Article dated 27th March 2010
GUERNSEY GFSC ALLOWS BANK TO OPERATE FOR TWO YEARS WITH A WORTHLESS GUARANTEE
DEPOSITORS IN LANDSBANKI GUERNSEY INITIALLY LOST £117 MILLION
Chief Minister comes up with lame excuse which doesn’t hold water
It now appears that Landsbanki Guernsey operated, from the time it purchased the Cheshire in 2006 until it went into administration on the 7th October 2008, with a worthless guarantee. That guarantee was used to give security to its existing customers and help convince new customers into depositing money. The Guernsey Financial Services Commission, then under Peter Neville, who was responsible for the regulation of the bank appears to have allowed Landsbanki to purchase the Cheshire and use this guarantee in the form of an undertaking on the majority of Landsbanki Guernsey’s literature without question. A full copy of the guarantee, that is made up of six pages, with a guarantee fee letter, is not even signed by the Chief Executive Officers of Landsbanki Islands hf, the mother Bank in Iceland and yet the undertaking, which stems from the guarantee, used on the majority of Landsbanki Guernsey’s literature, including Guernsey Press adverts had been allowed right up to administration.
Depositors are extremely angry, quite understandably, now that the winding up board in Iceland has ruled;
The winding up board has furthermore decided to reject the claim generally in every respect as it has not been sufficiently shown that Landsbanki Islands hf. Has given, or did in fact give, any kind of guarantee regarding the liabilities of landsbanki Guernsey Ltd.
The GFSC would only release a written statement to Channel Television on the 17th February 2010 and refused to answer further questions, that statement was:
" The GFSC has never required parental guarantees and pointed out the limitations of such undertakings in its August 2008 consultation paper entitled, ' Consultation on Parental Upstreaming and the Introduction of Depositor Protection and Ombudsman Schemes '. You should refer to Paragraph 4.2 on page 16 of that document which is still on the Commission's website. The GFSC does require subsidiary banks to have letters of comfort in place but it has always recognised that these are not legally binding and made that point plainly in the same consultation paper. "
Bullet points on the statement:
Guernsey’s Chief Minister Lyndon Trott, appears at present to be producing excuses on behalf of the GFSC by misquoting their press release as well as misunderstanding it.
Deputy Trott told the Guernsey press, that the GFSC had advised the Policy Council it had never required parental guarantees. The question must be, why was the bank allowed to operate for two years with an undertaking on all its paperwork right under the GFSC’s nose, when that undertaking (and the guarantee) were apparently worthless and why weren’t customers informed?
Deputy Trott went on, that, The GFSC does require subsidiary banks to have letters of Comfort in place, but it has always been recognised that these are not legally binding and made that point in the same consultation paper. Recognised by who? Certainly not the depositors. That Consultation paper was 2 years after Landsbanki Guernsey had bought Cheshire (Cheshire was bought August 2006, consultation paper August 2008), the undertaking (which stemmed from the guarantee) appeared on the majority of its correspondence during those two years. Also what use is a Letter of Comfort if in fact it has no legal validity. It just becomes a confidence trick to entice depositors.
Deputy Trott went on to say, that they (States or GFSC ?) had no legal responsibility for the recovery of monies on behalf of the Landsbanki Guernsey depositors. Perhaps they have, perhaps they haven’t, that will be another story at a later time, but they have a legal responsibility to ensure that Banks are operated correctly in Guernsey and Landsbanki Guernsey was operating with an advertised undertaking, which had no legal standing and in itself was a false enticement to lure customers into its bank. Therefore one must question as to whether there was negligence and bad faith on the part of the GFSC.
Deputy Trott went onto say that, it was clearly incorrect for the LGDAG to question the validity of the Chief Minister’s recent assurances that Landsbanki Guernsey Depositors would be treated fairly by the winding up board as claimed by the LGDAG. The following is his statement to the Guernsey press on the 12 August 2009 on return from Iceland. We dealt with issues of fairness and equality in a robust but diplomatic Way. All meetings were cordial and constructive, with understanding for the position of Guernsey as an Island jurisdiction, we received assurances that full regard would be given to all points raised. It appears a perfectly reasonable thing for the depositors to question what appears to have been a total failure.
