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Written response from Policy on Deputy DeLisle's question
on the depositor compensation scheme
13th December 2011
The response could almost win this prize on gobbledegook, there is so much flannel in it without answering the question in plain language for the average depositor.
The Question was:
How far will Guernsey’s 100 million [sic] Depositor Protection Scheme expect to provide
protection over a 5 year period given the potential loss of £117 million in one bank namely
As an average depositor , would you understand the answer?
"The Guernsey Banking Deposit Compensation Scheme is only designed to protect retail customers in respect of the first £50,000 of deposits placed by each customer. As such the total maximum cover per bank is significantly less than the total of deposits on its balance sheet both because, with some minor exceptions, non-retail deposits are not covered and because of the limit on compensation. In the case of a bank of Landsbanki’s size it is thus most unlikely that the £100 million Scheme cap would be relevant. The Board of the Scheme is prohibited by law from disclosing details in respect of any one bank, but has indicated that for the five banks whose retail deposit base is closest in size to the indicated figure for Landsbanki’s total deposit base, the maximum amount of compensation payable would be in the region of 19% of total retail deposits; no bank in this group is affected by the £100 million cap. The Board has no information which would enable it to establish how much of Landsbanki’s deposits would have been classified as retail deposits; the actual maximum pay-out for a bank of its size might in practice be substantially smaller as a percentage of the total deposit base. "
Landsbanki was only quoted as an example, but there are retail banks in Guernsey with between £200 and £400 million in retail deposits, and the first £50,000 is in fact up to £50,000 and that depends on the total of the retail deposits in the bank and how they are made up.
The wool really has been pulled over the eyes of Guernsey's small depositors regarding this depositor Compensation scheme.
Read the full answer to Deputy DeLisle's question here
Depositors can only expect to recover between 85% and 91% of their deposits
over a number of years
without Guernsey Government intervention.
So far they have ignored the Depositors.
Its time for select committee
type inquiry into the handling of the whole affair to ascertain the truth
Questions linger about depositor compensation
Guernsey press letters page 13th January 2012
ONE of the benefits of listening to the States of Deliberation meeting live on the local BBC radio station is the ability to be able to hear word for word, politicians’ answers to written questions asked of them by fellow politicians. What is so compelling about this situation is that whatever the responses are, there is no denying the wording used by the politicians, as all are recorded verbatim. I was greatly interested, as an ex-Landsbanki depositor, in the responses of the chief minister, Lyndon Trot, to questions asked by Deputy De Lisle regarding the Guernsey depositor compensation scheme in a recent States meeting. Quote from the chief minister, Lyndon Trott,
“the most important protection a depositor can have is to ensure that the bank with whom they deposit does not fail. In a banking crisis the depositor compensation scheme can only ever be the last line of defence.”
Well, thank you very much, chief minister — if you had told me and 1,599 other depositors that some three- and-a-half years ago, Landsbanki Guernsey would never have failed as the Guernsey Financial Services Commission, as regulator, would never have allowed it to happen.
But don’t worry depositors, we are assured by our chief minister that everything is now In hand, as he went on to say: ‘Since the events of 2008, the Guernsey Financial Services Commission have continued to work diligently to understand, manage and reduce the risk in Guernsey banking sector.
As a result, I am confident that all Guernsey banks are well capitalised, well managed and sound.’ Well, there you are, folks. We really are in good shape and dare I say it, why, if we are in such good fettle, do we really need a depositors’ compensation scheme? But, if we do already have a Guernsey DCS, let’s take Deputy Trot’s advice and open up numerous bank accounts in Guernsey, Quote from the chief minister: ‘They can simply place their deposits with two separate banks, thus double the amount of protection they receive. By placing their deposits with a number of different banks, depositors can double, triple, or quadruple their protection if they so choose.’
Well, that’s my retail banking sorted, no more stress — the family will be pleased.
