Wall Street Journal writer interviews ministers and Landsbanki depositors
Wednesday 19th May 2010, 2:29PM BST.
A US-based journalist has interviewed islanders who lost money in the Landsbanki collapse for a book about the global financial crisis.
Michael Casey, who writes for Dow Jones and the Wall Street Journal, was in the island yesterday and also spoke to Chief Minister Lyndon Trott and Treasury minister Charles Parkinson.
Mr Casey (pictured) said he wanted to focus his book on the human stories that have come out of the financial crisis and show how all parts of the world were affected by it because they were linked.
‘Globalisation has made the world much more unstable and the reason we have this instability is we have inconsistent laws, exchange rates and policies, which causes huge imbalances.’
His research will take him all over the world and he is due to visit Spain, China and Algeria. He said, despite different cultures and experiences, feelings about the banking collapse were similar across the world.
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The Depositors Action Group very much welcomed Michael Casey’s visit and the opportunity to express their personal feelings on just how the collapse of Landsbanki Guernsey has felt for them, some 20 months after the event.
Each and everyone of the LG depositors has a very personal story to tell, the pain they have endured, be it financial or psychological.
Many depositors have suffered in silence with no support other than themselves or their family, some have sadly passed away, others have supported each other in whatever way they felt they could contribute.
I sincerely hope depositors do take this opportunity to express their own feelings, remember you can remain anonymous.
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Sooner or later the truth will come out about LG and the GFSA maybe Mr Casey is the man to uncover it for us!
Ian Wild
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So you wanted the extra few percent but thought it came risk free, is that it?
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As a depositor in this bank, I feel totally let down by my island of birth. The lack of support from the so called government is appalling. Thank goodness that a support group was set up, thank you very very much. This little old Guern has been very let down by it’s government.
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The notion of inconsistent laws is not the truth. The truth is that no system of law encourages or permits fraud and theft. The Guernsey authorities changed the law almost clandestinely in order to ‘legalize’ lying comfort letters. None of the depositors were ever made aware of this change. Those responsible should be sought out and investigated.In addition the Guernsey FSA simply ducked responsibility and failed to keep an eye on Landsbanki activities.
Now depositors who have suffered huge loss are to get no compensation and have the stress of waiting and hoping to recover their lost (stolen) life savings.
Guernsey is a great place to keep your savings!
I do not think.
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We were living in Australia at the time when we received a letter from Landsbanki Guernsey, stating that they had bought out Guernsey Cheshire, a reputable building society. They had said that there was nothing to concern ourselves about this take-over; that everything would function as before, if not better.
Who were we to argue? We made the assumption (incorrectly as it happened), that the powers that be in Guernsey (i.e. the Government and the GFSA), had done their due diligence regarding Landsbanki, and allowed them to conduct business on the island.
Time and time again, I had spoken to Mr Steven le Poidevin,the manager, who assured me that the bank was solvent and triple A.
We had plans to buy a newer home in Australia so that we could be near to our grandchildren.
All these plans have since been well and truly dashed – our money, our hard-earned savings were GONE.
I am a retired 75 year old, and now there is nothing I can do about our plans. Thank you very much Guernsey and the GFSA, who had the responsibilty to monitor the outflow of monies from the island, and did nothing about it.
We asked a few deputies to sign a requete to expose why this banking collapse had happened but we were given short shrift, as much as to say that it was our fault to go chasing higher interest rates! And as has been clearly proved, there were similar, if not higner interest rates available elsewhere. But the general public are unsympathetic about our plight, which is a sad reflection on the selfishness of some people. They’re just glad it didn’t happen to them.
Ironically, and in my opinion, were it not for this Landsbanki collapse, a Depositor’s Compensation Scheme may still be on the back burner. And those in the know would clearly understand that this DCS is not worth the paper it is printed on.
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I wonder what flannel the Chief Minister fed Mr Casey and more importantly whether he fell for it.
As evidence amounts to the complete failure of the guernsey authorities to protect its savers by means of the GFSC in the first place then to believe HMG post the bank failure when is Mr Trott going to act in a responsible manner and allow a Public Inquiry – his continued prevarication leaves a large stain on his ministerial legacy which will not be forgotten.
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If Mr. Casey felt inclined, he could have a “beano” digging up all the filth and lies than underlines the Landsbanki fiasco. A Journalist’s dream…….
and I’m sure the depositors would only be delighted to furnish him with the info required for the kick-off.
