Scrutiny set to get more intense – GFSC
Wednesday 14th July 2010, 2:30PM BST.
GFSC director-general Nik van Leuven.
The warning, given by Nik van Leuven in his director-general’s statement in the GFSC’s 2009 annual report, centres on the attention that external parties, particularly the European Union, will be giving to the island’s financial services regulation in future.
‘The preservation and enhancement of our international reputation is even more vital now than before, especially as those jurisdictions and institutions bent on criticism continue their assaults,’ said Mr van Leuven (pictured).
As a result, he welcomed the States’ decision to open a Brussels office in order to work on addressing the perceived threats from EU initiatives such as in the funds sector with the alternative investment fund managers directive, and in the insurance sector with the Solvency II directive.
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Here is a good idea. Why not sort out the Landsbanki Guernsey fiasco and show the financial world that Guernsey is a well regulated jurisdiction and not some hopeless amateur banana republic in denial.
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The amount of new rules and regulations put out since Nik became head of the GFSC is beyond a joke. Sometimes rules change by the day. It’s a full time job updating manuals these days.
If the GFSC carries on in this manner we won’t have to worry about increased scrutiny from anyone as the finance industry will have upped and left and gone to a more friendly jurisdiction.
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The GFSC’s 2009 annual report, specifically the banking division part of the report is a self praising, look how good we are report. Anyone reading it would think that the GFSC were the saviours of the Landsbanki Guernsey Depositors, rather than, through their lack of due diligence during 2008, allowed landsbanki Guernsey to get into a position where the only way out was to place it into administration. They refer to ensuring that upstreamed funds were placed with third party placements, namely Heritable in the UK. Heritable was hardly a third party placement, it was part of landsbanki islands hf in Iceland and relied on the mother company for cash flow. Placing money there was almost as bad as upstreaming it to landsbanki Iceland. The £37-40 million was never ring fenced and ended up in the Heritable Administration pot. A big help to the depositors
The GFSC did absolutely nothing for the Landsbanki Guernsey depositors and totally failed in their proper regulation right back as far as when landsbanki took over Cheshire in 2006 where they failed to ensure that the Landsbanki guarantee was signed.
Yes the GFSC are learning by their mistakes, at the expense of the Landsbanki Guernsey Depositors
For this very highly paid bureaucracy of 90 (approx) employees, they performed abysmally in 2008.
Value for money I wonder: earnings:
£0-£39,000 40 employees
£40,000 – £79,000 42 employees
£80,000 – £ 119,000 8 employees
£120,000 – £ and above 7 employees, I wonder how far above?
And all those who were employees before January 2008 are on the Guernsey States Pension scheme and you and I will be paying for those extremely large pensions.
Why?
Read a depositors comments at:
http://www.landsbankiguernseyfiasco.net/GFSC%202009%20annual%20report%20comments.html
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I have no doubt that the island’s finance industry will come under more and more international scrutiny, but although that is almost ineviatable, I am of the opinion that it is the scrutiny of Guernsey bank depositors that is the greatest threat to the banking industry in the years to come.
The collapse of Landsbanki Guernsey and the subsequent support for those depositors since 2008 changed all of that and we are much more knowledgeable and less trusting of the system now.
Gary Blanchford has more than adequately outlined just how many questions have been asked and what those responses were.
None of this gives any confidence or incentive to existing depositors or potential depositors and to the outside world who read this continual struggle, day in, day out, on the internet.
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“If the GFSC carries on in this manner we won’t have to worry about increased scrutiny from anyone as the finance industry will have upped and left and gone to a more friendly jurisdiction.”
Implying that “more friendly” means “less wanting to combat criminality and comply with international standards”.
That’s exactly the kind of business we want, eh Chris. Thems that we need to a blind eye to….
It’s worked for us so far….
Sorry for boring you all to tears…
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Further to my comments above:
What will Guernsey do now that the EU is proposing putting its depositor Compensation scheme limits up.
The European Commission has formally proposed to increase the guarantee for bank depositors to €100,000 by the end of this year, which is significantly higher than the current £50,000 limit in the UK and a huge difference to the limited Scheme in Guernsey.
