Chief Minister off to Iceland to discuss Landsbanki woes
Thursday 30th July 2009, 2:29PM BST.
CHIEF MINISTER Lyndon Trott will be discussing the plight of Landsbanki Guernsey depositors in Iceland next week.
He told States members during question time at the start of yesterday’s session that, along with other senior officials, he will meet representatives of the Icelandic government.
He also refuted suggestions that no one from the States had got together with their UK counterparts to discuss the collapse of the bank.
A freedom of information request by the Landsbanki Guernsey Depositors’ Action Group revealed that no meetings between the States and the Ministry of Justice had taken place between September and March.
Deputy Trott (pictured) said meetings with HM Treasury at which Landsbanki had been discussed took place in October, February, March and May.
Speaking at the lunch interval, he said these were four one-to-one meetings in addition to dozens of conference calls between the parties.
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Well, I wonder what has suddenly made the Chief Minister sit up and make a move after months of hedging and failing to do anything to help the Landsbanki depositors. After all we are still waiting for the meeting he promised when he spoke on Guernsey Radio on 22nd Feb this year, he renaged on that after being invited about three times. No meetings with Ministry of justice over Landsbanki between Sept 2008 and 30th March 2009 and they are meant to represent us, and the MOJ had no meetings with the UK treasury during the same period over Landsbanki. The Chief minister has mentioned four meetings with the UK treasury, but you can never tie him down as to whether they were specific to landsbanki or not, I suspect not.
Going to Iceland must be his get out of Jail card and as one of the depositors said, I hope he gets more than the Finance Minister’s telephone number.
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Another little trip at the ratepayers expense?
If the UK government can’t convince the LandsBanki.
what makes superman think he can do better?
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here he goes again this time to iceland his passport must be full by now, when did the states have a meeting to say he could go, who is paying for this maybe the isladidank investers who lost thier money! more likely the guernsey tax payer.
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Can someone in the know clarify something for me?
After the Landsbanki collapse, we had a depositor protection scheme put in place.
This is capped at £100m in a 5 year period.
I was looking at putting money in a well established local institution, whose latest accounts show funds from depositors at £500m approx.
To me it seems that if this institution failed with my money on deposit, I might only get about 20% of my money back, depending on what the administrators could recover.
Am I right here, or have I missed something? If I am right, in future depositors could be even worse off than the Landsbanki depositors in the unlikely event of another bank failure here, with a protection scheme in place!
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Let’s hope Mr Trott and his colleagues are going to Iceland to sweat their shirts, and not for their summer holidays, at the taxpayers’ expense. Looking forward to hearing about any progress made, Mr Trott. But after 10 months of this saga, to say the least, your effectiveness is in doubt…
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Mr Trott should rather travel to any other country in the world to understand how politicians should best tackle a bank collapse to keep confidence in the banking system (in particular if it is your economy’s bread and butter).
Being conscious of taxpayers’ money, I suggest a little hop to the Isle of Man (where they committed £193million of cash to help out). For a little more money, he could learn even more from any European country, and even the UK; the advantage of the latter being that it could be combined with a first meeting with the department of Justice to discuss Landsbanki.
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Maybe Mr Trott goes to Iceland to double check their Finance minister’s mobile phone number? Well informed sources indeed suggest that there was one missing digit, which fully explains Mr Trott’s inability to act so far. But we should rest assured that he is now taking the bull by the horns.
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What a happy man Mr Trott must be! I envy his job, actually. He is off to Iceland to have a good time and he knows that so few people and deputies will hold him accountable for what he will have actually done there, and for the absence of achieved results. If it pleases him, he will tell us in a few months’ time that he had a meeting with officials.
Long live Guernsey and its CM!
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Mr Trott,
Voters do not like your making trips which will lead to nothing and are a waste of public money. If such a trip was of any use, that should have been months ago.