Sorry Deputy Trott, I need to come back to you. I had this awful nightmare last night that my Guernsey bank had gone belly up. Please can you explain how the depositor compensation scheme works as, to be quite honest, I don’t really understand a lot of it?
What does up to £50,000 mean?
What does a limit of £lOOm in any five years mean?
What does ‘the scheme aims to pay out within three months of the bank’s failure’ mean?
Where is the money coming from, as the States cancelled the prepaid scheme?
I am now thinking of a lot more questions I need to ask.
I assume your reply wifi be:
‘Get in contact with the Guernsey banking deposit compensation scheme — they will answer all your questions.’
Thanks, Lyndon. I knew you would point me In the right direction. Oh, but they only point me towards an advocate for advice. So, as an old age pensioner, where do I go from here?
Name and address withheld.
Editor’s footnote: The Policy Council declined to comment on this occasion.
"The most important protection that a depositor can have is to ensure that the bank with whom they deposit does not fail."
Quote of the year: Guernsey Chief Minister, Lyndon Trott in answer to a question in the States of Guernsey, 30 Nov 2010.
Deputy Trott was responding a question put to him by Deputy David DeLisle on the inadequate Guernsey Depositors Compensation Scheme and started his reply with the above comment. He obviously has a crystal ball and perhaps he should let us all in on the secret.
There was another area of his reply rather open to question and misleading to anyone listening, it would be interesting to know who prepared his answers for him:
"Of course it is relatively easy for depositors to achieve protection above fifty thousand pounds or one hundred thousand pounds for a joint account. They can simply place their deposits with two separate banks, thus double the amount of protection they receive, by placing their deposits with a number of different banks, depositors can double, triple or quadruple their protection if they so chose."
Yes technically you could, but the Guernsey DCS has a maximum ceiling of £100 million in any five years and covers up to £50,000 for a single depositor and up to £100,000 for a joint account and that depends on how much the bank losses are. Say a bank has deposits of over £200 million, then depending on the make-up of those deposits you could receive back only a part of that £50,000. The larger the capital amount of deposits in the bank the lower the final pay-out is likely to be. The following year a second bank goes down, but the £100 million was all used up on the first bank, as a depositor you will get nothing as you are still in the five year period.
The other worrying element of the scheme is that it is post funded, that is, it relies on the good will of the participating banks to pay up if a member goes down. Up until 2010 it was meant to have been prefunded, but no money had been paid in up until the time Commerce and Employment brought it back to the States to get them out of a mess (they had failed to carry out the States resolution from when the DCS had been passed) and somehow managed to get the States to change to a postfunded scheme.
Now Deputy DeLisle quite rightly questioned this by asking a supplemental on the £100 million cap on the fund:
"Supplementary on that sir , Can I ask the Chief Minister how far Guernsey’s one hundred million depositor protection scheme over a five year period will go, given the loss of one hundred and seventeen million in one bank, Landsbanki."
A totally common sense question when you consider the facts above, but the answer he got was deliberately insulting, "that is a ludicrous question to ask and expect a factual answer. " Of course the question isn't ludicrous and Deputy Trott, who obviously didn't know the answer, should have just said that he would find out.
I rather suspect that few members of the States fully understand the limitations of the Guernsey Scheme and just tend to go along with what they are told. In Fact On the 29th September 2010, the Chief Minister told the States in answer to questions by Deputy DeLisle: "
"experience of Brussels shows us that there is no certainty that the level of protection will be set at €100,000. Should the draft directive be approved it will then need to be transposed into domestic law in all EU member States, that process is likely to take some years, with the process usually taking between three and seven years depending on the nature of the particular proposal."
In fact at that time the FSA had already announced that it would come in on the 31st December 2010, and it did come in on that date, so even he doesn't know what he's talking about at times.