The EC published an EU-wide package of proposals on the 12th of July that aim to increase consumer protection and confidence in financial services.But Guernsey is not part of the EEA and will remain under its own scheme.
The EC is proposing faster payments so that all depositors are reimbursed within seven days of a bank failure.
The EC says if a depositor has an account with a failing offshore bank, their national deposit guarantee scheme will repay any money owed and act as a contact point. The national scheme would then be reimbursed by the scheme in the failing bank’s jurisdiction.
But as said above Guernsey is not part of the EEA and it would appear would be left with its own inadequate scheme, which will only worsen its already worrying retail banking image.
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Nothing compared to the increasing scrutiny it is coming under from depositors worldwide, who are concluding that Guernsey is unsafe for savings.
Despite the evidence of clear regulatory failure by the GFSC there has still been no independent public inquiry into the fiasco of the collapse of a Guernsey bank in 2008.
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@ M J Asheby
How many more times do Landsbanki depositors have to be told. It was not a Guernsey bank it was an Icelandic Bank licensed in Guernsey.
The Icelandic Bank collapsed and could not meet its guaranteesto it’s subsidiary. If you read the accounts of Landsbanki guernsey it was obvious that deposits were being used to support the London and Iceland holding companies and their rush to fund the growing desire by iceland to buy up most of the UK high street.
If Barclays or HSBC had collapsed and you had lost your deposits in Guernsey with them would you have been saying it was a Guernsey Bank?
It is the population of Iceland who have decided not to repay.
Having said that i had money in Cheshire in Guernsey. and as soon as some tinpot bank from a tinpot country with a population of only 300,000 took it over i withdrew my money despite the financial penalties.
I have said this numerous times before do your own research and due diligence it did not take too much analysis to realise that the Country of iceland was buying up the UK High Street, taking over UK businesses and was funding this by offering higher rates to savers.
i did not like what i saw and got out quick.
There is a world wide banking crisis taking place and unfortunately Guernsey was a casualty. However it was clearly spelt out on all documentation at the time that there was no Depositor Compensation Scheme in Guernsey.
I do feel the states of Guernsey should have offered some form of compensation to Landsbanki depositors but i do understand that the Landsbanki depositors will get a significant proportion of deposits back thanks to the efforts of Deloitte.
Is the GFSC totally to blame for all of this? I do not think so. What about the employees of Landsbanki in Guernsey or the people of Iceland who have voted not to reimburse
Valuable lessons have been learnt across the world. Unfortunately as the Director General of the GFSC has said all finacial services will be subject to closer scrutiny in future
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John
How many more times do you need to be told. It was not a branch of an Icelandic Bank licensed in Guernsey. It was a Guernsey-established, Guernsey-registered, Guernsey-authorised limited company and bank. Of Icelandic parentage, yes, but unlike IceSave, it was not, repeat not, a branch. It was a Guernsey bank, hence the name ‘Landsbanki Guernsey Limited’.
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John I think you miss the point, we are perfectly aware it was an Icelandic bank licensed in Guernsey. Who was it licensed by, the GFSC.
What have the GFSC said in their Annual report for 2009,” The Commission had required LGL
to reduce its direct exposure to Iceland substantially and required
the bank to replace assets up streamed to the parent in Iceland with
third-party bank placements, placements with Heritable Bank Ltd
in London and a portfolio of third-party loan assets, which resulted
in LGL acquiring a credit portfolio of property loans.”
The relevant phrase, “ The commission had required LGL to reduce its exposure to Iceland,” but what it did was to allow up streaming to Heritable without ring fencing and thereby expose the £37-40million pounds of landsbanki depositors money, not to a third party placement, but to a company that still relied on landsbanki Iceland for Cashflow. The GFSC arranged this and when Heritable went into administration the £37-40 million ended up in the pot. Yes the property portfolio was ring fenced and we are slowly getting some reimbursement from that, but in a very poor market and it could go on some years.