This is a story “up for grabs”
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Letter from Lord Myners of HM Treasury London, July last year, to Vince Cable.
“regularory oversight of Landsbanki Guernsey, is the responsibility of the Guernsey Financial Supervision Commission.” and regarding the letters of comfort “the Guernsey authorities are seeking to enforce this.” – oh yes!! when they knew quite well it was a deceipt to lure customers to Guernsey.
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Simon – posting above. Once and for all will uninformed people stop saying that we were chasing high interest rates. When I put much of my savings in Landsbanki in Autumn 2007 I was on a rate of 5.85%. Yes, it sounds enormous now but at the time my knowledgable London friends said I was an idiot to go for such a low rate when I could easily and safely get 7%+. I chose to stick with a Guernsey Bank as the Bailiwick is my home and I trusted the jurisdiction and the GFSC it had set up. My highly respected local IFA had given me a list of Guernsey and IOM banks and the interest rates they were offering. He suggested that I asterisk 3 then discuss my choice with him. One was Landsbanki – it was about 7th in rank as far as interest rates were concerned – and Skipton Guernsey paying slightly less. He approved my choice, saying that although Guernsey didn’t come under the UK compensation scheme, Landsbanki was very sound; had their own guarantee and, moreover the trusted GFSC had approved it. As the very expensive GFSC have now told us that we must do our own ‘due dilegence’ in future, I ask the question – “WHAT ARE THEY ACTUALLY FOR?”
I am 75 and neither my husband nor I have the chance now to ‘go out and get a job’ to rebuild our savings. My shortfall, if we get say 85% from the Administrators would not be enormous compared with what some savers would lose,but it would have been enough to put my lovely grandchildren through University so they did not emerge with massive debts and could move on with clean slates. The effect of all this in my family at least will last many many years into the next but one generation.
Guernsey may well have been given the white status – but as I see it, it may be a good place to do business and to set up a bank, but it is most definitely not a safe place to put one’s savings! I recall a term that was used for people with some money to save but didn’t have the time, facilities, know-how or level of ability to do their own enquiries “THE FOOLISH CHILDREN”. This foolish child has probably bought a Porsche for some greedy banker.
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Veteren saver
You placed your funds where there was no depositors protection and call me uninformed!
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Oh come on Simon, do your sums before making uninformed comments. Veteran Saver just about says it all. My late husband and I just wanted middle of the road interest rates and for our hard earned savings to be SAFE. We weren’t clairvoyant in suspecting the florid Guarantee sent from the Landsbanki parental company in Iceland when they bought out Cheshire Guernsey. We thought we should consider moving to something more ‘British’ but Joe was already too ill when the takeover took place for us to discuss the whole matter logically And I used all my energy caring for him. The GFSA didn’t raise the alarm either over the Landsbanki takeover at the time of the takeover but approved the parental guarantee. It is so easy, Simon, to make cheap wisecracks when you haven’t done your homework. It just makes you look simple.
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Simpleton Simon: Did you expect a Guernsey 98 year old to be chasing high rates? No and neither were most of us. I had an account with Cheshire Guernsey Building Society for 10 years before they informed me it was now owned by Landsbanki a bank in existance for 150 years, they omitted to inform us Landsbanki had just been taken over by two individuals with a criminal record in accountancy. We had letters both from Cheshire and Landsbanki assuring us the parent bank guaranteed the Guernsey operations. However the Guernsey financial authority knew this guarantee to be worthless.
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Irrespective of which side of the argument you lean towards, Guernsey bank depositors need to ask themselves the following questions:
1. Why is the Depositors Compensation Scheme quoted as ‘up to £50,000 compensation’?
2. If a Guernsey bank went bust and used up the £100 million maximum (represents 2,000 depositors with £50,000 pound deposits) what compensation would I actually receive?
3. Should another bank go belly up within that 5 year period, would I then have to share my compensation?
4. Why are banks allowed to advertise their ‘small print’, the real information bank depositors really need to know, in such small print?
The answers to the first three questions are already printed in literature that is freely available.
Total Scheme compensation in any five year period is limited to £100 million. If claims exceed this cap, compensation would be reduced pro rata.
The cap also means that compensation in respect of any one bank cannot exceed £100 million.