The full transcript of the question and answer (30 November 2011) on the DCS, can be seen here
The coverage by the UK & European scheme can be seen here
Bring your Money Home! Eurozone crisis raises fears over cash held outside UK safety net
This is money 30th Oct 2011
The safety of their money is once more weighing heavily on the minds of savers as the world’s banking system struggles to accommodate the write-offs announced in last week’s do-or-die eurozone deal.
Europe’s banks were forced to swallow £100billion of Greek losses as part of the fraught negotiations in Brussels. Many must now raise new capital.
Offshore Depositor Schemes do not give adequate cover.
There are also dangers closer to home. ‘Offshore’ savings providers, typically divisions of mainstream UK firms based in the Channel Islands or the Isle of Man, are not covered by Britain’s Financial Services Compensation Scheme. Instead they must rely on local schemes that tend to be more complex, less generous and, possibly, less reliable.
Looking shaky: Savers are being told to play it safe and stick to banks covered by the UK compensation scheme as Greece, Italy and others totter
The Jersey and Guernsey schemes, for example, cover deposits up to £50,000. But a complex overall ‘cap’ of £100 million, which cannot be exceeded in any five-year period, applies on top of a saver’s £50,000 limit. The Isle of Man applies a higher, £200 million cap. Theoretically, these caps could reduce savers’ compensation to nothing.
On the £50,000 limit, a spokesman for the Jersey scheme says: ‘We will move to a higher limit if Guernsey and the Isle of Man move, but we do not believe in differing standards between finance centres.’
Request to DCS Board as to when their 2nd Annual Report being produced
11th August 2011
Dear DCS Board,
I wonder if you could inform me when the 2nd Annual Report for the DCS is likely to be produced. The first report although undated on you site, I believe came out in July 2010, so i had anticipated a further one in July 2011.
With the scheme changing last year from a pre-funded scheme to a post-funded scheme it will be interesting to see how this is explained away in the Annual report, when it eventually comes out. Since then of course the UK and Europe have upgraded their schemes whilst Guernsey has remained stagnant.
Guernsey has also been losing its retail banks, the Yorkshire being the latest (August 2011) to declare that it is leaving. This places a higher onus on the remaining banks should another default to honour their committment to the DCS scheme.
20th August 2011
Guernsey Banking Deposit Compensation Scheme
Annual Reports and accounts
The report which can now be found on their website shows no surprises, in fact it is rather lacking in detail and explaination as to why the scheme went from prefunded to post funded, which was against the origonil States resolution from Nov 2008, but that may have shown up Commerce and Employment, if they had expanded in the Annual Report, who had difficulty answering questions at the States meeting of November 2010, when the scheme voted to go post funded.
The conclusion in the Annual Report states that the Board wishes to ensure that the Guernsey Scheme matches high international standards.
They have a long way to go before they even approach the current scheme in the UK and Europe and it will be interesting to see how , over the coming year they intend to meet those standards, with a declining retail banking sector in Guernsey.
Reading the report and the legislation, it is still not entirely clear how the banks will be forced to pay up to 100 million within three months, should another bank go down. It all appears, on the face of it, to be on a trust basis that they will pay up.
DCS IS AS CLEAR AS MUD
Email sent to all Guernsey Deputies
31st January 2011
An E-mail has been sent to all deputies requesting that questions be asked of Guernsey's Commerce and Employment as regards the updating of retail banking Depositors on the latest changes made by the States of Guernsey at their 2010 November sitting.
At that sitting the following changes were made to the scheme:
1) The Scheme was changed from a prefunded to post funded.
2) Charities were to be included in the scheme.
3)They also expanded the ability of the Deposit Compensation Scheme Board (the DCS Board) and the Guernsey Financial Services Commission to share information.
In the current legislation there appears to be only a moral obligation for the banks to pay up should another bank go down under the post funded scheme, no legal liability.
