Landsbanki depositors lose Iceland priority bid
Thursday 3rd November 2011, 1:01PM GMT.
Landsbanki Guernsey collapsed in October 2008.
LIQUIDATORS for Landsbanki Guernsey have been unsuccessful in a legal challenge attempting to give its depositors priority status for any payouts coming from Iceland.
The joint liquidators from Deloitte had taken the case to Iceland’s Supreme Court, arguing against the decision by the winding up board of Landsbanki Islands HF [head office] to award wholesale depositors priority. Landsbanki Guernsey savers were classified as unsecured creditors.
‘The joint liquidators regret to announce that the Supreme Court of Iceland has ruled that LGL (and other plaintiffs seeking to reduce the priority claimants) have been unsuccessful in their appeals,’ a statement on Deloitte’s website said.
The court also ruled that no legal fees would be awarded to the Landsbanki Guernsey liquidators’ claim.
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It is now over three years since Landsbanki Guernsey collapsed and much water has passed under the bridge since then as depositors have struggled to get their savings back from this Guernsey registered bank.
The administrators Deloitte’s have so far managed to get 85% back for the depositors and are looking to get an eventual 91% for them.
Despite the efforts of the depositors and the administrators one has to question just what is it that both the GFSC and the States of Guernsey have achieved for the depositors other than point the finger in the direction of the administrators when confronted on vital issues.
The depositors, many of whom are Guernsey residents will not only be looking for responsible action from the Guernsey government when the eventual shortfall is established, but will also be seeking ‘transparency’ in just how well did Guernsey deal with this situation and what is it that they can do better, to prevent a further occurance.
Quite a number of depositors have died and will never see the eventual return of their savings, the most recent one a 94 year old Guernseyman.
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I would much prefer to have Deloittes on the continuing job, than have the States of Guernsey involved.
There will I suspect be no ‘transparency’ at the end of day, or a positive move towards compensation.
In brief, the States of Guernsey fell flat on its face some years ago, when it invested heavily in the Chemical Bank Corporation, an example of this is that under the auspices of ex Rep Geoff Norman, the Electricity Board chucked in 3 million pounds of our money; I have no idea of whether these funds were recouped into our Exchequor but I do know that several private individuals ‘put in the know’, invested heavily and passed on this ‘heaven sent’ opportunity to their relatives. My understanding is that they all lost out considerably.
Moral of the story is, leave the expertise to the experts.
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The financial muscle of the local authorities has enabled them to afford
very expensive legal representation whereas ordinary depositors in
Landsbanki Guernsey, where the sums of money involved are tiny in comparison
to those claimed by the LAs, have not been entitled to the same
representation. So their claims remain ranked as ordinary creditors and the
takings commensurately reduced following the success of the LAs action. If
one group of people placing a deposit in a bank are given preferential
treatment from another merely because that first group have the financial
clout to enforce preferred treatment then it is indeed a very sad day for
justice. Of course the lawyers in this case will only be representing their
clients but surely they should also be pursuing a truth that all depositors
who placed money in these Icelandic banks should receive equal treatment. It
is not clear to me why the LAs should have preferential treatment, other
than that it was not fair for Icelandic depositors to receive preferential
treatment over foreign depositors. It is sad that truth and fairness should
not be apparent to all interested parties and this should not require expensive legal
actions. Sorry for being naive! Meanwhile I concur that Guernsey’s
authorities have lacked the moral courage to fight on behalf of Depositors
who have been treated more as shareholders in a bankrupt company. A review
of the Guernsey Financial Services Commission paid for by the States of
Guernsey (which also funds the commission) found no wrongdoing despite the
fact that the Parental Guarantee of Landsbanki hf of its Guernsey
Subsidiaries deposits was never actually signed and accordingly Landsbanki
hf are exempt from this proposed support. Would you put your money into a
jurisdiction where there is such a moral vacuum? “
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“Depositors who have been treated more as shareholders in a bankrupt company” No, it’s a step up from that. They have been treated like creditors of a bankrupt company – which is exactly what they are.
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So, just what has Guernsey’s Government done to politically assist the Landsbanki Guernsey Depositors, since the Chief Minister was embarrassed into going to Iceland in August 2009. That visit was only made because the LGDAG had shown that the UK treasury, who, we had been informed by the CM were representing Guernsey depositors in Iceland, were actually acting in their own interests to the detriment of Guernsey and the Landsbanki Depositors.
We had been assured by the CM, that,UK Treasury had said that we would receive “fair and equal “ treatment.
Since that visit, all approaches to Guernsey’s Government asking what political assistance was taking place have been met with silence. Whilst other governments have been working hard to ensure the return of funds from Iceland to depositors, Guernsey’s Government does nothing. The UK and Dutch Governments had already reimbursed their depositors.
Somehow the UK, acting in their own interests again, have managed to gain priority creditor status for all their local authorities, whilst Landsbanki Guernsey depositors ,who have been left as ordinary creditors, will receive nothing. (Because there will be no money left after paying priority creditors)
How has Guernsey Government been liaising with UK Treasury to ensure that they have also been representing the interests of the Landsbanki Guernsey Depositors. I suspect they have done nothing since August 2009.
