Unanswered questions on Landsbanki

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From Eileen Lerche-Thomsen.

COULD our States Members kindly let the Jersey electorate know what is being done to prepare legislation to protect the savings of individuals in Jersey banks?

What would happen should a locally based branch or subsidiary became insolvent? If such legislation has already been drafted, when will it be debated in the Jersey States and come into law?

Confidence that our money is safe has to rely on the statement made to the House in 2008 by the then Chief Minister, who is no longer even a States Member. When major banks, including some of the frequently quoted ‘top 500’, are having to rely on governments to keep them in business, how secure can individuals feel?

As a minor depositor in the Guernsey subsidiary of Landsbanki, I have personal experience of the dire consequences of a lack of protection. The Chief Minister of Guernsey appears to have no qualms about leaving 793 of his fellow islanders,125 people in Jersey and 1,115 in other parts of the world, mainly British expatriates, to await the outcome of the administrator’s efforts to retrieve what he can of Landsbanki’s assets.

We are all owed 70% of the savings entrusted to what was at the time the subsidiary of a highly rated bank. The administrator’s current estimate of up to four years to fully realise those assets even then carries no guarantee of returning 100% of our savings.

Too late we now know that a so-called ‘guarantee’, or ‘letter of comfort’, from the parent bank in Iceland could never have been relied upon, as it had no force in law.

To quote from the Guernsey Financial Services Commission consultation paper of August, 2008: ‘All Guernsey subsidiary banks have letters of comfort in place which represent an expression of the intention of the parent to support the subsidiary.

These letters of comfort can take several forms (ranging from general statements about “support” to references to guarantees). However, no subsidiary has a parental guarantee in the sense of a legally enforceable document and these letters do not necessarily ensure that the parent bank will support the subsidiary in times of severe crisis. Letters of comfort are statements of intent which are not legally binding.’

Nobody told us that when we took the ‘guarantee’ at face value. Are any depositors in a bank branch or subsidiary in Jersey under a similar misapprehension, that the safety of their money is legally guaranteed by a parent bank in another jurisdiction, when this is actually not the case?

The collapse of a bank in Guernsey is bad for Jersey, too, if the Channel Islands get a bad name in the finance industry as a result. Publicity about the lack of a depositor protection scheme won’t help, either. And although Guernsey has belatedly set up its own DPS, we are still without one. What implications does that have for confidence in the industry on which Jersey depends?

My final question is this: what are our ministers doing for those of their own electorate who are among the only uncompensated victims of the British banking crisis?

Are they attempting to persuade their Guernsey counterparts to respond positively towards the plight of those who deposited savings in their failed bank? Have they asked Guernsey’s Chief Minister seriously to reconsider his refusal to explore schemes to help them, schemes suggested by the administrator himself because of his own concern about the serious hardship being suffered by many Landsbanki depositors?

The UK Treasury Select Committee to whom Mr Trott gave evidence in February told him very firmly that the consequences of the collapse of a Guernsey bank were problems for Guernsey to deal with. Those of us who are members of the Jersey electorate would very much like to know what our representatives are doing to represent their interests in the sister island.

While I imagine the issue of a depositor protection scheme must be under consideration at some level, clear answers to the questions posed here would be appreciated by the public at large who, like me, may have missed any official announcement on progress.


Grève d’Azette,

St Clement.

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