Voters expect you to help sort out the Landsbanki mess to try and restore our banking sector’s reputation. And if it means lending some money to depositors or even spending some to top up the administrators’ recoveries, so be it. Amounts at stake are relatively small and our reputation is priceless. It would therefore be a good use of a little of taxpayers’ money, unlike all your useless trips with which everybody is fed up and for which you are not made accountable.
I can see you prefer inaction and enjoying those trips (perfect timing to go to Iceland; much better than winter or spring time) but this is not what voters want. They want results and accountability.
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Frank:
Glad to see someone has realised the possible implications of the DCS that is currently in place.
May I suggest you, your family and your friends go and ask your intended bank that very same question.
Please ask at the same time what may happen to your estimated payout should another bank/banks go down in that five year period. To be fair you may have to pay some back as all depositors affected need to be treated equally.
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Well said Luke Bernard;
Now fluffing of feathers, but a straight forward, right from the shoulder to a person that thinks Guernsey was made for his benefit,
There is no doubt he hasn’t got control of his lower minions, so takes this way out to let us know he is still around,
‘Hang up your Boots Trott, your game is over,
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Frank – Exactly.
Last time all this was debated on here I repeatedly said that a so called ‘guarantee’ means nothing if the funds don’t exist to cover it.
Guernsey just cannot afford to underwrite money held on deposit.
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If he T CM, doesn’t fall into the one of the many geysers in Iceland, and if one of our ancestors (vikings)doesn’t settles his hash once and for all.
Then if he should arrive back, a large placard should be at the airport with these words 2 foot high.
PERSONA NON GRATA.
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I would like to see a breakdown of Mr Trott’s expenses in relation to his work, including associated costs of his family travelling et al.
Post the costs under the FOI Act…
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Frank
You are exactly right in your assumption, the DCS is capped at £100m over a five year period so if a bank with £500-00 of depositors money went down, you could only expect 20% back,if a second bank went down during the five year period, you would probably get nothing.This has been questioned at Guernsey Financial Services Commission and the Commission for the DCS, both refuse to give advice on the interpretation of the law, except for suggesting one consults an advocate.So this should be a clear warning to depositors, that your money may not be as safe as you thought it was, and the £50,000 pay out on a bank collapse may never happen. But without legal interpretation, we are guessing, fairly accuratly I believe.
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My previous message should have said,….. a bank with £500 million of depositors money went down not £500-00……..
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On the DCS: I wish the Guenrsey Press would use its daily, Monday to Saturday pages to out line to islanders the pit falls of the local scheme.I have questioned one local bank and was horriifed at what I was told.
If the scheme has been building up for just 1 year, then only 1/5th of the £100m would be available to compenstate depositors. Once that money is used, it will then start buildig up once more to a maximum of £100m over 5 years. If I have been misinformed then please tell me.
This must be a good subject for the GP business section to investigate and inform the Guernsey public.
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So Trotsky’s off on yet another jolly with taxpayers’ money. How nice for him. I can’t afford a holiday this year but he seems to think it’s OK for us to cough up any time he feels like one……
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Frank. Do the safe thing and put your savings ANYWHERE OTHER THAN GUERNSEY.
The GFSC are not to be trusted to keep an eye on it and the Guernsey government is the only administration not to have come to the aid of victims of the Icelandic banking disaster.
The above comments and those on a similar article last week are proof if proof were needed of the Guernsey residents’ opinion of their Chief Minister. The island’s reputation has already suffered and we will continue to spread the bad news until the Landsbanki depositors get their money back.
My wife and I await Lyndon Trott’s report on his return, more in hope than expectation I’m afraid.
The Guernsey media must be at the airport on his arrival !!
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Oh Joe. I assume you are not local. Tell me why didn’t you put your money in a bank where you live? Were you worried your local tax authority would take their share? and where are you going to put your money now? The UK cannot manage their own affairs – they caused part of the downfall of Landsibanki locally by using anti terrorist legislation to close the UK bank. Most Western governments have pumped billion to shore up banks without any forseeable return.
