a moral obligation. This to my mind was due to the failure of the GFSC as a regulator. It waited for guidance from the FSA and was surprised when LG collapsed. Many of us were not surprised, because we were not blinkered by the tick the box mentality used by regulators.
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Bob:- I love the assumptions being made here.
Actually I do actively research where my money goes, what is done with it, even what currency to hold it in etc. Reading through the annual reports of banks and taking careful note of the implications of any RNS announcements and the current state of world markets as a whole is just common sense.
I’m not going to make an effort to look after my money, who else is going to?
Susan:- I’m more than qualified to speak on the subject of fractional reserve banking, in fact I have seen ‘It’s a Wonderful Life’ several times.
Anyway, congratulations you have stumbled upon the elephant in the corner of the room.
So we all accept that banks don’t hold your deposit as cash?
So they take your money, lend it out to others, make use of it as they see fit and pay you a fee?
In other words it’s invested, as I have been saying all along, and along with that investment comes, wait for it….
RISK.
And then we are surprised when it sometimes goes wrong………………..
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Mrs. P
Listen to this Mrs. P, and sorry if I appear patronizing.
Every bank is by the nature of its operations a shaky, unstable and to a degree a semi-insolvent business. It is funded short, ie the depositors, wholesale funds (the bank’s liabilities) could ask for their money back at any time, whilst its landing (the bank’s assets) is long term (mortgages, loans to buy cars etc.). If for some reason every depositor in your bank were to ask for his money back, soon the bank will be insolvent, ie it would not have enough cash to repay its liabilities. The tier 1&2 capital, plus few other cash reserve items would not be sufficient to keep the bank afloat. The banks with the most solid capital cushion are geared, ie their assets are much greater than the money in the till.
LBG would not have been in the position it is now if Darling didn’t freeze all Icelandic assets in the UK. The new owners of Landsbanki hadn’t had enough time to alter the asset profile of the Cheshire bldg. society. The only risky investment seems to have been the loan to the Heritable in the UK, now under a legal dispute. I can say that because even as things stands the depositors in LBG are likely to lose only up to 20% of their money. This suggests that the asset profile of LBG was quite conservative – mostly real estate where prices are some 20% lower than before.
As for your superior knowledge of CDS rates, these only applied to the parent, LBG didn’t issue any debt. If it were a totally separate entity, not coupled with the parent, the bank would be still ticking as well as all the other banks.
to Gilthead:
The interest one gets for depositing money in a bank or other deposit taking institution isn’t a thank you for the depositor’s generosity; it’s a monetary reward for the depositor’s delaying consumption. The borrower, on the other hand, pays a fee for the ability to bring his consumption forward. With interest rates going up, savers have even more incentive to delay ‘consuming’, something that they will eventually do. Quite opposite to what’s happening now: low cost of money that encourages savers to spend rather than save, and borrowers to commit even more to bring in their future consumption to today.
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Well said, Bob.
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I don’t think anyone is suggesting that depositors would have asked to withdraw their money in cash, virtually all would have requested a paper transfer to another bank, so no need for liquid reserves, just balance sheet entries between banks lending to one another.
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Snowman
You said:
“LBG would not have been in the position it is now if Darling didn’t freeze all Icelandic assets in the UK. The new owners of Landsbanki hadn’t had enough time to alter the asset profile of the Cheshire bldg. society. The only risky investment seems to have been the loan to the Heritable in the UK, now under a legal dispute. I can say that because even as things stands the depositors in LBG are likely to lose only up to 20% of their money. This suggests that the asset profile of LBG was quite conservative – mostly real estate where prices are some 20% lower than before.”
OK, so you are saying that LG was inherently low risk and got burned because Mr Darling stopped the cash in the UK.
So why again should Guernsey bail out the depositors for the remaining 20%?
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“So why again should Guernsey bail out the depositors for the remaining 20%?”
It’s not going to happen. Trust me I know this :)
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Yes Snowman I’m aware of that. But you are compensated for lending the money to the bank.
But many posts on here and elsewhere assume that depositing money in a bank is safe and that you can “visit” your money at will. Not the case.
You lend the money to the bank – thats the way it is.
There are many people (me included) who have lost a lot more during this downturn than Landsbanki depositors!
Thats life as the saying goes. So we all need to get on with it.