I have no argument in much of your analysis, but seeing it, you are obviously a reasonably switched on investor who followed the markets and was able to make an early decision on your own due diligence. Please remember that the vast majority of the depositors were unsophisticated and had deposited in the Cheshire Building Society, in a well known established Building Society. When they received the letters from Cheshire that it was being sold to Landsbanki with the assurance that nothing would change etc. etc. and the fact that the sale was authorised by the GFSC, the majority , like myself, were happy for our money to remain where it was, after all we kept getting told that Guernsey’s financial regulation was second to none.
You have hit the nail on the head, how many ordinary depositors read accounts, most like myself haven’t got a clue on bank accounting and often by the time they come out they are a year out of date. We do have professionals though that we rely on, or did rely on, The GFSC, who, if they had been doing their job properly and seen all the signs would have realised six months before landsbanki Guernsey went into administration, that something was seriously wrong.
I have personally learned a lot from this debacle, I relied on the professionals to know what they were doing, because I am a layman when it comes to finding a place for my money, as were the majority of the landsbanki depositors, most of whom were pensioners, I now know that The GFSC were placing all their reliance on the FSA and it now appears the FSA were playing on the naivety of the GFSC, so in 2008 we did not have a professional body looking after our interests, we had a rather amateur group in the GFSC playing at it and 1600 people lost £117 million.
Yes we can blame Iceland, we can blame the FSA, but our regulator,the GFSC, who we trusted, failed us totally. It will take many years to build up faith in Guernsey’s retail banking system again and Guernsey’s Government and the GFSC have to take total blame for their abysmal handling of the situation.
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In 2006 my account with Cheshire Guernsey bank was bought by Landsbanki and renamed to the Landsbanki Guernsey bank. I read all of the information that was made publicly available by the bank and the GFSC to reassure me that my money was safe. I was convinced that we had a guarantee that our savings were safe.
Nearly two years after my life savings were taken from me in 2008 I now have had 67.5% of them returned. I have beeen told that sometime in the future I may receive some more of my savings back.
The GFSC have done nothing to help get my money back. Guernsey government has done nothing to get my money back. The only people who are getting my money back are Deloittes, who are being paid by me.
What then is the point of the GFSC?
What then is the point of the Guernsey Government’s ridiculous comments of ‘we are working tirelessly behind the scenes…’?
Whatever money we have receieved and may receive in the future will never be deposited in a Guernsey bank.
Yes, the GFSC has come under increased international scrutiny – I for one have scrutinized them and deemed them to be worse than useless!
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John
How come you knew when to withdraw your funds from Cheshire/Landsbanki – when I checked with GFSC in September,2008 I was patted on the head and told there, there little old lady your savings are fine. As my dear husband had just died I was too emotionally drained to be suspicious. Sorting out probate alone took all my energies.
And so, the small remains of my savings in Guernsey are transferred to somewhere safe and legal. I agree with suggestion that the only way Guernsey can begin to regain her reputation internationally is to SORT OUT THE LANDSBANKI-GUERNSEY SCANDAL. Maybe Mr van Leuwen is hoping us oldies will die and the sooner the better.
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We all know that the GFSC and the FSA between them are to blame for the plight of the Landsbanki Guernsey savers.
Why did the GFSC when tightening controls allow Landsbanki Guernsey to put funds in the Heritable – another Landsbanki Bank? Why was a request for a return of funds from the Heritable prior to it going into administration refused? Why was the Heritable put into administration when it was solvent? Why was there no communication between the FSA and the GFSC at the time to protect all savers not just those in the Heritable? Why has so little been done subsequently? Let’s have an enquiry. Let’s put matters right.
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The bottom line is that we are STILL WAITING for our money since October 2008. Some of the older clients will probably never see the end of this story that has caused them dreadful hardships especially among the pensioners. As depositors, the blame element is only one part of this fiasco, but this HAS to be sorted, and we want our money back as of NOW. As far as democracy is concerned within our banking system with the all-important reliability in the banking structure, this on-going situation is outrageous. We depositors are well aware however, that the mysterious overnight disappearance of all our funds in Landsbanki Guernsey did not happen by ‘a magic wand’ but by human manipulation……..
