Audio Extracts

Ernst & Young carry out independent review into the Guernsey Financial Services Commission

30th November 2011

Depositors will disagree with some of the comments made in the extract below


Extract from their report:

2.4 The world is now a more complicated and dangerous place

In comparison to other jurisdictions, Guernsey has had a good crisis. The most notable event (at least from a public viewpoint) has been the collapse of Landsbanki. Inevitably this has attracted some criticism. Whilst it is axiomatic that the collapse & a banking institution, with consequent loss to depositors, cannot be helpful from a regulatory perspective, it is important to note that Landsbanki depositors in Guernsey have received a large proportion of their money back. Furthermore the reasons for the bank’s collapse are not attributable to regulatory malfunction in the Island. It is also important to compare the fortunes of Landsbanki Guernsey depositors with those of depositors in other failed Icelandic banks. The Commission must take some credit for its actions both before the collapse of the bank and subsequently.

Whilst we would accept that Landsbanki hf's collapse in Iceland cannot be attributed to regulatory failure in Guernsey, that is a broad statement that does not cover the full facts.

The Guernsey Financial Services Commission had allowed Landsbanki Guernsey to operate in Guernsey under a worthless 'letter of Comfort' and a Guarantee by the mother Company in iceland that had never been signed and that has also proved to be worthless. Depositors were blissfully unaware of this and advertising using the guarantee was allowed right up to the date the bank went into administration.

The Financial Services Commission also failed in their due diligence during 2008 and the proof of this has been well documented, although not accepted, in a comprehensive report, Submission for a public inquiry, on the GFSC's dealings with the FSA and the upstreaming of funds to Heritable (Directly linked to landsbanki Islands hf) whilst knowing there was a crisis. The promontory report was produced on behalf of the GFSC, a shallow report that could easily be pulled to pieces, but one that Government and the GFSC have always used as an excuse and refused to address any of the questions asked relating to it.

Ernst & Young rather condescendingly state that landsbanki depositors have received a large proportion of their money back. 85% in fact, and surely after more than three years it is not unreasonable to expect 100% of one's hard earned savings returned from a bank that was regulated by the Guernsey financial services Commission.

They say it is important to compare the fortunes of Landsbanki Guernsey depositors with those depositors in other failed Iceland Banks. Ernst & Young do not elaborate on this statement, but if you take one such bank, Icesave in the UK, you will find that all depositos were reimbursed 100% by the UK Government within a very short space of time, as were Dutch savers by their Government. Landsbanki Guernsey received no aid whatsoever from Guernsey, in fact Guernsey's Government have tried to distance themselves from the depositors.

They go on to say the Commission must take some credit, both before the collapse and subsequently. Well before, is explained in the ' Submission for public inquiry report above', subsequently, after the Collapse the commission did nothing and have been deafening in their silence ever since, failing to address any pertinent questions asked of them.

So you will excuse us if we do not agree with Ernst & Youngs rather GFSC friendly statement they have made above.

Guernsey's Chief Minister makes statement welcoming the report 

Ernst & Young's get out clauses

in their report.

30 Nov 2011


We have relied on information as to systems and controls supplied to us by management including oral and written representations made by management. We have not performed independent verification of the financial and other information provided to us and have used the facts and information as they have been presented to us.

During the course of work, employees of the Commission provided us with documents, information, data and explanations to facilitate our work. We did not seek to verify the accuracy of the information provided to us in the course of our work, except the extent that we were able to do so based upon the documentation made available to us.


So nobody really accepts any responsibility for any of the comments they make.





Landsbanki Guernsey

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, both before and after, to ascertain the truth

IMF report shows the GFSC of 2008

was inadequate

January 2011

Reading between the lines the GFSC was certainly inadequate in the way it operated during 2008, it seems that since the banking crisis and the putting of Landsbanki Guernsey into Administration on the 7th October that year, the GFSC has spent all its time trying to correct the way it regulates the banks. The IMF report  shows how the GFSC has moved forward since that time, but that in itself tends to highlight just how inadequately the GFSC dealt with the whole situation during 2008, especially in its dealings with the UK FSA and its lack of due dilligence in the upstreaming of funds to Heritable, relying totally on exchanges between itself and the FSA. Meanwhile unsophisticated depositors in Landsbanki Guernsey were placing their whole trust in Guernsey's regulatory system, which we had been told was second to none. How wrong we were. 