1600 Depositors lost around £120 Million initially in a Guernsey regulated bank, whose regulator failed in his due diligence. They are still owed around £20+ million three years down the road and Guernsey’s Government are deafening in their silence.
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What a joke. British taxpayers are expected to contribute another £29b to prop up Greece, Portugal, Ireland and Spain yet cannot find a fraction of that amount to repay LG depositors. I hope that Guernsey suffers and collapses with no assistance from anywhere.
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Sian S – you seem confused. First you are complaining that the UK taxpayers cannot find it in the hearts (or pockets) to look after LG depositors, then you curse Guernsey. You do realise that the former have nothing to do with the latter, don’t you?
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Totally let down by lack of States representation.The States have plenty to shout about when things go right for them or the island but very quiet when things go opposite direction.
Sometimes wonder if guernsey is stll a good place to live?
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The real issue for everyone who has brushed aside the problems of Landsbanki depositors is that it could happen again and to anyone. Most of the large retail banks in Guernsey are NOT branches of their parents they are legally separate Guernsey companies and their ‘parents’ in the UK, Europe or elsewhere are under no legal obligation at all to bail them out if the Guernsey operation goes wrong. Yes, on the back of Landsbanki Guernsey Limited ( falsely “guaranteed” by its Icelandic parent)there is now a Guernsey depositors protection scheme. That scheme however is wholly inadequate to cover depositors if even one of the Guernsey banks (e.g, HSBC/Co-op/Natwest etc) went down.
Therefore the Guernsey government could do three things with immediate effect:
1. It could state plainly what it DID do to persuade the UK government to include Guernsey in their negotiaions with Iceland and if NOTHING then say so
2.State plainly what they WILL do to address the fact that the UK fought and won the right for UK depositors to get their money back, but not private depositors in Guernsey
3.Negotiate with the UK Government and the British Bankers association to establish policy clearance allowing Guernsey residents to open accounts with the UK ‘parents’ of local banks, thereby ensuring that local depositors have the comfort of the fully funded UK depositors protection scheme up to £85,000 per deposit. ( As anyone who has tried to do set up such accounts will know, most UK retail banks will not permit it.)
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D. Collins – your thinking is flawed. LG did not fail through its own operations, it failed because its parent went bust, after sending too much money to its parent. If you want to assess the strength of Guernsey banks you need to look at the strength of the parent. Guernsey banks do not undertake the risky “gambling”-style activities which have attracted so much criticism and so the changes of failure being cause from within Guernsey are very small. Of the banks that we have left, I cannot see any where the parent company would fail or would be allowed to fail (despite politicians’ and Bob Diamond’s soundbites to the contrary)
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Terry… yes indeed, LG did upstream too much to it’s parent, but who is resposible for making sure that Guernsey regulated banks are indeed regulated and not permitted to do crazy things like that?
I’m frankly amazed that you have the cheek to come on here and try to defend your position. When Landsbanki took over the Cheshire, they sent out letters to all depositors telling them that the assets of LGL would be “guaranteed” by the parent bank in the event of LGL being unable to meet its liabilities. Do you not feel the slightest bit ashamed knowing that this letter was:
1. Never a guarantee, it was merely a “letter of comfort”
2. It was never legally enforcable anyway
3. The document was never even signed by the parent bank!
All this was done under the noses of the Guernsey “regulator”.
Talk about a cover up!
I’ve given up and moved on and rarely get involved with the Landsbanki fiasco these days. However, when further term deposits mature, the money will absolutely not be staying in Guernsey. I will never commit another penny to the island and until my dying day, i’ll be advising others to do the same!
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J Green – oh, I’m sorry, I thought this was a discussion forum. As for having the “cheek” to “defend my position”, you have no idea what my position is, and I am not defending anything.
I am merely pointing out to D. Collins that suggestions that it could happen again are wide of the mark. He was basing this on the idea that the UK parents would not help the Guernsey subs. I was merely pointing out that it was the parent which caused the LBG problem, not the other way around, and also that the current banks are also unlikely to fail due to homegrown liabilities.
Did LBG upstream too much cash? Yes. But that is not what D. Collins was saying.
And as for your comments about the parent guarantee, in my view the GFSC did not do a great job on that point but it made no difference – the parent had no money with which to honour the guarantee even if it had been binding.
You final comments about not depositing in Guernsey unfortunately show that you have reached the wrong conclusion from this sorry episode – it is the strength of the financial institution which matters, not the jurisdiction. If Landsbanki had been stable, LBG would still be here.
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Terry Langlois – You state ‘LG did not fail through its own operations, it failed because its parent went bust, after sending too much money to its parent.’
Exactly, and isn’t that exactly what a Financial Regulator is there to prevent. You have just confirmed how useless the Guernsey authorities are!
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The whole thing is a stitch up between the Dutch, the UK and the icelanders and at best we can only think that Mr Trott was naive when he took the word of HM treasury that they would consider the Landsbanki Guernsey savers equally with the $4B that the UK wanted to recover.