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Thanks to those who have confirmed my suspicions about the Depositor Compensation Scheme. I agree with CSW that it should be the subject of an article in the GEP business section – can the moderator suggest to the business editor please? There are probably many people with false belief in the security of their savings.
Joe Baggott – I agree that the press should be at the airport to meet Mr Trott, but I guess any questions would be met with the increasingly fashionable reply of Messrs Trott, Jones and Flouquet, ie “no comment” or “I’ll issue a statement in due course”!
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Gary Blanchford – you are not guessing, it is quite clear that the scheme is capped at £100m. This was discussed fully in the Billet that introduced the debate in the States.
As far as I am aware, there is no state funded DPS anywhere in the world – they are all funded by the banks themselves. The banking sector in Guernsey simply cannot create a fund that is a bottomless pit. The banking industry here is small fry (in terms of profits) compared to the UK or elsewhere. So it would simply not work to have an uncapped scheme.
As for the consequences of that cap, a bank may have £500m of deposits but of course the DPS only protects the first £50k of each person and so a fair proportion of that would not be covered by the scheme anyway, cap or no cap.
There are also differences between types of banks, with some having a much higher risk profile than others (in terms of structure, rather than their likelihood of going bust). I cannot recall the details offhand but if you read the Billet it is all discussed in there. From recollection, the conclusion was that very few deposit taking banks here are likely to cause a claim on the DPS even if they went under.
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MIKE….
No I’m not a ‘donkey’ I live in France and pay my taxes here. Have you not heard of the European Tax directive ? One has to opt for an interchange of information and declare income, or have tax taken at source, (to the benefit of your treasury). We have no fiscal incentive to use the channel Islands but it is all but impossible for expats to open bank / savings accounts in the UK.
The new Guernsey depositors protection scheme will be as much use as a chocolate teapot should there be another crash until funds are built up.
Alistair Darling has branded us ordinary expats as tax-dodgers but we are far from that.
I do have more than one account in France but despite it being a very ‘safe’ option ( the French government are more capable than your little island’s States ), interest rates are usually lower and strangely, as pensioners we need income to live on. SIMPLES EH!
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Shouldn’t this thread be discussing why the GFSC and States failed the Landsbanki depositors and not why they put their money into a Guernsey regulated bank?
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Mr Trott – Please do not return to Guernsey unless you have something productive to offer Landsbanki savers.
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Having some knowledge of the how Lansbanki marketed itself in Guernsey and Jersey in its short tenure here, one of the most unfortunate elements of people’s commentary is the distinction between a deposit and an investment.
All of the marketing literature, be that full page ads in the GP or online activity stated ‘deposit’ in ‘bank’ at ‘fixed rates’ for a ‘fixed period’.
It may now be academic but one of the dynamics of this affair is that what was clearly marketed as a deposit, for a fixed term with the ability to withdraw that after the set period has now been defined, by some, as an investment.
Irrespective of the legal idiosyncrasies of the Landsbanki product range there is absolutely no doubt in my mind that the people who were attracted by the promotional activity considered themselves depositors (no risk) and not investors (low to high risk).
That subtle shift from depositors, now becoming investors can only add more salt to what is a very open wound for some people. There are some very normal every day people who have been greatly effected by this and, purely on a human level, I don’t see the point of trying to make there plight any worse by mean spirited academic comments.
Caveat: I had no money with Landsbanki and don’t know anyone that did.
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Gary
Can’t the LBDG take any courage in the fact that the CM is meeting with the Icelandic reps? It may not be happening as quickly as you might like, but all meetings with other countries take an awful lot of time to match diaries and go through diplomatic protocol loops.
If it were me and my money at stake I’d be a hell of a lot more supportive of any efforts. Especially so as you know full well that Guernsey has no legal obligation to anything at all.
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Neil
Your 10.16am post is excellent and totally appropriate.
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Absolutely Neil Inder.
It’s tantamount to mis-selling IMO, but obviously it isn’t because, as any fule kno, banks only exist because they want to gamble in order to provide benefits for the executive and artificially raise the share price, and so its perception as a bigger player, thus raising fees and increasing the stranglehold on the market.