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JMG says of the return from LG “It was a full 1 to 1.5% less than I could very easily have got elsewhere”
This begs the question of why on earth didn’t you deposit elsewhere. Your words “than I could very easily have got elsewhere”
No problems with UK banks refusing to accept yoour money, so why?
Interestingly Isalnder sees the JMG post as the only sensible one in the thread!!!
Jackie
I would suggest the LG depositors should be grateful that the Administrators had, in the circumstances, done a good job for them.
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For TL
Two reasons: First,as a separate legal territory, it was and is Guernsey Administration’s duty to ensure that individuals have trust in the banking system under its jurisdiction. It is trust and only trust that convinces individuals to put the money into the deposit taking institutions. Individual depositors in Guernsey and everywhere else are the bedrock of the global financial markets. Even the most complex synthetic financial derivative has at its core actual cash provided by individual depositors.
Second, the amount of money involved helping those who for no fault of theirs are to lose some of their savings isn’t massive. The size of the Guernsey’s financial sector tops £200bn, mostly wholesale money, ie not savings of people like you (I presume) and me. A tiny levy on these huge funds run from Guernsey would have solved it. It would have been prudent for the Guernsey’s Administration to at least try.
I admit that I’m one of those who left money in LBG. Not a lot, I had transferred the bulk before the crisis hit. I left a sum in because I felt that if every depositor were to panic and take the lot out, the outfit couldn’t have survived (see my earlier notes to Mrs P, please). I thought that the failure would lead not only to my losing the money, but also to redundancies (as it must have done), and I didn’t want to feel that I was amongst those who contributed to it. I know how it feels to los one’s job. You may find my reasoning either false or foolish, or both. My wife does, but then we are all different.
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So, Mrs.P – I will imagine you sitting with your tickertape running, knitting ethically sound warm vests for former Lehman Bros. employees from the print outs, smiling away to yourself. Safe in the knowledge that the bloke down the pub has your deposit, and has told you he lent it to the bookie…but ethically so…isn’t that the Co-Op bank?
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To Gilthead
There isn’t a safe place anywhere, agreed. Hiding money in a mattress could prove equally disastrous if the mattress goes up in flames. In complex societies, such as ours, it’s to everyone’s benefit to make the deposit taking institutions as safe as possible. Failure to do so would lead to a collapse of the economic underpinning of the societal model that relies, at its core, on individuals trusting the deposit takers. We cannot function without it. It facilitates everything from simple credits to CMOs square, and synthetic paper. Without it, we would have to turn the clock and go back to cash or barter.
The reason that lies behind your Administration’s reluctance to help cannot be simpler. The money of the individual depositors in Guernsey (few hundreds of millions) are dwarfed by the massive wholesale money (over £200bn). Why should Mr. Trott worry about the few, well some 1600 individuals, who are to be short of few tens of millions collectively. We are not the ones who butter his bread. The big money boys are. Yet I reckon that the strategy may save millions, but lose billions in the long run. Bad memories linger on, and who knows, sooner or later the big governments of the world may need the taxes that Guernsey and other tax heavens leak. The irony is that it will be the ordinary people of Guernsey who will get hit.
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Bob.
You’re right, I do read the tickertape (or level 2 as it has been in the UK for some time) How very insightful of you.
But I don’t feel sorry for anyone, employee or otherwise that was involved in any way with Lehman brothers.
If the bloke down the pub behaving irresponsibly has been leant my money by a bank so be it but my assets are very, very spread around not just between different institutions but many diverse asset classes as well.
In fact if there’s one thing to learn from all this it’s the often repeated but almost universally ignored; “Don’t put all your eggs in one basket.”
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Snowman, some good rhetoric there but ultimately your reasons to be bailed out boil down to:
(a) it is in everyone’s interest for people to trust the system therefore those that are unlucky should be bailed out to prevent society collapsing; and
(b) Guernsey can afford it
As to (a) you could put forward an equally sound argument that it is in everyone’s interest for people to be reminded once in a while that financial institutions are just private enterprises and that problems do occur. We should not blindly assume that institutions are safe or that the regulators are able to predict every eventuality, or that a white horse will rescue us come what may. To prevent society breaking down it is helpful to remind people to keep their eyes open and spread their risk, no matter how samll they consider that risk to be.
I don’t think either of those positions is entirely accurate but hopefully you get the point that there is an equal counterargument.