But he also sought, so we were told by him, and received assurances from the UK Treasury:
15th October 2008 Chief Minister Trott:The UK treasury will be making representations to Iceland on behalf of Guernsey's States…. The head of the island's financial services regulator and the States Chief Exec have been in talks with UK officials this week. The UK treasury will represent Guernsey as well as the Isle of Man, in negotiations with the Icelandic government.
Wednesday 28th January 2009, at the Guernsey States Meeting in answer to a Question by Deputy Matthews, Chief Minister Lyndon Trott replied, “ One specific outcome of our dialogue has been clarification of her Majesty’s Treasury’s support and action in assuring that the Icelandic Authorities treat all creditors equally. This has been confirmed by the Economic Secretary to the Treasury in response to a Parliamentary question of the 23rd January 2009.”
A further material outcome is that her Majesty’s Treasury is assuring that the Icelandic authorities are fully aware of the call of the Guernsey Financial Services Commission for Landsbanki Islands hf to honour its public undertaking for support for its Guernsey subsidiary. (which apparently has no legal standing).
Well the statements above go by the board if you take the recent statements made by Alan Bell, Treasury Minister for the Isle of Man in answer to Questions at a Select Committee hearing on Kaupthing, Singer & Friedlander (a parallel situation to Landsbanki Guernsey) on relations with UK Treasury and how much assistance they afforded to the Isla of Man.
“How are relations with the MOJ” inquired Mr Watterson. (MOJ =Ministry of Justice)
“Very good” replied Mr Bell.
“And the relations between IOM Treasury and UK Treasury”; to which Mr Bell responded: “Interesting”.
Mr Watterson wondered if Mr Bell would like to expand on his comment; to which Mr Bell replied: “Not on the record”.
When pressed further Mr Bell appeared almost as an apologist for the UK Treasury, stating they had been protecting the UK interests and if there had been any “secondary interests” they had been “trampled on”; and effectively became “collateral damage”.
Mr Watterson put to Mr Bell the UK Treasury had said they would represent the IOM’s interests in negotiations with Iceland and wondered if he was satisfied with the “voracity of their representation”.
Mr Bell said it was made clear under the terms of the constitutional relationship the IOM couldn’t negotiate directly with Iceland, so although, ultimately, the UK Treasury did agree to make representations he didn’t sense any urgency on their part. In his view the UK Treasury had been very robust in protecting the interests of the UK but not the IOM’s. In fact he confirmed, in reply to a follow up question, he had seen no evidence at all of the IOM’s interests being represented.
Exploring the issue of direct negations further, Mr Bell said he thought the UK would have washed their hands of the IOM if they had tried.
Mr Watterson put it to Mr Bell the reality is the UK washed its hands of us and kept the IOM quiet at the same time.
“You could say that” came back Mr Bell.
I think the above states quite clearly where the UK Treasury stood and gives the Landsbanki Guernsey Depositors Action Group every right to question Guernsey’s Chief Minister, as they believe that Guernsey was being treated in the same manner as the Isle of Man and that was the reason why the Guernsey Chief Minister could never answer questions as to what was happening, because he wasn't being told. The UK Treasury was doing little or nothing for Guernsey, but looking after themselves and our Chief Minister didn’t know, he, like the Isle of Man, was collateral damage. The evidence is in the statements by Alan Bell above and the fact that the Chief Minister has failed to achieve anything for the landsbanki Guernsey depositors.
Eighteen months down the line, the Chief Minister is still doing nothing and has failed right from the start as did the GFSC. Guernsey failed its depositors, the only jurisdiction in the world to totally fail its depositors and treat them like dirt, whilst at the same time trying to give the rest of the world the impression it was doing all it could to help.