Perhaps they should also be informing the Guernsey retail depositor that compared to schemes now operating in Europe, the UK, Gibtalter & Leichenstein, who will now repay depositors €100,000 (£85,000) within seven days of a bank defaulting, Guernsey still only pays up to £50,000 depending on the make up of the deposits. You could receive a lot less. The scheme totally lacks transparency and a plain language explaination of its workings.
To date, 4th February 2011, only three Guernsey deputies had taken the trouble to respond to the E-Mail.
Article in the International Advisor
Read the Email sent to the Deputies on 31st January 2011
Email sent to Guernsey Deputies
Guernsey Press covers The e-mail to the Deputies
on 3rd February 2011.
Read the article and add your comments to the forum
Since the DCS was first introduced in November 2008 there has been a secrecy behing the workings and how they were progressing in the following two years. Many questions were asked by the Landsbanki Guernsey Depositors Action Group, but for the most part were blocked both by the DCS Board and Commerce and Employment. It was not until the States meeting of November 2010 that the Commerce and Employment Minister Carla McNulty Bauer was forced to admint that no payment had been made by the Banks into the prefunded scheme during the previous two years, creating a shortfall to the fund of about £4 M. It then became obvious that the main reason for now wanting to go post funded was to get Commerce and Employment ou of the fix they were in. No one has been taken to task on this issue.
DCS WEBSITE NOT UPDATED
The scheme changed to post funded after the States meeting of 29th September 2010, yet the DCS website still states it will be funded by the banks through annual charges. This appears unbelievably inefficient for supposedly professional people.
Guernsey DCS Website 25 January 2011.
About The Scheme
The key features of the Scheme are:
It came into force on 26 November 2008.
It covers all 'qualifying deposits' (mainly those from personal retail depositors, wherever they live).
In the event of the failure of a Licensed Bank after the effective date, it provides compensation of up to £50,000 per qualifying deposit in respect of that bank.
It aims to pay compensation within three months of a bank failure.
It is operated by an independent statutory Board which is separate from both the Guernsey Financial Services Commission and the States of Guernsey.
The maximum total amount of compensaton is capped at £100 million in any 5 year period.
If claims exceed this cap, compensation will be reduced pro rata. The cap also means that compensation in respect of any one bank cannot exceed £100 million.
It will be paid for by the Licensed Banks through annual charges and special charges in the event of a bank failure.
IMF, International Monetary Fund makes comment on Guernsey's Depositor Compensation Scheme
16th December 2010
53. The establishment of the DCS represents a significant change in the relationship between banks, their depositors, and the authorities. The scheme covers deposits of individual depositors, wherever located, up to a maximum of £5O,000 per person. It is not funded, though, although it has government-guaranteed liquidity back-up, but aims to pay compensation within three months of a bank failure. The maximum total amount of compensation is capped at £100 million in any five-year period.20 Payouts would be scaled back were a number of banks, or one of the largest banks (by covered deposits), to fail in this period. Some 180,000 depositors had deposits covered by the scheme as at September 2008. However, analysis of data on the distribution of deposits as at that time (i.e., before the scheme’s establishment) suggest that actual coverage level, in case of a single bank failing, is high—nearly 100 percent in the case of subsidiaries, although lower, at 62 percent, for bank branches. It will be paid for by the banks through annual charges and special charges in the event of a bank failure.
READ ALL THE COMMENTS MADE BY THE IMF
Make up your own mind if Guernsey is fully complying with the principals of the Basel core guide lines
Guernsey DCS Board fails to update Depositors
in plain language on Pre to Post funded scheme.
If you go to the DCS Board site you will see very little difference to when
it was set up in 2008. But recently there has been a substantial change
as to how the scheme is operated, in that it has changed from prefunded
to post funded. All you will find on their site is the regulation of Nov 2010,
in legal jargon, laying out how the Banks in the scheme will make their
payments now that the scheme is postfunded. There does not appear to be
a provision to force the banks into making payments, it appears that it is all
done on a voluntary basis.