Another real insult is those prosperous banks setting out restrictive criteria on borrowing, telling viable small businesses that they have to pay much, much more for operating loans, and stopping funding if the margins are not high enough, citing ‘business plan shortfalls’ as a reason.
Where were the auditors to assess the going concern of these institutions? For how long were the toxic ‘assets’ hiding the fact that key accounting prudence and viability were threatening the structures? Would they have been allowed to carry on with the extreme leveraging and exposure to risk like they did?Why is it deemed acceptable for a sign off on a subsidiary when not taking to account the other aspects of the business it is linked too?
Why isn’t there transparency in the selling of these ‘deposit’ products mentioning that the cash is not held here in Guernsey, but used in global casino investments, to benefit only the bosses and shareholders in other countries, whilst avoiding tax there and paying next to nothing here?
And on top of that, the same managers of the failed institutions are still running the global operations – we may be somewhat isolated (and insulated) from the inevitability of real economies in decline, but whilst the ‘masters’ are celebrating the return of risk taking, and the prestidigitation of turning the proceeds of our daily stresses and labours into tax-dodging, state-begged, morally-dubious mega profits caused by sudden market dominance and a whole raft of state insurances on the bad debts (at least in the UK) overseen by their incompetent and flawed short-termist models.
If preserving the failed business models of the global entity take precedence over protecting the depositor in one of the subsidiaries, then surely it becomes that jurisdiction’s responsibility, knowing this, to impose local legislation demanding that if these places want to take advantage of our highly competitive business environment, then they should adopt some ‘best practice’ and pay insurance equivalent to the riskiness of their total operation. The riskier the gambles, the more local capital they must hold.
It shows how far we have gone when we accuse those who have lost life savings of trying to smear the local jurisdiction they lost them in. If it had been Cheshire Building Society, with all the ‘old fashioned’, safe reputuations that the old mutual model used to maintain, would we be mocking then? I reckon not, I reckon there would be an outcry in how a building society could be so mismanaged.
Individuals should not suffer because of a lack of systemic controls. Audits and registration should only be signed off if corporate governance includes treating the customer as priority.
It is not just the Landsbanki depositors that have lost out – the same failings are ruining ordinary folk all over – LBG highlights our involvement.
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Why is Deputy Trott so secretive about his dealings with the UK and Icelandic Govts over the Landsbanki failure. If he is working hard to help the return of the depositors money why doesn’t he publish minutes of meetings and notes of telephone conversations. Unless he can provide evidence of his hard work, the depositors, and his critics, will simply not believe him. And if he cannot be deemed credible over this issue, what credibility will he have on other matters – surely an untenable position for a Chief Minister.
In October 2008, Deputy Trott said Guernsey was commited to transparency when dealing with the OECD, so why does this transparency not extend to the Landsbanki issue.
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I agree with Stephen John re Neil’s posts.
I’ve made one or two insensitive remarks about SOME of the Landsbanki depositors on one of these threads, for which I apologise.
I do think my sort of reaction is understandable, though, bearing in mind the bellicose and inflammatory statements coming from certain quarters.
Sure, I’d be angry too if I’d lost my savings (not a lot in my case!) but whatever you think of Lyndon Trott there is no doubt he is trying hard to help the depositors get as much of their money back as possible.
Lashing out wildly at Guernsey in general and its CM in particular isn’t doing any of you any favours.
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Joe
You said it in your last line. Opt for lower interest rates in a safe pot or higher interest rates in a, as you would put it, unsafe pot. And yes I have heard of the EU Savings directive but it has not been around that long! I believe for 2 or 3 years at the most.
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Neil
Your spot on with that post. Something i have been saying for a while now re deposit vs investment but there are some who seem to refuse there is a difference. In fact Bob Chillcot tried to make the comparison on the sunday phone in, that he has made investments that have gone bad. Then he goes on to liken it to a bank deposit. I was shocked someone with his knowledge could see the two in the same light.