The amount payable may be reduced if the Bank has any contractual right of set-off against the account. The Scheme is entitled to recover
compensation from any funds subsequently paid out by the Bank.
The answer to the fourth question is surely one the Guernsey Financial Services Commission should be answering on our behalf under their ‘code of advertising’ information.
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Good to see ‘man of the people’ Lyndon Trott getting in on this;
The man of the people who sits in the front of the plane in first class, the middle seat of the VIP box and the backseat of the stretch-limousine.
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Michael Casey stated that, he had heard lots of different stories from people who feel they were let down and their trust was betrayed and that is a very global feeling right now.”
Mr Casey was interested in the links to the collapse of Landsbanki Guernsey and the depositors reactions to losing their money. He said that the overwhelming thing that came across was how much it had shaken their faith in the banking system. Its interesting how conservative and mistrusting they now are of banking.
If ever there was a jurisdiction where the above statements are true, it must be Guernsey, where the Landsbanki Guernsey depositors have been totally let down by their Government and Banking regulator. Let us hope that Michael Casey’s book adds to the growing criticism of Guernsey’s Government and their failure to instigate a fully independent inquiry into the whole affair.
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It’s a pity this mandate has nothing to do with Dave Jones. All could guarantee action would have taken place swiftly & every single saver would have had answers as soon as they could be found.
This is a disgrace for the CM & GFSC. There must be states members that could help or at least speed things up?
Any deputy that is worth their salt, & knows the difference between right & wrong, has a chance to shine here. DJ is the only one with the balls for it I believe.
My guess is those that are in the know have been silenced due to legal implications on the commissioning body & even more bad press for the local industry as a whole.
I have always maintained until all the savers start a consortium & mount legal pressure nothing at all will happen. This has been swept under the carpet now. It is just not completely forgotten about. Yet.
I would love to know where the money would come from for this DPS if another bank went under?
More letters of comfort about money being returned “in due course” after those that should know better get their heads round what went wrong & why again.
The facts are clear for all here. There is little sympathy for any of the savers. Feeling sorry for yourselves is not having any impact. Disputing the facts with others will have no impact either. Legal action is what is needed now.
LT & GFSC are liable. Simple as that really. Shame on both for having such little regard for others who have lost so much because they bought into all the upbeat BS.
I would love to know what was discussed in this meeting. I bet the savers would too. Any people that believe Michael Casey will be of help are deluded.
He is putting a story together & that’s that. His main concern is whether it will be a top seller or not.
Everybody needs to question why every other jurisdiction had coughed up apart from Guernsey. The answer lies within this. Guerns are very trusting folk. Even after being robbed few are taking any steps that will make a difference with the conclusion. It is almost laughable at the lack of any action at all. The lambs are still happy to follow the fox. Shame all round to be honest.
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Simon should put his glasses on and read other people’s postings before “contributing” to this debate. Or maybe that’s all he can come up with; in which case, I can only feel sorry for him.
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I am a Guern but have been working abroad for a charity for some while. Now back home, I am paying a visit to a friend who has suffered very badly due to the collapse of a local bank. He tells me that our government has so far refused to take responsibility for its failure to let even its own people know in time for them to draw their money out that this Iceland bank was very very dodgy. A large part of my friend’s savings was originally put in a UK based Guernsey Bank that apparently Guernsey allowed the Iceland bank to buy out. I have missed much of what has been going on here for the past year or so, but my friend has directed me to this website. The question I ask of people who have responded to this article, particularly to ‘Simon’, is, please, where can born and bred Guerns safely put their savings? I have all my savings in Guernsey. Thank goodness none of it was with Landsbanke, but assuming the information set out by Rustynut above is accurate, the new protection plan that has just been set up in Guernsey is not adequate and it is certainly not safe to trust it if you are a person of limited means and will need all the money you have saved. Maybe I have got it all wrong, but surely governments should require banks to be fully insured before they allow them to move in and take their citizens’ money. The premiums charged would reflect the risk to the insurance company and and it would not result in a Russian Roulette. Yesterday, on hearing what a dodgy place Guernsey really is I decided to take steps to transfer my savings to the UK where it would be backed by the UK government but have just been told by my friend that he doesn’t think the UK will let us do so if we don’t live in the UK and can’t produce a UK Tax number. Please can some of the people who are more knowledgable on these matters let me know what on earth I can do to protect my future. I am not looking for high interest rates – in fact I won’t need to live on the interest until I retire probably in 8 or 10 years’ time. I just want – nay need – my savings to be safe or I shall be in real trouble.