But consider for a minute those persons soon t o come to retirement, who through prudent management had placed their pensions into increasingly low risk funds as their big day approaches. Then, through no fault of their own everything blows up and they find that their pot is worth 20-30% less than it was 6 months ago. They have done nothing wrong. They have not taken reckless risks. It would be in the interests of society for everyone to have faith in the equity markets, otherwise investment dries up, business stops and society collapses…etc. etc. The position of those persons is not so very different from the position of the LG depositors. Wrong place, wrong time. Very unfortunate but no-one is appealing for them to be bailed out.
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“… some of us read the papers, some of us saw the TY warnings, some saw the CDS ratings, some saw the credit ratings…”
Again, why on earth didn’t you warn Peter Neville at the GFSC – and write a letter to the Gsy Press to warn depositors?
Savers in Gsy and worldwide are warning all and sundry that it is still unsafe to deposit savings in Gsy due to the woefully inadequate deposit protection scheme. Why didn’t you warn anyone about Cheshire LG at the time? Why? Why? Why?
Gilthead
Why didn’t you raise the alarm that Cheshire LG was a “Ponzi scheme” as you say? Why didn’t you warn the GFSC or write to the Gsy Press?
SJ
“No problems with UK banks refusing to accept your money, so why?”
Stephen, for most Cheshire LG savers, saving in the UK was not – and is still not – an option. That’s why they’re moving their savings to the Isle of Man. The Isle of Man Govt knows that deposits are becoming increasingly important with the collapse of the wholesale money markets.
Mrs P
What’s “RNS”?
BOTTOM LINE
The States has no obligation to cover any shortfall. However, ponder on this: Guernsey Finance travels to China and the world promoting its affluent international finance centre.
Yet when a GFSC-licensed Guernsey-incorporated entity goes belly up it turns out that Gsy cannot afford to help in any way and also (according to Deputy Dave Jones) cannot afford to send its Chief Minister on transatlantic official business in Businesss Class – let alone First Class.
The Isle of Man (£180m) and even the tiny Faroe Islands ($65m) stumped up to help with the Icelandic crisis.
How can Gsy ever expect to be taken seriously again as an international finance centre now that the world knows it is seriously impoverished?
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In response to Stephen John’s comment asking why I didn’t chase the highest interest rate….
Well, there’s plenty of posters on this board who have accused people chasing the highest interest rate of being “greedy” and they “got what they deserved”! I deposited my funds with Cheshire Building society in 2004. I had been happy with the service and felt some degree of comfort with the GSFC approved Parental Guarantee. The interest rate was not the best, but I saw no reason to change. The banks offering higher rates were all offshore anyway and I have learnt the hard way what offshore banking is all about and I won’t be doing it again!
What is extremely sad about the whole affair is that a huge percentage of LG depositors were pensioners and the total lack of any support or assistance whatsoever from Guernsey and i’m not talking financial support here. Nobody cares that these peoples lives have been destroyed. I sure hope that this does not happen to you guys !
As for TL’s coments about peoples pension pots being eroded due to the downturn and nobody is calling for them to be compensated. Well, my own pension pot has lost 25% in the last year. I’m not moaning or complaining. That’s just the way it is. The money in my pension is invested in funds, many of which are very low risk but still lost money. These are “investments” and not “deposits”. There IS a massive difference and i’m surprised that many people here seem to think they are the same. If we let the banks go bust and people lose their deposits, we will be well on the road to total anarchy. Maybe I should buy a fireproof mattress!
To add insult to injury… I actually closed my LG account before it went into administration, but my funds transfer was frozen… then my house was broken into just a couple of days before that! 2008 was a year that I want to forget as quickly as possible.
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MJA
My comment “No problems with UK banks refusing to accept your money, so why?” was a specific response to JMG.
I accept your point about ex pats not being able to open accounts in the UK. I understood from the Treasury elect Committee evidence that steps were being taken to rectify this.
