17th October 2009
Deputies of the States of Guernsey,
Sir Charles Frossard House,
St Peter Port,
Guernsey, GY1 1FH.
We write to thank you for your continued support with regard to the plight of the 1600 savers in Landsbanki Guernsey, more than 600 of whom are Guernsey residents.
As you are aware the joint administrator, having received the overwhelming support of the creditors of Landsbanki Guernsey has started legal proceedings against the Winding up Board of Landsbanki Islands HF and also potentially against the Icelandic Government to ensure the depositors of Landsbanki Guernsey receive fair and equitable treatment as promised by the Icelandic authorities as part of the IMF bailout package to Iceland and in line with other domestic and international savers in Landsbanki.
With regard to fair treatment of the Landsbanki Guernsey depositors I enclose, on behalf of the Landsbanki Guernsey Depositors Action Group (LGDAG), an outline for a full Public Inquiry into the failure of Landsbanki Guernsey. I am sure that you are aware that a previous, limited investigation of the actions of the Guernsey Financial Services Commission (GFSC) commissioned by the GFSC showed no regulatory shortcomings; however LGDAG and others investigations since this inquiry have highlighted a number of regulatory shortfalls, the most critical being:
The GFSC level of due diligence at the time of the acquisition by Landsbanki Islands of the Cheshire Building Society;
The inability of the GFSC to recognise that the Heritable Bank only retained liquidity due to a £400M committed line of credit from Landsbanki Islands prior to the GFSC authorising Landsbanki Guernsey to upstream significant funds and assets to Heritable Bank; and
The apparent implementation of additional regulatory controls which precluded further discussions with banks interested in acquiring LG from the administrator as a going concern.
Lord Justice Clarke, in the Thames Safety report, identified “two purposes of a public inquiry, namely ascertaining the facts and learning lessons for the future.” Set up in the face of a failure by the Government or an incident about which there is public concern, public inquiries “ HYPERLINK "http://www.publicinquiries.org/information/select_committee" matter greatly to the public, especially those directly affected by the events under investigation.”
Based on this and other salient information contained in the attached outline the LGDAG would appreciate your support for a public inquiry ensuring full disclosure, not only of the actions prior to Landsbanki Guernsey being placed into administration but thereafter.
The LGDAG would submit that the rational for this Public Inquiry is clear.
Independence and transparency consistent with the interests of justice are needed;
Fairness and respect for individuals, both the general public and the savers in Landsbanki Guernsey;
Establishment of the facts and access to the necessary resources;
The ongoing Landsbanki issue is costing the States considerable money;
The continued publicity regarding Landsbanki Guernsey is potentially costing Guernsey income;
Guernsey’s reputation within the international community is being tarnished by the inaction of the Guernsey authorities;
That it is in the best interests of the Guernsey public and the depositors of LG that a full disclosure is made not only for their peace of mind but also:
To show the efforts made by the GFSC were in the best interests of the depositors;
To show that the States is actively supporting LG depositors
To show that actions have been taken from the lessons learned by LG and that the GFSC has been beefed up to deal with these circumstances in a more timely manner
To show that at a political level The States has also learned lessons and has streamlined channels of communication with UK
To show that the FSA was indeed negligent and that the lessons learned from this have been learned
To show that the GFSC has improved communications with the FSA to ensure ambiguities such as those in LG will not occur again
As further basis of support for a Public Inquiry the LGDAG would submit that the comments of the Chief Minister, when questioned as to whether the States of Guernsey would intervene in the Landsbanki Guernsey collapse and rescue savers, said: “...there was no evidence to suggest that there was any policy regulatory failure at all . . . however it would be foolish to say never until all of the facts were completely understood by all parties”.
As noted previously and in depth within the outline document there have been significant further disclosures which call into light regulatory performance and therefore the Chief Minister should re-examine the Landsbanki Guernsey issue.
The LGDAG would stress at this time that whilst it is disappointed by the lack of support shown by the Guernsey authorities to date it has not asked for General Treasury funds to be used to make up the expected shortfall in savers’ deposits. The LGDAG has suggested a number of mechanisms available to the States of Guernsey to make up the shortfall which would have an overall cost of zero and these areas should also be incorporated into the remit of the Public Inquiry.
I trust therefore that the LGDAG can expect your support in calling for a Public Inquiry, not only for the peace of mind of the depositors in Landsbanki Guernsey but also to clear the situation to the benefit of the whole of Guernsey.
Should you require any further clarification with regard to the document or the remit contained therein please do not hesitate to contact me.
For and on behalf of
Landsbanki Guernsey Depositors’ Action Group