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Whilst we get into arguements regarding the jurisdiction of Landsbanki guernsey the GFSC continues to operate and has escaped scot free. no matter where the bank was registered it SHOULD have been regulated by the GFSC – this esteemed institution decided to wash its hands of the regulation and rely on vague and un proven assertions made by the GFSC rather than use some of its own resources to check. I assume that this has / is the case still with all other banks in Guernsey – where was the GFSC when Northern Rock fell – what actually had the done to prevent the local branch from collapsing? Of course they weere lucky there in that the UK stepped in to save their skins – but unfortunately this did not act as a wake up call before Landsbanki Guernsey was also pulled down.
I see latest figures show drop in money coming into the country – i wonder why – savvy investors see that rather than address the fundamentals the GFSC and States would rather try to whitewash the situation. Opening an office in Brussels will achieve what exactly apart from another fat cat salary.
A public Inquiry is necessary not only to look at the GFSC actions leading to NR and LG failure but also to soothe the unceertainties the financial community is facing by showing that the GFSC has now learned its lesson and is acting in a manner mor suited to its regulatory role.
Until this happens cash flight will continue and Guernsey will return to being a tomato growers haven whilst its citizens standard of life will only go one way!
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It is very clear to anyone with an ounce of brain ( of which I have none, I put my trust in GFSC) that there was a failure in this so called well regulated banking industry of Guernsey. If you would have followed the many comments made in various forums by Gary Blanchford you will have soon realised that this man knows what he’s talking about. He is right with every point he makes and yet, Mr Trott and his cronies still elect to do nothing about it. There is also a report by Matthew Dorman of the LGDAG which everyone should read as to why there should be a public enquiry into this fiasco. http://www.landsbankiguernseyfiasco.net/Covering%20Report%20for%20public%20enquiry%2017Oct09.html for public enquiry 17Oct09.html if the above link is not displayed go to the website of landsbankiguernseyfiasco.net and read it there. Clearly GFSC let down all the depositors whether they be big or small and its no comfort to get 67.5% of your money back with a possibility of a little more over time, say up to 80% over 5 years. Yes it is better than the Glanmore Property fund another GFSC supervised product. Which allowed the fund to advertise its product to investors as a low risk fund initially then changed it to a medium and now since 2008 as a high risk fund. Investors in the Glanmore Property Fund currently stand to lose 80% of their initial investment if they were allowed to cash in. Guernsey has allowed this company to lock up the fund to withdrawals for four years yet the managers and directors still draw their highly inflated fees of around £15 million pr year. So maybe Landsbanki Guernsey depositors on reflection should be celebrating, I think not ! Be warned that it is foolish to entrust any of your money no matter how you invest it into anything to do with Guernsey, its just not safe to do so.
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Outline argument for the setting up of a fully independent public enquiry into the placing into administration of landsbanki Guernsey Ltd.
Made on behalf of the Landsbanki Guernsey Depositors Group. The report was put together by Matthew Dorman.
Submitted to the States of Guernsey Deputies for consideration on 7th October 2009
Below is just the introduction to the report and as Calpespain states above the main report can be found at:
http://www.landsbankiguernseyfiasco.net/Covering%20Report%20for%20public%20enquiry%2017Oct09.html
Introduction:
Landsbanki Guernsey Limited (LGL) collapsed primarily because it was prevented from accessing funds in its sister bank, Heritable UK (HB), following UK Government intervention by means of FSA and UK Treasury management of Heritable transfers in the days prior to Heritable Bank being placed under administration. Heritable was unable to access an established line of credit from its parent Landsbanki Islands HF (LIhf). Deprived of liquidity, LGL’s senior management were forced to apply to the Royal Court of Guernsey to place the bank into administration.
LGL transferred funds and assets to HB during Quarter 2, 2008 following agreement with the GFSC. The decision to transfer such a large percentage of its asset and funds base to HB and the management of funds transferred to one financial entity raise major issues about the risk management skills of LGL’s management and the role of the GFSC in not completing an internationally recognised level of due diligence prior to permitting the upstreaming of funds to HB.