The Landsbanki Guernsey Depositors have taken an interest in the Scheme,
not because it will do them any good, but because it should be of interest to
everyone in Guernsey with a bank deposit and they do not want to see the
Islands depositors caught out, as they were in october 2008.
Basel Core Principal 12,
In order for a deposit insurance system
to be effective it is essential that the public
be informed on an ongoing basis about the
benefits and limitations of the deposit
Guernsey has failed miserably in this area.
Steve Watts of
29th December 2010
Regarding the Guernsey
Depositor Compensation Scheme.
Read it and see if you can make sense of it
As more deposits flow out of Guernsey
Europe and the UK increase Depositor Compensation,
Guernsey's Chief Minister misleads States, again !
Sheila Nicoll, director of conduct policy at the FSA, said that the need to maintain
customer confidence in the banking system is one of the key lessons from the
The Financial Services Authority (FSA) have now confirmed that the new deposit compensation limit for the United Kingdom will increase from £50,000 to £85,000 per person, per authorised firm, from 31 December 2010.
This is the Sterling equivalent of the 100,000 Euros deposit compensation limit which comes into force in all European Economic Area (EEA) member states at the end of the year.
Further changes coming into effect on 31 December 2010 are:
· Fast payout rules, with a target of a seven day payout for the majority of claimants and the remainder within the required 20 days.
· Gross payout, which protects customers by ring fencing their deposits if they have savings and loans with the same firm. Currently, any outstanding loan or debt would be deducted from any compensation.
· This new pan European requirement replaces the existing UK arrangement which has been in place since 2009, and which allowed for separate compensation cover for customers with deposits in two merging building societies.
Read the FSA Press release 17th Dec 2010
All of this was known back as far as July 2010 and stated clearly in July 2010 as part of a European Commission press release on the 12th July 2010, which can be read by following the link below. So why didn't the Chief Minister know all this when he made his ill informed comments in answer to deputy deLisle's questions as to guernsey's position.
Read European Commission release 12th July 2010
Guernsey is now well out of step with the UK and Europe
20th December 2010
Having recently decided to go for a post-funded Depositor Compensation Scheme instead of the prefunded scheme which has been running (of sorts) since November 2008, Guernsey has put itself out of step with the majority of European Countries who are moving towards prefunded schemes.
It has now compounded this by making comments that the European & UK increase in Depositor Compensation would not come in for three to seven years and on one local broadcast, Chief Minister, Lyndon Trott stated ten Years. We now know it will start on the 31st Dec 2010 as shown in the article to the left. So now Guernsey will be left well behind in the protection of its retail depositors.
Guernsey States Deputies have shown a distinct lack of knowledge of what has been going on, not helped by misleading comments.
The landsbanki Guernsey Depositors Action group have emailed them all pointing out their shortcomings.
Someone's head should roll over this shambles.
Guernsey Commerce & Employment Dept fail to carry out States
resolution of 2008.
Depositor Compensation Scheme has not received a bank payment in two years.
24 November 2010
Deceit and a lack of transparency by C&E Minister Carla McNulty Bauer
In the States meeting on Thursday 24th November 2010, some very well worded questions to the Minister for Guernsey's Commerce and Employment Department, Deputy Carla McNulty Bauer soon showed that the Landsbanki Guernsey depositors Action Group had been right in pressing for answers to their questions regarding Guernsey's DCS. It became clear that since the Guernsey States resolution of November 2008 to set up a Depositor Compensation Scheme, Commerce & Employment had persued their own agenda and failed to carry out the wishes of the States along the lines outlined in the resolution.
Although a DCS Board had been set up, not a penny had been paid into the scheme by the banks over the previous two years and that amount by now should have reached around £4 million. In fact it was eventually dragged out of Deputy McNulty Bauer that, should a bank go down tomorrow, the Guernsey Taxpayer would be liable to initially pay out up to £20 million to support the scheme.