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Neil, bcb, et al
I agree that the deposit/investment discussion is misguided. Those who argue that the LBG depositors had themselves to blame claim that they were chasing high rates and therefore accepted high risk. A high rate deposit account in Bank X is no more or less risky than a 0% current account at Bank X – if the bank goes bust the exposure is the same regardless of the rate of interest in any given account.
To that extent, bank deposits are not like investments and the depositors are not gambling in the same way as people who buy shares in emerging markets companies.
However, where many of the LBG depositors have it wrong is that they seem to assume that because it was a bank deposit that they could expect all of their money back come what may. Some even seem to think that their money should be sitting in a vault in St Peter Port (or even London for that matter). This is a complete misunderstanding of the fact that a bank deposit is nothing more than a loan to a private financial insitution. If the institution goes bust it cannot repay your loan.
If the institution is solvent but relies on parent guarantees to repay its loans, and the parent goes bust, then the institution cannot repay your loan.
No money was stolen – the person that the money was lent to just cannot repay because its parent went bust.
We should not be talking about whether the depositors were to blame in making the deposit, nor demanding payment from the States merely because the money is no longer in the bank (as clearly there is no right to compensation unless the States were at fault – there is just an understandable wish to be repaid by someone). What we should be talking about is how the situation was allowed to happen and whether anything that could and should have been done was not done. If there was fault on the part of the States, then there is an argument for compensation. But if it was one of those things that no-one here could have prevented, then the argument should be had in Iceland and London, which is where the problems started.
Arnald – you call the way that banks treat deposits misselling and describe it as a big con. I don’t think it is because most people do know that banks are not guaranteed and do not keep money in a vault. Why else have depositors protection schemes? What about when BCCI went bust (with no-one expecting the state to pick up the tab in those days)?
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TL is right to say we should concentrate on “…how the situation was allowed to happen and whether anything that could and should have been done was not done”
The answer can be found in the evidence of the GFSC to the Commons Select Committee. Some might recall the then Director General say that the GFSC was relying on the FSA for information on the Icelandic banks. It was a surprise to the GFSC when the proverbial hit the fan because the FSA hadn’t told them so.
All of this despite
1 There was sufficient evidence available to the GFSC to show the fragility of the Icelandic banks and economy, especially when one is constantly reminded of the expertise at the GFSC. Many of the posters to this forum were aware, from sources available to them, of the dangers of leaving their money with Landsbanki. Makes the GFSC reliance on the FSA (known to many as the Fundamentally Supine Authority) to the select Committee as feeble in extreme.
2 The GFSC had already concerns about the effect of upstreaming at Landsbanki.
3 The GFSC of all people should have been aware of the dangers of the banking model of Landsbanki. After all one of the Commission members was a director of Northern Rock when it floundered.
Whilst it is fashionable to criticise those depositors who entrusted their money with Landsbanki, even if they hadn’t done their homework they can still feel justified in the belief that the regulator let them down, despite the review of the regulator, commissioned by the regulator itself, and conducted by a former regulator.
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TL
If deposits are sold on the understanding that the risks the banks are taking with their cash are fully transparent, calculable and available for scrutiny by the depositor, then it wouldn’t be so much of a problem.
Potential customers for anything are able to browse the likes of Which? for info and compare user test ratings for tvs and the like. They do this by understanding how they work and applying everyday usage to gauge how they perform. When you invest in a Retail Fund you are given the bits and pieces, and with a bit of nous, you can see what’s what. But not a deposit. You get an interest rate. You know what that is. You are also aware that a DPS exists but the incidents are so rare and NEVER mentioned (previously) in any correspondence other than a reference to a law (probably).
You don’t get information about how integral your deposit is to the wider actions of the bank. A TV becomes yours, if the company goes down you still have a TV.
This corporations have no public accountability. They do what they want within the lax regulatory constructs in order to drive massive profits for themselves. If they are overexposing themselves to risk then it should be published. It is still client money. There should be enough capital at any given time to be able to repay all deposits.