The extract from the report below (which in total is about 600 pages) covers the area spoken of above and you can draw your own conclusions.



The area of the report on Guernsey Depositors Compensation Scheme is also of interest and certainly shows that Guernsey does not keep up fully with IMF expectations.

One has to point out that the DCS is the responsibility of the Guernsey Commerce and Employment Dept and the DCS Board.




Landsbanki Guernsey

Depositors can only expect to recover between 87% and 91% of their deposits

over a number of years

 without Guernsey Government intervention.

Its time for a fully independent select committee

type inquiry.

An interesting aspect of the GFSC, it used to be mentioned in their annual report in 2001,

but no longer.

Annual report 2001 under status, functions and structure of the Commission:

The status of the Commission is dealt with in sections 1 and 4 of the Commission Law. It is not a committee of the States nor a servant or agent of the States and its staff are not civil servants. Neither is it a company for the purposes of the Companies (Guernsey) Law, 1994. It is a body corporate with perpetual succession and a common seal, capable of suing and being sued in its corporate name.


Section 22 of the Commission Law provides that no member, officer or servant of the Commission is personally liable in any civil proceedings in respect of anything done or omitted to be done in the discharge or purported discharge of any function (statutory or general) of the Commission under the Commission Law unless the thing is done or omitted to be done in bad faith.


The Financial Services Commission (Limitation of Liability) Ordinance, 1990,The Protection of Investors (Limitation of Liability) Ordinance, 1990 and,The Insurance Business (Limitation of Liability) Ordinance, 1990, made by the States in exercise of powers under section 23 of the Commission Law, together with section 55 of the Banking Supervision (Bailiwick of Guernsey) Law, 1994 and section 57 of the Regulation of Fiduciaries, Administration Businesses and Company Directors, etc. (Bailiwick of Guernsey) Law, 2000 provide variously that no liability shall be incurred by the States, the Committee or the Commission in respect of anything done or omitted to be done in the discharge of the Commission’s various statutory functions unless the thing is done or omitted to be done in bad faith.


You really have to work hard on their new site to find the above facts and they are not confirmed in current annual reports.


Landsbanki Guernsey Depositors Action Group

reject aspects of the GFSC 2009 Annual Report

30th August 2010

In a letter to the Director General, Nik Van Leuvan on 19th August 2010.

 See article and associated letters and reports by following this link.


The fundamental objective of a deposit protection scheme is to give basic protection to small depositors and savers, including small businessmen, so that, in the event of a collapse of a bank, the depositors will not lose all of their “money in the bank”: they might lose some but not all of their funds. Underlying this conventional wisdom is an essentially political notion, that upstanding citizens of a country should not be allowed to lose their life savings – at least, that portion deposited in the bank – if they themselves have not been reckless.The conventional wisdom also throws up the corollary that large corporations and institutions are big enough to look after themselves and do not need special protection.
Philip Marr - Director of Banking

The newsletter of the Guernsey Financial services Commission.Number 16.Summer 2001


GFSC 2009 Annual Report and Financial Statements

July 2010

The report mentions various areas of the 2008 banking crisis and a number of mentions are made of Landsbanki Guernsey and how actions taken by the GFSC were directly benificial to the interests of the landsbanki Guernsey depositors, although I would suggest that the Depositors may disagree with that statement. The report can be read on the GFSC website.





Landsbanki Guernsey

Depositors can only expect to recover between 85% and 91% of their deposits

over a number of years

 without Guernsey Government intervention.

Its time for select committee

type inquiry.

9th July 2010


If it can't keep it's own house in order, how good is its regulation?

THE Guernsey Financial Services Commission recorded an operating loss of more than £300,000 last year.
Chairman Peter Harwood said it was hit on a number of levels by the onset of economic recession.