It also became obvious , listening to the debate that few deputies understood the full implications of what had been going on and failed to note the very good speech made by Guernsey's Treasury Minister Deputy Charles Parkinson, as to why a prefunded scheme should go ahead in preference to a postfunded scheme. The arguments against a prefunded scheme appeared weak and seemed to have been brought forward by Commerce and Employment after pressure by the Banks from a consultation process which had not been agreed by the States since the 2008 resolution.
All in all the debate showed Commerce and Employment in very bad light, but their proposition to turn the DSC into a post funded scheme did win the day with Deputies.
This now leaves the States Scrutiny Committee with the question as to an inquiry into the Commerce & Employments total failure to carry out the resolution of the States and to whether there should be a vote of no confidence in that committee. The States do not like votes of no confidence and they are rarely passed when it comes to the point, so it will be interesting to see which direction this shambles takes.
Deputy Honeybill pushed the C&E Minister towards the end of the session into answering as to whether there would be legislation in place to enforce the post funded scheme and ensure that banks paid up should another bank go down, once again Deputy McNulty Bauer was unsure of herself and the the answer she gave was certainly not a definitive one. It appears that Commerce & Employment felt that they could rely on the good will of the banks to payup without the legislation to back it up. That appears naive in the least.
An audio of the debate has been ordered so as the exact wording relating to the above report can be added.
Add your comments to the Guernsey Press forum
Chief Minister Lyndon Trott evades question on the
Guernsey Depositor Compensation Scheme
29 September 2010
During question time in the States debate on Wednesday 29th September 2010, the Guernsey's
Chief minister Lyndon Trott was asked by Deputy DeLisle,
"Can I ask a supplementary Sir. How much money does the Guernsey scheme hold or have access to in total and if a major high street bank failed is there enough to give everyone their money up to £85,000 or even £50,000." The reply or non reply totally evaded the question and it is a question that has been asked in the past of the DCS committee, again without a detailed response. So no depositor in Guernsey is clear as to what extent they would be covered should another bank go down tomorrow.
One should be reminded of Principal 12, Public awareness:
In order for a deposit insurance system to be effective it is essential that the public be
informed on an ongoing basis about the benefits and limitations of the deposit
This certainly isn't happening in Guernsey and it appears the Chief Minister spends more time dodging questions rather than answering them.
A transcript of Deputy DeLisles Question on the DCS to the Chief Minister can be read here
An audio of the transcript of the debate can be heard here
Trott's reply to FSA announcement of increased DCS, decries value of retail banking in Guernsey
" The second point that it is important to make in response to the question is that over 90% of the deposits in Guernsey are not retail in nature but are corporate , institutional or wholsale deposits and which therefore would not be covered by the proposed scheme should it eventually be translated into law. In addition the growth in deposits in the last decade has largely been from none retail deposits"
Which of course doesn't answer the question but goes off at a tangent and in doing so gives the impression that its the non retail business that is important and the retail of little importance.
Of course the main question was, is Guernsey likely to follow the EC in increasing the Depositor protection to €100,000 or the sterling equivilent, approx £85,000 for retail depositors.
Chief Minister lets slip, Commerce & Employment
to bring DCS back to States.
Wednesday 28th July 2010
The Chief Minister whilst replying to questions and statements at the end of debate on the Guernsey Financial Services Commission Report for 2009,(Transcript of States debate) let slip that Commerce and Employment were taking another look at the Guernsey Depositors Compensation Scheme.
"With regard to the Depositors Compensation Scheme, that's a matter for the Commerce and Employment department and indeed in the near future, Commerce & Employment will be presenting to this assembly their views on how that scheme should go forward."
This has apparently been brought about because of a certain amount of discontent by the banking industry as to the way the scheme is funded.
Pressure must also be on Guernsey to improve their scheme, especially as the EC is now proposing higher payments to depositors on a banks default.
It will be interesting to see what Commerce & Employment come up with.