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Clearly Iv touched a nerve!
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Worried Pensioner
May I confirm that the information I gave in my above post is correct and also direct you to http://www.dcs.gg where you may confirm this and other pertinent details that will affect you and all bank depositors in Guernsey.
I share your concerns regarding retail banking in this Island, the last thing you want to have to worry about is the very money you worked hard for all of your life that will ultimately be needed to support the remainder of your years.
There are some banks in the UK that will open an account for you and cover you for the £50,000
UK compensation, there are also many banks that will not open an account for a channel islander.
National Savings will take your money, albeit that their rates are not particularly attractive, they are rock solid on the £50,000 compensation.
Investec UK will also open you an account.
What a sad indictment this is on the Guernsey banking system that pensioners, who should now be enjoying the fruits of their labour, are waking up daily worrying about their life savings deposited in Guernsey banks.
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To worried pensioner:
You are quite right when you say you have heard that Guernsey’s Depositor compensation scheme is totally inadequate. The UK scheme will guarantee up to £50 thousand pounds and £100 thousand for joint accounts no matter how large the bank retail capitol is, whereas Guernsey will cover only up to a total cost of £100 million, therefore if the bank had retail deposits of say £400 million it is unlikely you would get anything like your £50 thousand back.
You are also right that without a UK address it is difficult to open an account in the UK, but not impossible. It is not the UK Government stopping you but the different banks policies on “know your customer”. There are still a few banks that will accept non UK customers but Identity paperwork has to flow to and from before acceptance. I have recently transferred what funds I have had back from the administrators to the UK and I know many other Landsbanki depositors have done the same.
There are a number of reasons for not depositing money in Guernsey and I recently lifted the list below off a website. It appears to sum up the situation quite accurately, but I am open to argument on that.
REASONS FOR NOT DEPOSITING YOUR MONEY IN GUERNSEY
Guernsey has earned the reputation as being the worst jurisdiction in the world for depositors, because of the way it treated its depositors in Landsbanki Guernsey
Guernsey has no interest in you as a depositor, except to extract what tax it can from the interest earnings on your deposits
It has no bank of last resort
The island is too small & too vulnerable to shoulder high
risk banking operations
In the financial tsunami of 2008 Guernsey was the only western Government to totally fail its depositors, totally in every way and refuse through its Policy Council to instigate a Public inquiry into the circumstances leading up to the administration of Landsbanki Guernsey. The Isle of Man opened a Select Committee inquiry.
It has a seriously flawed Depositors’ Compensation Scheme
In time of financial crisis affecting depositors the Government acts primarily in the interests of Guernsey & not of depositors
The Guernsey Financial Services Commission [GFSC] attitude appears to be that banks should be allowed to fail to the detriment of depositors.
The GFSC now says that Customers must be responsible for their own due diligence and not rely on the GFSC , even though the GFSC are responsible for regulating and vetting the banks
Letters of Comfort, guarantees, undertakings, are not worth the paper they are written on, as they have no legal standing, so the GFSC now say since mid 2008, in a consultation document
The GFSC has obtained legal protection from being sued by
depositors in the event of regulatory failure on its part
The notion of ‘trust’ & ‘duty of care’ does not feature as
a moral imperative in the island’s banking culture
Banks tell depositors what they, as banks, want them to
know & do not necessarily tell them, as customers, what they want to know
Banks advertise to give the appearance of offering high
returns with the illusion of assured security on money deposited. This was shown not to be the case with Landsbanki Guernsey in October 2008 although the GFSC allowed them to purchase Cheshire Guernsey in Aug 2006 on production of a Guarantee, letter of Comfort and an undertaking from Landsbanki Islands hf.
1600 depositors, including 600 Guernsey Tax payers lost a total of £117 million. To date March 2010 depositors are still owed 32.5% of their deposits some 18 months down the line.
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Gary Blanchford
Which website did you “lift” this list from? By not disclosing this then your article should not be published? By doing so are you not doing similar to a bank and only publishing what you want the reader to Know?
Worried Pensioner
You can come up with the same amount of pro’s as GB came up with negatives and as a Guern I am comfortable like 99% of the island who have deposits here in putting my deposits with a large UK Bank present on the island.