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MJA:-
RNS = Regulatory News Service
http://www.londonstockexchange.com/en-gb/products/irs/rns/
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mrs p
now jmg has pointed out the diff between an investment and a deposit do you at last get it?
if i were to invest my money (speculate) in shares then it would be up to me to keep an eye on whats hapening with my investment, rns,market sentiment and all the other info that i could aquire simply because i know there is and was a risk from the moment i got in, i could also control how much risk i want to place on my “bet” but i would also be aware that it would be possible to loose everything. it`s simply using money for one purpose and thats to make more money i.e. investing or betting that your right about somthing.
do you relly expect someone who deposits money into a bank to follow the same procedure ? the whole idea of the bank is to put it in a place for safekeeping,
if a depositer losses all his money in a bank its because the BANKERS (morons) who run it have messed up and have done a bad job of looking after OTHER PEOPLES money. if an invester looses all the money invested its his own fault because HE`S done a bad job of looking after his own money
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MJA – because I had already discounted lending money to a very dodgy Eskimo bank.
Apologies for taking my eye of the ball.
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bcb – whilst there is a difference between investment (in the sense of buying equities) and bank deposits, it seems to be you that doesn’t get it in that you are still expecting the bank to be guaranteed. It is low risk, but it is not zero risk. It is not guaranteed, especially in a jurisdiction that did not have a depositors’ compensation scheme at the time.
your last paragraph is wrong. if an investor losing all the money invested then the directors did a bad job of running the company and the investor did a bad job leaving his money there after it was time to cut and run. if a saver loses all their money then the bank directors did a bad job running the bank and the depositor did a bad job leaving his money there after it was time to withdraw it. not that dissimilar. I accept that the degree of risk is different, but you (and most of LG depositors) seem to be saying that you expected to be able to deposit your money and then forget about it, and not have any responsibility for what happened next.
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bcb, where exactly did jmg point out the difference?
Oh, do you mean where said ‘there is a difference’ I don’t think that has convinced me, it’s not really a meaningful argument.
Also your comment:-
“if a depositor losses all his money in a bank its because the BANKERS (morons) who run it have messed up and have done a bad job of looking after OTHER PEOPLES money.”
If you do think that bankers are “morons” than I would argue you are in fact a bigger “moron” if you give them your money.
Do you really believe that the purpose of a bank is to act as some kind of pseudo-charity and give you somewhere nice to put your money “for safekeeping?”
No, the purpose is to make money. For them and for you, if you want to keep your money safe, buy a gold bar, tell no-one about it and then bury it in the garden. You won’t earn 6.5% interest (paid monthly obviously) on that little scheme though so I guess Landsbanki customers wouldn’t be interested.
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TL
Firstly i have never had money in that bank, i dont expect it to be gauranteed, and if they didn`t play fast and lose with peoples money there would be almost zero risk, and isn`t that the way it should be?
my point was is that there is a diff which at least you can see.
i never suggested that there is no risk in a bank but what i was getting at is people telling the depositors about the checks they should make, ticker tapes, rns, world markets, come on do you really think that any person should be doing all this with money on deposit? whatever next? technical anlysis of charts, i would just suggest that these are the things you would do as an investor.
i dont agree with your last statement, while i agree the directors would have made a bad job it is the investor who with many tools to gauge the investment should never let it get that bad and if he does then he`s done a bad job of investing, he could only lose all his money in this way and not becuse of a bad directors, where as the bank should be looking after the money for you, isn`t that the reason you put it there?
i am also not suggesting that you should just be able to deposit your money and forget about it, just that some here seem to think that money on deposit should be treated in the same regard as an investment.
yes i do think there is some middle ground here and one should make some attempt to check the credentials of a bank and watch it from time to time but never expect it to be treated as an investment because its not.
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TL
“it seems to be you that doesn’t get it in that you are still expecting the bank to be guaranteed.”
Where exactly did i say that?
but you (and most of LG depositors) seem to be saying that you expected to be able to deposit your money and then forget about it, and not have any responsibility for what happened next.
sorry didn`t say that either
you make too many assumptions.
i have never had money with that bank and i`m not even sure the tax payers should compensate.
i was just pointing out there`s a difference to mrs p because there is one.
i have never seen a ticker tape thats indicated that a bank is about to have a run on it untill it`s to late.
a depositer should have peace of mind that the banks are looking after their money thats why they put it there, for safe keeping, it should be and would be almost zero risk if the bankers weren`t so reckless, whereas an invester is putting his wits against the market forces in order to make money.
i stand by my statement.
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As someone who had no real feelings about this either way, but read all the comments out of interest, I have to say…
Go, MrsP! You rock. Please can I join your ladies’ tea party. I promise to sit up straight and not stick my little finger out (you don’t also write the Mrs Mills column in The Times, do you?)
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Hardly safe, Mrs. P.