GFSC annual report for 2009
Depositors Compensation Scheme Board Annual 2009 report
Be warned you need to be an accountant to read and understand it.
Principle 12 . Public awareness
In order for a deposit insurance system to be effective it is essential that the public be
informed on an ongoing basis about the benefits and limitations of the deposit
DCS Board Assessment: This topic is considered at some length in the report. The website,
leaflet and advertising code together are designed to ensure that
members of the public are fully and accurately informed.
The Guernsey Depositors Compensation Scheme
A totally inadequate scheme with more questions than answers.
Do not go by the headline figure of £50,000, it is unlikely that you are covered to anywhere near that figure. It is a white elephant that Guernsey uses to keep its reputation partially intact, following the Landsbanki Guernsey affair.
The Foot Report released 28th October 2009, backs up everything the LGDAG have been telling the States of Guernsey and the GFSC about the DCS
EC proposes increasing bank deposit compensation to €100k
Citywire report by Michelle McGagh on Jul 12, 2010 at 13:55
The European Commission is set to increase the level of compensation for bank depositors to €100,000 and is proposing returning lost money within seven days if a bank collapses.
In a paper published today, the EC plans to adopt a package of EU-wide measures to create a sound financial system.
Makes Guernsey's scheme look positively stone age.
THE GUERNSEY DEPOSITORS’ COMPENSATION SCHEME
Information supplied by the Landsbanki Guernsey Depositors Action Group (LGDAG)
An issue, which must be of considerable interest to all depositors in any bank in Guernsey, is the Guernsey’s Depositors’ Compensation Scheme. [DCS]
The Guernsey Authorities have made great publicity concerning the approval of a Depositors’ Compensation Scheme for Guernsey’s banks. LGDAG would like to highlight a number of issues regarding this scheme so that savers in Guernsey do not have to suffer the same distress as those depositors who banked with Landsbanki, Guernsey.
The Scheme as Understood by LGDAG:
§ Provides a maximum of £50,000 per account or £100,000 for joint accounts. If a bank fails with more than £100M in eligible compensation claims, the likely recovery will be pro-rated and thereby reduced.
§ The scheme is further capped at £100M over a 5-year period so, if a bank fails and the £100m is exhausted in compensation payments, then there will no money left if another bank fails in the same 5 year time frame.
§ Guernsey’s DCS differs from that of other jurisdictions as it has a capped maximum and also, a time limit.
§ LGDAG asked the Board of the Guernsey DCS for clarification, however the reply was that 'The Board does not, as a matter of policy, give advice on specific questions relating to the Ordinance.'
§ On asking for clarification from the Director General of the GFSC, the reply was, 'the Commission is not in a position to advise you ... whether you should take advice from the Guernsey Bar is again a matter for you but I should have thought it were sensible to do so.'
LGDAG concludes that given the terms of the DCS, neither the Board formed to manage the DCS nor the GFSC are in a strong position to assist affected savers.
LGDAG suggests that the replies of the GFSC and GDCS Board should concern everyone who saves in a bank or building society in Guernsey.
There is no evidence to suggest that the GFSC has improved its regulatory policies since the failure of Landsbanki Guernsey so do not think they will act in time to save your money.
LGDAG strongly urges all depositors in any Guernsey bank to:
§ Check your own bank and ask about its retail deposit level. If it has more than £100M in accounts of £50,000 or less, be aware that if your bank fails you may not get full compensation of up to £50,000.
§ Remember, if more than one bank fails in a 5-year period and the first has used the full £100M guaranteed by the DCS, you may receive nothing!
§ Recognise what the risks are in Guernsey’s retail banking sector and, if possible, deposit money with a UK parented bank. It seems that even if the DCS fails to compensate you, there may be recourse to recover part of your savings through the parent - but check!