If an instituion wishes to play high stakes monopoly then it should make it’s own arrangements to raise cash, if it desires our input then it should make it quite clear what it’s doing. Otherwise retail banking should be as straight and boring as it comes. It’s a service not a casino.
As the banking crisis shows, these ‘masters of the universe’ who, incredibly, are still in their jobs, still getting hundreds of millions, still claiming that they know best, are simple con artists. Absolutely no different to any other snake oil merchant.
It’s people’s money. They should call the shots.
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Stephen John
The reason things like this happen is because the people with the power to make it happen did just that. The real crooks and scumbags (not all i must add) in this world are in a very powerful place in society, they can cause untold harm to the ordinary man and woman in the street who have to suffer for their actions. It`s just a big game to them and the the average joe public are just treated like pawns in their game of casino. Do they have any remorse for what they have done? i doubt it. All they will be careing about is how they can set up a whole new ariena and change the game rules with the hope we dont notice. Has the bonus culture started again yet? haha.
Arnald
Spot on
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Today’s Sunday telegraph has a good article on Landsbanki and Icelandic banks.
It states
“One London-based analyst at a large investment bank who followed Kaupthing, Glitnir and Landsbanki for many years is unsurprised at the some of the revelations. It is the ratings agencies and financial supervisors who must take the blame for failing to spot some tell-tale signs that some unusual activity was occurring, he claims.
“If you took one careful look at the annual reports you could see that loans to related parties was extremely high,” he says. “Any normal bank might give his chief executive a mortgage but running into billions is certainly unusual. But getting money on the international markets was cheap and there was no penalty for not being a proper bank – as I don’t believe these were.”
One headache that may have caused the regulators to back away was the banks’ complex ownership structures involving a constantly shifting mess of investment vehicles and holding companies. All the banks appear to have sold and re-sold stakes, shifted around top management staff and lent each other’s owners large amounts.
By Christmas 2007, a handful of analysts were beginning to suspect that something was up. It looked like the Icelandic banks were finding it even more difficult than most to raise money on the international markets, turning instead more European depositors to fund their loan operations. This gave birth to Landsbanki’s Icesave and Kaupthing Edge.
Per Lofgrem, an analyst for Morgan Stanley, wrote at the time: “New funding has not come from traditional sources. The acquisitions of Derbyshire Building Society and Robeco [a Dutch bank] were made in order to get hold of their deposit bases. We also believe that the bank would have used better-known markets than Mexico to issue debt if more conventional markets were open.”
Others warned investors strongly to stay away from them. Andreas Hakansson, an analyst for UBS in Sweden, repeatedly wrote client notes stressing that the complexity and vulnerability of the banks.
Kaupthing Edge started marketing to British savers in February 2008 and was fast building up a deposit base. And all, including Glitnir, had been recommended by advisors to local authorities as a good high-interest place to put their savings.
As Kaupthing, Landsbanki and Glitnir appeared to be on the brink of collapse in the autumn of last year, an army of spin doctors tried to persuade the UK that the banks were the target of a media conspiracy to discredit them”
The shame is that the GFSC still blames FSA for not telling them what was going on.
The known facts and the content of the Telegraph report shows just how the regulators failed depositors.
From the utterances of he new GFSC man it seems the lessons might not been learnt.
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No doubt the Chief Minister would have been appraised of these regulatory issues, by the specialist adviser on Icelandic affairs, who was part of the official party.
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Thanks, Stephen John. It shows how important this incidence was, not just those that have lost their savings: in the most part that money represents a life’s ‘work’. The exchange of money for labour so that it gets recycled in the economy to continue the circle is one of the cornerstones of our current civilisation, but important also because of the slow uncovering of facts concerning the systems and ideology that made the mess possible in the first place.
I am pleased Guernsey is making the right noises when it comes to transparency. It is in the interest of the free market that no accounting ‘holes’ are hidden in order to make the right choices. Would anyone invest in a company if they knew they were so dependent on others lending you enough every month to stay afloat?
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