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Right up to days before Landsbanki Guernsey collapsed in October 2008 the Guernsey Financial Services Commission had been reassuring concerned Landsbanki Guernsey savers enquiring by telephone that they need not fear for their savings because a 100% Parental Guarantee was in place. Indeed the Parental Guarantee had long been Guernsey's primary marketing tool to attract retail deposits to bolster its finance centre. Now that Landsbanki's Winding Up Board in Reykjavik has made abundantly clear that it is refusing to recognise any sort of guarantee, the GFSC appears to have changed its tune: it is telling enquirers that a Parental Guarantee was never a requirement and that - even if one were in place - it would not be legally binding. The question that springs to mind is: could savers be forgiven for thinking that the GFSC is being disingenuous?
No lessons appear to have been learned in Guernsey's finance centre because, for instance, when Skipton Building Society acquired Scarborough Building Society's Guernsey operation last year Skipton Guernsey's Managing Director wrote to depositors on 23 October 2009 to reassure them that "...your deposits placed with Skipton International Ltd (SIL) are covered by the undertaking given by our parent, Skipton Building Society, which is now the 5th largest building society in the UK..." He failed to point out - and the GFSC should make this a requirement in the interests of full transparency - that SIL is not a branch of Skipton Building Society in the UK but a Guernsey-authorised subsidiary that, at the end of the day, is dependent on the actions and regulatory environment created by the Guernsey authorities.
In the interest of transparency it would surely be apposite to add: "Depositors should be aware than an 'undertaking' does not constitute a legally-binding Parental Guarantee that safeguards their savings should the Guernsey subsidiary ever encounter difficulties. It is merely a 'comfort letter' designed to concentrate the minds at the parent and nothing more." This warning was not required of Landsbanki when it purchased Cheshire Guernsey Ltd and never started to hover near the surface until the GFSC published a Consultation Paper in August 2008 - two years after they approved the sale of safe Cheshire savings to an Icelandic bank that most Cheshire savers had never heard of - and only when they started to fear for the stability of the Guernsey bank. Now they are informing depositors who have lost life's savings that they should have read this obscure and very technical Consultation Paper and, by implication, should have moved their savings elsewhere. It was their own fault. Is the GFSC being disingenuous? What do you think?