As a result of the stitch up 64 plaintiffs in the case, consisting of bond holders, inter-company creditors (such as LG), and other non-priority claimants, and included such titans as Deutsche Bank, Nomura, Societe Generale, and Royal Bank of Scotland have been left to fend for themselves.
The total non-priority claims against Landsbanki Iceland stand at around £12bn, while the priority ones (which are almost exclusively UK & Dutch govts and LGAs) total approx. £7bn, and there’s only expected to be enough recoveries to repay the priority ones at an estimated 98%, leaving nothing for the rest.
So, £12bn of claims will get nothing in order for £7bn of claims to be repaid, more or less, in full.
Where is the fairness in this Mr Trott?
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I assume it wil lbe about time for the States to Trot(sic!) out the Hoary Foot Report showing that the GFSC was blameless.
how does that co-incide with the Icelandic Supreme court ruling that the (unsigned) guarantee letter is worthless?
How can the GFSC state it was a functioning regulatory body when it allowed Landsbanki Guernsey to transfer more than 25% of its assets to sister / parent banks even though these banks had no ringfenced funds to repay in the event of a collaps and even though the BASLE convention recommends that no more than 10% should be transferred for exactly the reason that a default in one could bring down the other – exactly what happened in Guernsey.
Why not a full public enquiry? If as the GFSC and the Chief Minister claim, there is nothing to hide – why 3 years later are they still hiding?
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D. Collins you are right. £100M maximum within any 5 year period depositors compensation fund – wouldnt even have covered Landsbanki, a small fish in the Island let alone one of the majors.
And how is it to be executed in the event of another failure, looming large again as the extent of bnk exposure to Greek debt is gradually coming to light? Who knows – not the GFSC who will suggest you take legal advice to understand the mechanism of the compensation scheme; nor the management team for the compensation scheme.
Another quasi governmental set up to provide jobs for the boys. Has Guernsey learned anything from the LG failure – no! But those who govern the country and who regulate the financial sector can practice ostrich management again ( head in sand therefore exposing thinking parts!) and hope that it all goes away at least until the next elections.
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So Mr Trott, I assume you are still working tirelessly to support the Landsbanki Guernsey depositors?
Three years on and you must be exhausted!
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I saw the not so esteemed Treasury Minister at the Guernsey Society of Chartered and Certified Accountants dinner last night.
During the guest speaker Andrew Neal’s hugely negative (and rightly so) speech on the current economic turmoil, I noticed the Treasury Minister had trouble keeping awake.
Key theme in Guernsey – there is ZERO accountability. We do have an active and broadly quite competent regulator in the form of the GFSC however the Landsbanki crisis showed that the States of Guernsey cannot live in a bubble and ignore the need to act.
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If I had spent years (and countless sums of taxpayers money) globe trotting and glad handing statesmen and politicians around the world, I would expect to be able to demonstrate some achievements. If none were obvious, I would start to consider whether I had appeared merely trivial and ridiculous to those I had met and hoped to impress.
If I were able to ignore the fact that 800 local Landsbanki depositors were also taxpayers (and voters), and disregard the local workers in the fulfilment industry who may be affected by the unquestioned UK decision to change the LVCR.
If I were able to be pleased that Guernsey now has a 12 mile fishing limit (the same as Jersey) and forget the secret compensation that had been paid out.
If I could do all these things and more, I would be a politician my son (apologies to Rudyard Kipling).
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Dear Mr Trott
What have you forgot?
Landsbanki Savers
That is what
We’ll never go away
And always have our say
Landsbanki Savers
Hip Hip Hooray.
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March 2009
The Chief Minister at the Treasury Select Committee on the banking crisis and landsbanki Guernsey.
Mr Trott reply:” Her Majesty’s Government has been able to get an undertaking that all creditors regarding Landsbanki (Guernsey) and indeed the whole group, will be treated fairly and equally and that we consider is a very positive statement.”
Perhaps now is the time to take this up with whichever department gave that undertaking. After all it is all on record.
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Ode to a Politician
He’s full of Huff and full of puff,
But doesn’t really know his stuff
Transparency is what he preaches
Not is what we hear in Speeches
Misleading statements more his style
Pompous with a smirk or smile
He promised treatment equal and fair
LG soon found it’s all hot air
Now silence for the past two years
Political failure will soon bring tears
If voters see through this shallow veil
Blank papers are all that will entail.
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It is at times hard to believe that the States of Guernsey and CM Trott in particular have acted or rather, not acted, in the way they have since the collapse of LG.
Many of us have moved on having given up on this sad business and any hope of help from the Island’s government.
I hope the good honest people of Guernsey will give your chief minister just and due treatment at the ballot box and then in the job centre….
He should be aware that we will never forget his claims and hollow pronouncements. Our non-beief in him is proving well founded.
Our family removed all our savings from the island long ago and will neither visit nor buy any produce knowingly coming from Guernsey.
We small investors have little clout as has been proved, but we can continue to discourage others from leaving their savings on the island.
I fear the really sad thing is that your state members will read all these comments and not give a **** !
Thank-you Deloittes !
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That is indeed the power of money. If every man has his price how much is a regulator worth?
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Another guernsey shambles
Lets rid the island of this cancer ( finance)
RIP THE OLD guernsey
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