Depositing Money in Guernsey, can seriously damage your wealth,
Ask any Landsbanki Guernsey Depositor
This is a new site
This is a new site and is still being constructed. It will expand over the coming weeks to cover the Landsbanki Guernsey Situation and keep relevent news on the front page. The links to "READ MORE" etc. will start working as the site expands. It will be here to criticise Government and regulatory authorities where that is necessary and its aim is to always print accurate facts on the current situation.
It is not connected to the main LGDAG site which should still be the first stop for all Landsbanki Guernsey Depositors, and where information and discussions cover every aspect of our problem.
DEPOSITORS COMPENSATION SCHEME
A lot more will be said about this in the near future. Suffice to say it is totally insufficient and would not cover the headline figure of £50,000 of your savings, should another bank go down.
The scheme is operated by an independent Board which is seperate from both the Guernsey Financial services Commission and The states of Guernsey. They have a new website at www.dcs.gg
A short History of the Guernsey Depositors
Tax Havens Haggle Over Depositor Protection
By Conrad de Aenile, published Saturday 22nd May 1993By Conrad de Aenlle, Published: Saturday, May 22, 1993
Officials on the Channel Island of Guernsey don't think much of deposit protection regimes. For one thing, they point out, widows and orphans are not the clientele that they - or the Isle of Man, for that matter - cater to.
"We're after the high-net-worth investor for whom 15,000 Ecus is not a lot of protection for a $500,000 account," said John Roper, Director General of the Financial Services Commission on Guernsey. "We've got better things to do."
COMMENT: I would like to think attitudes have changed since the above statement, but I have my doubts, powers to be have been forced into change rather than instigating the changes themselves.
The above was in 1993, if we jump now to December 1998 and the Edwards report, published as a review of financial Regulation in the Channel islands and the Isle of man. The report was commissioned from Andrew Edwards a former senior Treasury Official in cooperation with the Island Authorities. Amongst its recommendations were;
a) The Islands should consider introducing a financial ombudsman to deal with customer disputes. (Still waiting)
b) Jersey and Guernsey should consider schemes along UK and isle of Man lines to protect customers in the event of business failure. (Guernsey Depositors Compensation Scheme introduced in November 2008 because of banking crisis, 10 years too late.)
In the summer of 2001 Philip Mar, Director of banking for the GFSC produced a newsletter titled "Towards Depositor Protection in Guernsey".
In February 2002 The Guernsey Financial Services Commission now under the Director General Peter Neville, produced an extensive consultation document on a Depositors Protection Scheme for Guernsey. At the same time the States Advisory and Finance produced a similar document for a Financial Ombudsman.
It would appear that both documents failed through a lack of interest by the banks and a lack of Political will on behalf of the States of Guernsey. Having said that an application to the GFSC to see feedback on the consultation to establish the full reasons was denied by Peter Neville on the grounds of confidentiality in February/March 2009.
In August 2009 a further consultation document was issued by the GFSC on:
a) Parental upstreaming
b) The introduction of a depositor protection Scheme
c) The introduction of a Financial Ombudsman
As we all now know this was eventually rushed through the States after being worked on by a group under Deputy Charles Parkinson , the name was changed to “Depositors Compensation Scheme” and it was introduced in November 2008 the month after Landsbanki Guernsey was put into Administration, not to be retrospective to cover the Landsbanki Guernsey Depositors. The Financial Ombudsman, still felt unnecessary, was left for another day.
The Depositors Compensation Scheme is another story and although most Guernsey people feel that their savings are now safe up to £50,000, that statement could be far from the truth, as this webpage will hope to clarify.
15th August 2009
“But among the worst affected by the crisis are 10,000 savers with £840m tied up in Kaupthing in the Isle of Man and 2,000 savers with £117m in Landsbanki in Guernsey. All lost their entire savings with no compensation. Many are still waiting in line with a queue of commercial creditors. “
Depositors can only expect to recover between 85% and 90% of their deposits without Guernsey Government intervention
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