The scheme is right for Guernsey as a whole and needs a limit – The whole island would be bankrupt if we did not have a limit. Every bank has assets and liabilities and lets hope the liabilities recovered will see the rest of money returned to the savers and lessons have been learned
Gary B – if your UK bank goes bust with Billions in deposits – lets hope the ConDem’ Gov’t honour savers from the Channel Islands and not focus on UK citizens first. Did you read the small print?
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PC
It’s not the ConDem Govt that would repay you; it’s the UK’s FSCS which, unlike the flawed Guernsey scheme, is properly funded. Further, it does not discriminate on the basis of address. You probably know that but choose not to show it.
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PC
http://www.landsbankiguernseyfiasco.net As I said I am open to argument on the points made but to me they appeared to be consistent with how I see the operation in Guernsey
Each to his own, if you are happy banking locally with the current DCS, that is entirely your choice as is mine in putting more faith in the UK DCS. After the Landsbanki Guernsey Debacle, you can guarantee one thing as a depositor in Guernsey, you are on your own, the Government doesn’t want to know.
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PC, excellent post. Guernsey can’t have unlimited depositor protection, and it will be interesting to see if the Isle of Man really does return 100% to depositors. Insiders on the island say no, but I guess we’ll wait and see.
Worried Pensioner:- Please exercise caution when choosing your next bank. Don’t just use the availability of an account as a reason to bank with someone. Nationwide might be pretty strong, but Investec UK aren’t in the same boat.
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PC
Are you seriously saying that together with 99% of Guernsey people you are ‘comfortable’ with trusting your savings to Guernsey subsidiaries of UK banks. How can you say this when you must know by now that the Guernsey is the ONLY jurisdiction in the civilised world that has refused to compensate the people who helped to provide such wealth for the island, and when you also must know that the new deposit scheme is little more than a joke. Are you absolutely sure that Guernsey would be behaving any better if Landsbanki had been a subsidiary of a UK bank? UK government has little regard for us “deserters” and “tax-dodgers”!
If the average family consists of about 2.5 people, then around 1500 Guerns (most of them taxpayers)are handling various degrees of personal problems following the collapse of this Guernsey bank. Trustingly savings were put in Cheshire Guernsey then, on the takeover, Guernsey Government’s assurance was accepted that Landsbanki Guernsey was a rock solid bank, all checked out by their Financial Services Commission.
We are talking about Guernsey – a respectable Crown Dependency – not some banana replublic that one would expect to treat its people like rubbish!
I fail to see how you can possibly feel ‘comfortable’. I certainly do not.
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PC & Greg
The choice of banking in Guernsey or the UK is entirely up to the individual depositor, what is important is that each and everyone needs to be aware of the terms and conditions that apply and the fact that are subject to change, depending on political and financial circumstances that occur.
For instance there is currently talk in the UK of cover for up to £50.000 only, anything over that amount would have no cover.
Here in Guernsey you can only be guided by the current information available through the http://www.dcs.gg which for instance states:
What about banking ‘brands’?
Brands of banks, such as the ‘NatWest’ brand operated by Royal Bank of Scotland International, are not Licensed Banks in their own right, but participate instead through the banking licence of their operating bank. Both
the operating bank and its brand are therefore classed as a single Licensed
Bank for the purposes of the Scheme. A person with a deposit in Natwest and a deposit in RBSI would thus only be entitled to a maximum total of £50,000 in compensation. You need to check the list of Licensed Banks carefully to
confirm the status of your bank. Alternatively, you should speak to your bank
about its status.
What happens if the administrator or liquidator subsequently recovers funds from the failed bank?
The Scheme has a prior claim on any monies which are paid back, up to the amount of compensation paid.
Does this mean that the DCS Scheme will pay you out up to £50,000 pounds within the first three months but will then start clawing back money from the Administrator of your failed bank to the detrement of savers with funds over £50,000?
Bank depositors, wherever they bank, need a much bigger voice in retail banking than the present GFSC representation. There is an Association of Guernsey Banks, perhaps we need an Association of Guernsey Bank Depositors?
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Eric – I agree that people should know what they are getting into. As you say, the information is there if you want to find out where you stand.
