‘Give offshore banks a wide berth’
Monday 28th September 2009, 2:30PM BST.
THE States has come under heavy criticism in the national press for not supporting investors who lost money in the Landsbanki collapse.
An article in The Times on Saturday launched an attack on the way Guernsey’s government dealt with the banking crisis and said the message to UK savers was clear: ‘If you value safety, you should give offshore banks a wide berth.’
The article by the paper’s deputy personal finance editor, David Budworth, said the savers involved were the forgotten victims of the credit crunch whom governments had ignored when they should have helped.
‘Pressure should be applied to the Isle of Man and Guernsey authorities to ensure that as much of their savings are returned as possible, as quickly as possible,’ he said.
The Isle of Man was at least trying, he said.
‘However, even faint praise cannot be extended to the Guernsey authorities. Worried about the damage to the island’s reputation, it has belatedly introduced a hopelessly inadequate compensation scheme, but it is not open to the Landsbanki victims.’
The scheme, he explained, was supposed to cover £50,000 per account, although total compensation was capped at £100m. in any five-year period.
‘Landsbanki’s savers are estimated to have had more than £120m. on deposit when it went bust,’ he said.
‘If they had qualified, they would have wiped out the scheme until 2014 – and they still would not have got all their money back.’
Chief Minister Lyndon Trott (pictured) said his letter to the Guernsey Press, published on Saturday, adequately covered Guernsey’s view.
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Yes The Times hit the nail on the head. A totally inadequate investor compensation scheme.
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we followed an advert by cheshire guernsey to invest in its guernsey operation.we have since experienced an astonishing display of duplicity and incompetance by the guernsey authorities demonstrating that it is not the nice place we foolishly imagined,but a totally untrustworthy place to deal with.
I would not buy even a single guernsey tomato now!
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Come on GEP even you must know that high returns equals high risk !
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If Landsbanki investors were advised to put their money there by financial advisers who presented Landsbanki as a low risk investment then those investors should be claiming against the advisers’ Professional Indemnity insurance on the grounds that poor advice was given.
However the States of Guernsey cannot be expected to take responsibility for the bad luck of investors who took high risks in the hope of receiving high returns.
For once in his political life Lyndon Trott has made the correct decision!
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The Times were exactly right, The new DCS was to close the door after the horse had bolted and depositors should check it very carefully as it is far from satisfactory. As far as Landsbank Guernsey was concerned it was a Guernsey regulated bank and the GFSC apparently knew there were problems some 6 months before, but depositors were kept in the dark. It now appears that they also failed to carry out proper due dilligence, so I must admit I would not be depositing any more money in Guernsy.
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Can I just ask – how much of their savings have Landsbanki customers now recovered and what is the likelihood of them recovering the rest?
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Dispossessed Kaupthing IoM depositors have mounted a youtube.com video campaign under ‘DON’T BANK ON THE ISLE OF MAN’ – depositing offshore is now such that it could seriously damage your wealth!
Jim
http://ksfiom-blog.blogspot.com
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Gary
I remember that just over a year ago I spoke to my bank manager.
I asked why I was just getting 5 % return on my savings with them whilst others like Landsbanki we giving over 7 %.
He explained that they appeared to be desperate for cash hence the high interest rate, so this made me vary cautious.
As a result I played safe and went elsewhere.
At that time and for the first time in my life I had a large sum of cash to invest, so had no knowledge or experience in these matters.
What I did feel was that from all the information I gained on investments was that I smelt a rat and it was obvious that we were heading for problems in the financial world.
As I said I felt it so why didnt you play safe with your cash, or maybe as I suspect the appeal of a very high return made you blind to the obvious.
You pays your money and you takes your chance.
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CD: 55% to date. The administrators’ say that they anticipate the ultimate recovery to be “in the region of” 70-80%, and expect that it will take to the end of 2012 to achieve that.
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the more I read from comments here the more the Guernsey fiasco mirrors that of Kaupthing IoM.
A top-ranking international forensic accountant has told me that if a liquidator is talking of 80+% recovery then don’t be surprised if that turns out down the line more like 40% net, because from experience that is what is left after liquidators and lawyers have taken deducted their ‘costs’.
This guy hadn’t looked at the Kaupthing books but his caution is something dispossessed depositors in Guernsey & the IoM need to bear in mind. The longer it drags on the more gets siphoned off & ends up adding to the billions that are made by the likes of E&Y & PWC.
The campaign DON’T BANK ON THE ISLE OF MAN is hitting home. The dispossessed depositors of Guernsey should join in with DON’T BANK ON GUERNSEY. It’s time for solidarity between depositors in the Crown dependencies to bring about pressure for a just political solution.
Jim
http://ksfiom-blog.blogspot.com
http://www.kaupthingiom-dag.co.uk
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My understanding is that approximately 55% has already been received. I also expect that the majority of the administration work has been done and now it is just a case of waiting for the remaining funds to flow through the system.
The simple fact is that retail banking is not big business in Guernsey and the industry cannot support an unlimited DPS – hence the rolling 5 year cap. I’m not sure what sort of “just political solution” you are expecting. If you fear that the administrator will not have much more to pay over, are you expecting the Guernsey taxpayers to bail you out for the balance?
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Jim
It seems you can’t read, as the post above yours (several hours before so you can’t claim it wasn’t there!) stated correctly that 55% had already been paid out.
If you can’t read that, maybe you couldn’t read the small print? If you ignored it, maybe you ignored the fact that 7% was waaayy too high compared to more established banks.
You risked, you burned. Simple as.
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Billythefish makes a painful but good point. Caveat Emptor comes into play here – why hand over your hard earned until you know where it’s going?
