FT Article 17th Oct

  • expatfrance1
  • 15/10/08 31/05/09
  • a depositor
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Posted: Fri, 17/10/2008 - 05:40

Article re Guernsey & IOM situation in FT today:-

http://www.ft.com/cms/s/0/30fbb00a-9bd0-11dd-ae76-000077b07658.html?ncli...

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Grim Outlook

  • IsleofMuppets
  • 13/10/08 31/05/09
  • unspecified
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  • Fri, 17/10/2008 - 07:05

Our case is heading in the same direction as the one in Guernsey. The UK government has let its people down.


Article Posted in Full for those not registered with ft.com

  • IsleofMuppets
  • 13/10/08 31/05/09
  • unspecified
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  • Fri, 17/10/2008 - 07:01

Guernsey savers fear loss of locked funds
By John Willman and Andrew Bounds

Published: October 17 2008 00:52 | Last updated: October 17 2008 00:52

More than 2,000 savers with accounts in the Guernsey subsidiary of a failed Icelandic bank are unlikely to recover all of their money, administrators warned on Thursday.

Depositors have been offered a preliminary pay-out worth just 30 per cent. An initial survey of Landsbanki Guernsey’s assets and liabilities by the administrators from accountancy firm Deloitte reported that £41m ($71m) of the £121m owed to depositors and others was available for distribution.

The administrators said their ability to pay depositors in full had been hit by the subsequent collapse of Heritable Bank, a UK subsidiary of Landsbanki. Heritable held £36m of Landsbanki Guernsey assets.

Some £13m had been placed separately with Landsbanki Guernsey’s parent bank in Iceland, which is now in receivership, while £52m had been lent against the security of British commercial, residential and development property.

Rick Garrard, one of the administrators, said there were good grounds to expect a significant return of cash from the commercial loans and the £36m placed with Heritable. But the uncertainty over how much could be recovered from these sources meant it would be difficult to find a buyer to take over the Guernsey bank.

He warned that in the absence of a depositor protection scheme in Guernsey, depositors would be reliant on the governments of Guernsey, the UK and Iceland to make good any shortfall, which he said “is not an obligation and cannot be assumed”.

The collapse of Icelandic banks has highlighted the dangers of contagion from the global credit crunch in small financial centres such as Guernsey and the Isle of Man, where hundreds fear the loss of their savings in the local subsidiary of Kaupthing Singer & Friedlander, which was put into liquidation last week.

The two islands are Crown dependencies, which are not part of the UK but independent territories with their own parliaments, judicial systems and financial regulators. The islands have 145,000 residents between them and rely on providing offshore financial services to wealthy individuals, expatriates and global businesses. At a meeting on Monday in London the UK Treasury agreed to represent the interests of the Crown dependencies in negotiations with the Icelandic government.

Mike Simpson of PwC, the accountancy firm in charge of the liquidation of Kaupthing on the Isle of Man, is attempting to find a buyer for the business. He said if that failed, the bank could be wound up on October 24, turning depositors into creditors and triggering pay-outs of up to £50,000 under the island’s depositor protection scheme.

Many savers have put much larger sums in the Isle of Man bank, which had about £840m in deposits.

Gary Hewitt, a businessman, said he had deposited the £500,000 proceeds from selling a company with Kaupthing. He had tried but failed to remove it last week. “In this whole financial crisis no savers have lost money but us. The Isle of Man does not have the funds for a guarantee. The UK must help,” he said.

Russell Crerar of Port Soder­ick, a former travel company manager forced to retire this year at 50, put his life savings of £230,000 in the bank.

He said: “I put my money in there because the bank said it was 100 per cent safe. I wish I hadn’t.”

Depositors in Landsbanki Guernsey have created a website to co-ordinate their campaign for action by the Guernsey and UK authorities to recover their savings.

According to the administrators, almost half the depositors live in Guernsey and neighbouring Jersey, where there were no subsidiaries of Icelandic banks. However, a third of the deposits came from the 455 UK-based customers.

Both Channel Islands are consulting on introducing a depositor protection scheme by the end of the year.