Gold will not preserve monetary value. There is a scarcity value, but as the price is generally set in US dollars and based on largely speculative demand, it could make a Landsbanki deposit look like a good idea, with only a 20-30% loss. Recent price has fluctuated massively as money has poured in and out of commodities, bonds, property and back into equities.
Get the right price and the right exchange rate for both buying and selling and you might be OK. Might make a packet. Could lose a lot of money.
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mrs p
“if you want to keep your money safe, buy a gold bar, tell no-one about it and then bury it in the garden. You won’t earn 6.5% interest (paid monthly obviously) on that little scheme though so I guess Landsbanki customers wouldn’t be interested.”
thats an investment an asset and no one is obligated to giving you back your initial stake just like any other investment so it is not safe. unlike money on deposit which the bank is commited to returning at least all of your initial deposit unless ofcourse you spend some.
i attack the bankers that have caused so much missery and you call me a moron ? lol pot and kettle
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bcb – I still think that you misunderstand the essence of banking. you say that by giving money to a bank it is committed to giving it back to you. Actually that is not true. When you give money to a bank it does not look after your money as a trustee, it is legally entitled to treat the money as its own but becomes indebted to you for the amount deposited. You become nothing more than a creditor of the bank. If the bank becomes insolvent, the depositors lose out. That is the way it has always been.
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TL
i`m not going to bother with this anymore as my initial point was that it is not the same as an investment and that is a fact, it can be looked up with a bit of effort, and actually the bank is committed to giving you your money back (i double checked) if it goes under then thats another issue, but nobody is obligated to giving you back your initial sum if an investment goes even a bit bad, now please how the two are the same, but just incase i`m wrong i`ll check my bank balance to see if it`s still the same and i bet you regardless of the share price move in the bank my DEPOSIT is still as it was. they take the risk and the change in price will reflect on the share holders (investers)and thats the way it`s always been.
i cant believe you suggested they are not committed to giving you your money back. are you telling me they can just send you packing and decalre it theirs? isn`t that stealing?. yes the bank will invest with your money but they and the share holders (investors) assume the risk, there is no risk to the depositor at all in that regard unless they go under but as i said thats deflecting from the deposit is the same as an investment issue. and just to be clear i would probably not want my money to be used to bail out the people who lost money (sorry guys)as i played no part in what happened.
have a nice weekend :)
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bcb
Sorry but I am with TL on this one, as he has a far more correct understanding of the risks of a bank deposit. By depositing funds with a bank you are making a loan to the bank for which the bank is paying you interest. The bank is meant to pay you back if it can, but if it cannot do so then that is the risk of the depositor. In that respect its an investment. The interest that you receive reflects the risk that the borrower cannot pay you bank. A high risk borrower has to pay more to borrow money than a lower risk borrower, hence Lansbanki were paying a higher rate of interest than the likes of HSBC and Barclays.
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thers risk if you stuff your cash in your matress but would you call that an investment even if though its a bad one ? ofcourse it isn`t. but then some of it might get stolen or even catch fire, so now it becomes an investment ?
just because there is risk involved it does not automatically make it an investment,
sorry dave but i`m with the fed on this one. but for the sake of world peace lets just call it a deposit investment then were all happy.
taken from the fed reserve site…
Deposits vs. Investments
Any money you have in savings and checking accounts or in certificates of deposit (CDs) is known as a deposit. Your financial institution is committed to returning all of your deposits (plus interest) whenever you ask. You can even take money out of a CD before it matures, however, you will have to pay a penalty for early withdrawal.
Financial institutions can also provide investment products like mutual funds and annuities to their customers. Your bank may sell you this type of product, but it is not obligated to pay you back for any losses you may have if the investment is not successful.
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………………. but all of that’s irrelevant if the institution is bankrupt isn’t it?
I could commit to paying you £10 a week for the rest of my life but if I run out of money what good is it going to do you?
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Mrs P
………………. but all of that’s irrelevant if the institution is bankrupt isn’t it?
again your only argument is because there`s risk involved,
I could commit to paying you £10 a week for the rest of my life but if I run out of money what good is it going to do you?
is that compansation for calling me a moron ?
well there`s no harm in trying :)
i think we`ll have to agree to disagree on this one and i`ll play the moron.
think i`ll go on another board and see if there`s anyone else up for a good old argument.
take care .
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