As depositors, we are unsecured creditors. We are handing our money over to someone and we have no control over what they do with it. We have a responsibility to be sensible about who we give it to, just as the regulators have a responsibility to regulate properly. But regulation does not guarantee financial stability and should not be relied upon with blind faith.
Re the UK and the £50k limit, my understanding is that the UK DPS is already limited to £50k (it was £35k until relatively recently). It is only because the banking crisis affects all banks that the UK government is prepared to bale out the banks – but that is in order to save the system, not in order to protect depositors. If an individual bank went bust in the UK without the backdrop of a potential collapse of the banking system, the scheme would not pay out more than £50k per person.
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The laws, and law-makers in Guernsey are flawed. Once again the ‘little’ depositor has suffered to the gain of the ‘big’ banker.
Why were letters of comfort re-assuring depositors allowed when GFSC knew they were worthless?
There are so many questions that need to be answered and yet no-one is answering.
GFSC, Trott et al you need to do the right thing by your own people, by your islands own customers.
Not next week, not tomorrow, but today.
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People keep telling me that Guernsey has the status of being on a White List. Unless we have fallen victim to political correctness, I think that White would be interpreted as Good by most people. How can this be, as the new compensation scheme is recognised (even by the relatively informed) to be inadequate? Mr Trott et al are travelling round the world (nice one) giving people the impression that Guernsey is a safe place to do any sort of business (and of course, placing your money has to be included under that heading). Is this not false pretences?
As for people being told to make extensive enquiries about the banks etc to whom they trust their money, as I see it, most working people I know are having to put all their efforts into paying their way and many are working very long hours. In any case, most of the information that would be needed is not readily available to anyone who does not have the internet and with all the takeovers and subsidiaries and partnerships, how on earth can the average person cope with such investigations. I know several people (not all of them old) who just cannot afford to set it up the internet (especially with the high monthly charges we pay in Guernsey) pay for instruction and maintain the equipment. I ask the same question as “Veteran Saver” -”what are they [the GFSC] actually for?” They ALLOW financial organisations to operate on our island and they they are PAID to do the checking and have the time and and expertise to do it. It is their DAY JOB – not ours.
It would be good to have the comments of others on these points. Perhaps “PC”, “Simon” and maybe even Mr Trott will respond.
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A D Beer
Most people I would suggest prior to retirement have their salary put into a retail bank and like my family and many of my colleagues build up a trust with their bank that then also takes care of their savings. We may go looking for best mortgage deal, other investments we can get but on the whole the competitive nature of major banks gives us a return on any cash investment and it is safe.
Note: If one of the big banks go then the domino effect of this will be to take a lot of small non connected banks/companies with them. Reason for bail out
Why? Every bank has treasury teams who are mandated to spread the risk of holding cash by putting it into various currencies with multiple non-connected banks (Eggs, baskets)
Hindsight – Financial crisis – Unfortunately GFSC were not blessed nor me with knowledge on every Domino and its position or the fact that the parent or the country would totally go under. Are Greek banks next? If other FSC’s agreed to a takeover of any company, what if anything could Guernsey FSC really object to. If they had more Assets than liabilities in Guernsey, well run at the time, …Was it the regulators fault the Treasury team of the bank (to make the bank money) put the money elsewhere?
DPS – They have put something in place which was achievable for the island. Have other islands/coutries really done the same and do you really think if a major bank in IOM went under do you think everyone will get 100& back.
In the end it comes down to Assets/Liabilities which have currently resulted in return of a significant amount of investors funds and really do hope that most will be returned.
Note – I have worked globally and locally in major banking organisations for 22 years and in a similar case (Barings)- had they not been bought would have destroyed many large companies such as pension/investment co’s on the island given BBG lent their money to London who lent to Mr Leeson. The Business world is now so interconnected that evey investment or deposit should have a Goverment warning.
My future strategy – Bank of Mum/Dad will be the option I will give my children when we retire – I will loan them my savings to buy a house and they will pay me less per month than they would pay a bank. In return I will also as security have a bond on their home. Risk is locallised and what happens in America, iceland does not put me through what some people have been put through.