The percentage of the funds transferred from LGL to HB was considerably in excess of international guidelines[1], which recommend that a minimum of 2 banks should be used. The percentage of funds transferred is also considerably higher than recommended guidelines laid out in the Banking Supervision (Bailiwick of Guernsey) Law 1994[2]. The actions of the GFSC in allowing LGL to continue with such a high level of its capital base in a sister company with a common Icelandic parent when there was ample evidence of the instability of the Icelandic Banking system must also be called into question.
[1] Basel Accord 2 and BIPRU
[2] Banking Supervision Law (Bailiwick of Guernsey) 1994: Section 24. (1) &(2)
Follow the link above to read the rest of the report.
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The other areas to consider in the performance of the GFSC are the recommendations of the UK Treasury Select Committee (TSC) hearings into the Icelandic banks collapse. these were critical of the GFSC and suggested strongly that the GFSC collaborate with the FSA in resolving the issues – what has been done to date?
Another salient point is one key finding of the TSC was that the savers in LG were largely normal savers with a low level of technical expertise in the terminology etc of the letters of comfort and risks associated with banking in Guernsey – so what has the GFSC done: slapped a further CYA disclaimer on its website telling all savers effectively CAVEAT EMPTOR and assuming they are skilled experienced bankers who have understood the risks – i.e. all is down to the saver. Surely a regulatory body should be there to serve those who place their faith in the body to ensure further banks don’t go bust not look at further ways to pass the buck? This i a mafraid seems to be endemic in the states official organs – be it the Chief minister avoiding the issue, the GFSC chief brandishing the patently discredited Promontory Report or the deputies themselves who have to date largely failed t ostand up and be counted in something which has directly affected their constituents. Shame on all of you!
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In March 2008 I was in Hong Kong when I read a report in The Week which suggested Landsbanki was in trouble. I went to the Landsbanki offices in Central and they told me that Landsbaki had just been voted Bank of The Year in America and showed me a newspaper reort to that effect. They called Guernsey Landsbanki and a man who claimed to be one of the senior staff told me that they were not in trouble and that my wife and my deposits were guaranteed by the Icelandic Bank ‘ no reason to worry’
I am a teacher of English not a banker. Foolishly, I believed that people are basically honest, not realising the true nature of that eveil beast, The Banker.
I thought that there were people taking care of that such as the GSFC. Another mistake: those guys were asleep at the wheel. Then I thought that we had a letter stating that Landsbanki Iceland would have our backs. Another mistake, it seems that ‘comfort letters’ had been rendered not legally binding by the Guernsey government who neglected to make us all aware of the fact.
Someone is to blame for this and John, when you say they were licensed by the Guernsey government, you are admitting that Guernsey must take responsibility.
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GFSC put your house in order. Not just in the future, correct your mistakes of the past. It is about time the DEPOSITORS of Landsbanki where returned their DEPOSITS in full.
What is the point in having a regulatory body if they do not regulate?
This has caused financial hardship for over 2000 people, all ordinary people who have worked and saved hard all their lives to have it taken away from them.
Some have lost homes because of this shambles.
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Ah, mon vieux, the GFSC, they got it planned, eh!
Up at Le Marchant House, they’ve got this here business recovery thingamy going. Well, you know, the only thing I’ve heard needs recovery is all this money from Landsbanki. I cant find any more in their long winded report – but perhaps there are some more going to happen, which is why they need a separate place to have enough room to get all this money in. Seems to me the sooner they get working on this first recovery, the easier it will be for them to deal with the others that come along, ’cause that will know by then how to do it properly. Cheree.
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The Irish have taken on board the findings from the Icelandic report which amongst others found
‘key individuals at government level and in the financial regulation sector were grossly negligent in failing to prevent the bank collapse.’
Does that sound familiar with the GFSC and States? At least the Icelandic authorities have addressed their failings with a public inquiry when will the States and GFSC act in a similarily mature manner and follow suit. This is an international problem which needs a cohesive response not parish politics.
I for one have taken all funds out of Guernsey, the knee jerk widely and politically touted ‘ compensation scheme ‘ would leave me out of pocket and until I see better leadership and regulatory responsibility I would rather place my savings in a jurisdiction which has recognised its failings and has clearly addressed them in a manner designed to give confidence to savers. The GFSC approach to date – including the compensation scheme is not clear and enquiries I made to the GFSC seeking clarification of the mechanism of the compensation plan were vague and i was advised to speak with a lawyer. A similar response from the compensation scheme management committee. If those who designed the scheme and those who are paid to manage it cannot answer simple questions what hope is there for any saver?