There is also a fundamental problem with these compensation schemes in that all financial institutions pay into the pot so those who deposit into relatively safe operations are paying an insurance premium to protect those who take the riskier option.
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If the GFSC were taken by surprise by the situation in Iceland and its banks, then the GFSC should learn to use Google. A simple search throws up numerous warnings, most of which should have been taken up by the Guernsey regulator.
For instance, Seeking Alpha, a provider of stock market analysis and opinion reported on 31 March 2008
“The risk of Iceland’s biggest banks defaulting rose above 49% based on credit-default swap [CDS] premiums. Since November 6, the krona has fallen more than 40% against the euro, dropping to a record low against that currency putting carry trade investors seriously underwater. It is down 32% against the beleaguered dollar since November. The Icelandic central bank unexpectedly raised interest rates to 15 percent this week and sold 7.15 billion krona ($93 million) of debt Friday in attempts to shore up the currency.
Credit-default swaps on the Icelandic banks are more than 10 times higher than the average for European lenders as the credit market freeze prompted investors to shun all but the safest assets. Premiums on the krona indicate very distressed levels according to Matthew Hegarty, a credit analyst at Barclays Capital in London interviewed by Bloomberg. “Credit spreads are implying there’s a chance of default over the next five years. Not a probability, but a real possibility.”
Many of these are general figures available from many other sources. These are just a few.
Also Bloomberg 25 March 2008 says of Iceland “The central bank also took steps to boost bank industry solvency as a global credit crunch makes access to funding difficult. Banks will no longer be required to include obligations at foreign branches when setting reserve levels.
“It can be expected that this change will considerably lighten the reserve requirements of those banks that operate branches abroad,” the bank said.
Surely this would cause some concern?
Surely these and other warnings 6 months before Landsbanki collapsed should have alerted the GFSC to the reality of banking and not the cosy, comfortable world of tick the right box.
After all it is the role of the GFSC and its well paid employees to analyse risk.
Those who still excuse the GFSC because it relied on a typical bankers meaningless reference from the FSA should reflect on their creditable, but misplaced sympathy for a regulator, who woke up and smelt the coffee when it was too late to protect those it had a statutory duty to protect..
Add to this the fact that one of the weaknesses was that Landsbanki was a stand alone bank which upstreamed to its rather fragile daddy bank. The failure of the GFSC to appreciate the uselessness of the comfort letter until near to the end of Landsbanki was another regulatory slip up.
If the main banking system is shaky, it is an act of negligence by a regulator of assume a bank set up to upstream, and with a useless guarantee is hardly a safe haven for depositors given the sheer weight of contra data about the bank and its parent bank and country.
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Well Said The Times!
this with the Wales Report and the recent findings pressing for a change in election and government structure really show what a sorry bunch of leaders Guernsey has. Fudging,fingerpointing and mud slinging seem to be their forte rather than mature open dialogue.
As for helping Landsbanki Guernsey: The GFSC slept whilst the Icelandic banking system melted and when it did decide to act what was its wonderful solution – move money from Landsbanki Islands to Heritable Bank – a subsidiary of the same bank – was it beyond the wit of the GFSC to othink that money may have been safer in a bank not associated with Iceland?
The Chief Minister has said if there was revulatory deficiencies he would reopen his decisions on Landsbanki Guernsey, when will he do so?
the GFSC thinks by not commenting it will make this issue go away, on the contrary it makes more people believe there was negligence which it is sweeping under the carpet.
An open and full public enquiry – not a sham commissioned by the GFSC on the GFSC is required to clear the air and begin the long road to recovery of Guernsey’s tarnished reputation as a safe well run jurisdiction with professional leadership!
Act with dignity for once and stop hiding behind worn out mantras and confidentiality claims – we all want to know want went wrong and what has been done to put it right!
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Guernsey and the Isle of Man have demonstrated their inability to protect savings from retail depositors. Fact. They are the only ones; Fact.
Going forward, they should be put onto a black list of places to be avoided at all costs if you do not want to loose your life savings. This is in substance what the Times’ informative article stated and the more informative articles, TV programs, internet videos and campaigns, the better. The public at large must be able to make informed choices.
You can’t have your cake and eat it.
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Thousands of British expatriates got caught by placing their trust into Guernsey and the Isle of Man, simply because they would not be allowed to bank in the UK. Once this anomaly is addressed –the sooner the better –,those untrustworthy States should be avoided. Thanks to the Times and other British media for spreading the word.
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@billythefish…sorry to be late responding…don’t come here very often!
My comments were really relating more specifically to the IoM & not Guernsey. So far only 24.8% has been recovered in the liquidation of Kaupthing IoM.
This liquidation expects asset recovery to be 70%-83% at the end of 6 years. The point I was making was that depositors will not see 70-83% credited to their banks. From the experience of liquidation it could be far less.
Of the 2 previous bank failures on the IoM one returned 29% net after 23 years & the other 60% after 10 years. Factor in inflation & loss of interest depositors got peanuts compared to the overall sum they lost.
Cheers!
Jim
http://ksfiom-blog.blogspot.com
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You will never know what it feels like to potentially lose your life savings in a well regulated bank until it happens to you.
Landsbanki depositors deposited money in a Guernsey bank and should be treated the same as any other individual who chooses to deposit money in a Guernsey bank.
Ironically they now have a double wammy as the 55% money they have received back is causing them further concern as they have no confidence in the Guernsey DCS and are sadly depositing their money outside of Guernsey.
I sincerely hope this situation never happens again to individuals in Guernsey – is your money safe in Guernsey, I’ll leave that up to you to do your research.
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