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PC
“Note: If one of the big banks go then the domino effect of this will be to take a lot of small non connected banks/companies with them. Reason for bail out
Why? Every bank has treasury teams who are mandated to spread the risk of holding cash by putting it into various currencies with multiple non-connected banks (Eggs, baskets)”
This of course was part of the problem, the GFSC already knew there were problems with Iceland some six months prior to Landsbanki Guernsey going into administration. Unfortunately they appear to have taken all of their advice from the FSA without doing their own due diligence and at that time it also appears that the FSA were dragging their feet with the GFSC and coming out with ambiguous statements. You only have to read the letters that passed between the Director General of the GFSC and the FSA in January 2009 to realize the relationship between the two. Those letters had to be submitted to the Treasury Select Committee hearing on the Banking Crisis.
You mention above (eggs, Baskets). With the full knowledge that there were problems, the GFSC allowed Landsbanki Guernsey to upstream around £40 million to Heritable in the UK who in turn relied on Landsbanki Islands hf in Iceland for its cash flow. This certainly was placing all one’s eggs into the one wrong basket. There was a vain attempt to have this money returned in the days just prior to the 7th October 2008, but it appears that the FSA had taken some control of Heritable and prevaricated until it was too late and that £40million ended in the administration pot or disappeared with Icesave funds to ING.
The Promontory inquiry into the GFSC was a shallow affair, to provide the GFSC with the Phrase that “they had acted in good faith” and thereby legally protect them from any legal action being taken against them. Its time an in-depth select committee type inquiry was instigated so as the full truth of the whole affair can be brought into the open, which ever way it falls.
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A D Beer
My very limited direct experience of the GFSC was with a previous director. He proclaimed that the main criterior for licencing in Guernsey was based upon tax generated i.e. if a bank for example would be likely to pay in excess of £500,000 pa in tax then they would be considered.
Im sure things must have changed as that was 10 years ago!
The issue of the GFSC is I believe a fair gripe on behalf of savers.
Guernsey seems to use the GFSC to demonstrate its integrity and this is unavoidable to anyone with connections to the Island.
So effectively the GFSC generate intergrity for any bank licenced to operate here.
If this effectively generated a false sense of security regarding the stability of any bank then surely that case should be against the GFSC and their insurers (should they have any).
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PC
You ask: “Was it the regulators fault the Treasury team of the bank (to make the bank money) put the money elsewhere?”
I ask: “Did it conform to best international banking practice to tie up the majority of the bank’s assets in various guises with Heritable Bank in the UK, in the full knowledge that Heritable also formed part of the Landsbanki group?”
I think the IMF will have a view on that one.
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There appears to be a good deal of fluffy thinking expressed in this thread.
At the date of collapse the figures presented by the liquidators were:-
Round £,000,000′s
Assets Cash 41
Secured loans 53
Due from parent Co. 49
Total Assets 143
Depositors 117
Other liabilities 3
Capital and reserves 23
Total Liabilities and reserves 143
It seems likely that there will be little recovery of the £49m from the other Icelandic banks but against this must be set the capital and reserves leaving a shortfall of £26m, being 21.6% of liabilities.
To have any chance of recovering the secured loans in full time is required. Eventually they will be realised and if, say, an 80% recovery is achieved, there will be an additional £42m in cash available. Thus, after fees the eventual payout will be £80m or some 67% with a loss of £40m borne by depositors and creditors.
If the Depositors group had made a plea for the £40m rather than the full £120m they might have received a more sympathetic hearing. The continual plugging of the £120m, which would have to be paid by every Guernsey taxpayer, some £5,000 per head, was too much..
Why has no action been taken against the Directors of the company who, if I understand it correctly, presumably sanctioned the transfer of substantial funds to Heritable days before the collapse? By what means could the GFSC have prevented this; they are not mandated to oversee and approve every use of a bank’s deposits.
Finally, there is no such thing as a completely safe asset. Even countries can go bust. For years the financial media has plugged the spreading of risk. Don’t have all your eggs in one basket
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Cher Eugene
No-one is saying that there is such a thing as a completely safe assets, although in the greater scheme of things savers, as opposed to investors, tend to gravitate towards simple savings accounts such as those offered by NS&I, Cheshire Guernsey etc.
What posters on this forum are pointing out is that Guernsey has proved to be much MORE unsafe than other jurisdictions and should therefore be avoided.
Unlike the UK, Isle of Man and Iceland which bailed out most savers and conducted public inquiries, Guernsey is still resolutely opposed to launching an independent parliamentary public inquiry, with the GFSC clinging for dear life to the Promontory report which they themselves commissioned and which we all know was a whitewash.
Truly shameful, you will agree.
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