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I thought that as the 17 page report submitted to the Chief minister and policy Council in October 2009 had been mentioned above, it was only right that I should place the reply we received on record. I might add that it required a second letter to the Policy Council to extract even this short, inadequate reply.
POLICY COUNCIL
THE STATES OF GUERNSEY
17th December 2009
Dear Mr Dorman,
I write in connection with your letter and enclosures of 14 October 2009, in which, on behalf of the Landsbanki Guernsey Depositors Action Group (LGDAG), you set out an outline argument for “a full Public inquiry into the failure of Landsbanki Guernsey”.
After careful consideration of your letter and outline, and having taken independent advice on this matter, the Policy Council is of the opinion that there are insufficient grounds to hold a public inquiry into this matter. The Council considers that the Promontory Group’s independent and definitive inquiry, which is already in the public domain, sufficiently addresses this matter.
Yours sincerely
Hand written signature
LS Trott
Chief Minister
It must be noted that the GFSC, as stated by the the Chief Minister, is an independent body and Guernsey Government has no influence upon it.
Surely then, a truly independent report into the circumstances preceeding Landsbanki Guernsey’s Administration and how Government handled the situation following the Administration, should be instigated by the Guernsey Government as an independent Public inquiry.
The promontory inquiry cannot be called independent under any circumstances, but its conclusions were a convienent back for the Guernsey Government to ride on.
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Of course the scrutiny of the Islands finance industry should be increased and in particular the role of the GFSC, and anybody who has money deposited in Guernsey should be warned that the Island governance is not capable of being a suitable guardian of funds which unsophisticated depositors such as myself placed in your trust in a Guernsey bank. The misleading information and lack of oversight after the takeover of Cheshire Guernsey has caused me, through the failure of Landsbanki Guernsey, loss and hardship.That the Leadership of the Island and the GFSC continue to avoid an INDEPENDENT inquiry speaks for itself. It should be particularly embarrassing to all deputies and anyone in leadership in the finance industry that the Chief Minister continues to avoid meeting with the Landsbanki depositors. I hope that the rest of the world is noticing that this small Island is not capable of regulating finance for the safety of depositors.
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Looking at the latest annual report of the FSA, the chief executive is somewhat revealing in his statement:….
“Historically, the FSA’s approach to conduct supervision was essentially reactive……This resulted in an inability to spot and prevent major risks from crystallising. Essentially, our focus had been too late in the product lifecycle to ensure that we identified potential issues early enough to prevent consumer detriment occurring”.
In the context of the recommendations of the UK Treasury Select Committee (TSC) hearings into the Icelandic banks collapse, these suggested strongly that the GFSC collaborate with the FSA in resolving the issues.
It is time the both the GFSC AND the Chief Minister publicly state how this is being arranged and when and how the restitution of savers funds is to be achieved without loss to those concerned.
Reference is constantly made to an expected recovery for depositors of somewhere around 90% of deposits, but so often overlooked is that, now almost 2 years since the event, considerable interest has been lost in addition – a figure which continues to grow -which may now increase every savers loss by 50%.
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I strongly suggest that the above applies equally well to the GFSC, in that by the time they had spotted the full problem with Iceland and landsbanki Guernsey, that problem had already crystallised and their actions were essentially reactive, in upstreaming funds to Heritable, a wholly owned subsidery of Landsbanki Islands hf and in doing so,as said in the FSA statement,failed to prevent consumer detriment occurring. Depositors lost approx. £117 million.
This is where a fully independent Select Committee type inquiry through cross examination under oath and forced production of documents would be able to produce an open transparent result to all the questions that are in issue.
Much as I hate to have to say it, I believe that the Guernsey Government and the GFSC have been dishonest in failing to answer the many questions placed beform them in an open transparent manner. This can only lead to the belief that they have something to hide over the way they dealt with the Landsbanki Guernsey issue. Of that we have no doubt.
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