GFSC sees benefits in UK banking regulation overhaul

Guernsey press 24 june 2010

Philip Marr director of banking


‘The transition of certain powers from the FSA to the Bank of

England is to be welcomed if it leads to more effective macro-prudential supervision of the banking system and the finance sector general and also to improved or more effective micro-prudential supervision of financial firms, including day to day oversight of individual bank safety and soundness.

‘Although this was clearly a political decision there is a general consensus that the previous tripartite arrangements between HM Treasury, the Bank of England and the FSA did not work as well in practice as they were meant to in theory, particularly during the lead-up to and at the height of the financial crisis of 2008.

‘It can be argued that ambiguity over what each of the tripartite bodies was responsible for reduced the effectiveness of the authorities in dealing with the crisis-

Read full article in the Guernsey press


That I would say was a complete understatement, as far as the FSA was concerned, and this has been clearly shown in select committee reports, Guernsey was collateral damage and in fact things between the FSA and the GFSC in the run up to Landsbanki Guernsey being put into administration were not working at all. The only problem was that the GFSC did not appear to realise that they were not working and were placing all their reliance on the FSA and the ambiguous signals coming from them, without carrying out their own due diligence. This is made quite clear by reading the letters that passed between Peter Neville ( The then Director general of the GFSC) and his counterpart at the FSA. Those letters were entered in evidence at the Treasury select Committee hearing on the banking crisis.

In the meantime the same was happening to the States of Guernsey, namely its Chief Minister, who was being strung along buy the UK Treasury and Ministry of Justice who instead of representing Guernsey were just leading our politicians along by the nose, whilst pursuing their own interests at our expense. Why is the UK a preferential creditor in Iceland and the landsbanki Guernsey depositors not? Because treasury left us out of the equation, but left the Chief Minister believing that they were acting in our interest. It took him eight months before he realised he’d been had and to try to correct his mistakes he went to Iceland in August 2009, far too little too late and has made no difference whatsoever. Since that trip he's gone to ground on the landsbanki Guernsey Fiasco.

What I find amazing is the fact that Guernsey’s Government have not taken the UK Government to task and organised their own select Committee type inquiry to find out exactly who did what, when & why. I suspect its because too many mistakes have been made by both GFSC and Government along the line and the last thing they want coming out is the truth in an open honest inquiry.

That's what the Landsbanki Guernsey Depositors demand and should be entitled to.



Reasons for not depositing your money in Guernsey

A New report lays the blame fair and square at the feet of the Guernsey Financial Services Commision and the Guernsey Government and still they do nothing, most Guernsey Deputies appear to have their heads buried in the sand.

A Public independent enquiry is called for.

Read the confidential letters that passed between the GFSC and the FSA and were required to be submitted in evidence at the Treasury Select Committee hearing


The report demands a Public enquiry into the actions of the Guernsey Financial Services Commission in the months leading up to Landsbanki Guernsey being placed into administration, many questions are asked as to the lack of due dilligence carried by the GFSC and their communications with the FSA. It also calls into question the actions of the Guernsey Government and does not accept that the report by Promontary, instigated by the GFSC under their terms of reference and paid for by them, shows a true reflection of the situation in the lead up to landsbanki's Administration.



Click here to read the covering Letter and Matthew' Dorman's full report .



Banking figures released on 28th August 2009 show a further drop in retail banking deposits in Guernsey for the second quarter of this year by 12.8% this adds to the first quarter drop of 9% making at total drop of 21.8% for the first half of 2009. Read More


Guernsey Press, letters from readers 7th September 2009.

The Guernsey Financial Services Commission fail to address the proof provided by Landsbank Guernsey Depositors Action Group. Read more


   The Evidence of impending failure was there - the GFSC ignored it.   

   The GFSC declined to make comment



Extract from article by Rowena Mason 18th August 2009

So the FSA (staff 2,800) relied on the say-so of the Icelandic FME (staff 50) despite the fact that some analysts, journalists and economists were warning that the country’s financial system was looking precarious? Did they take a look at the banks’ annual reports showing loans to related parties running into hundreds of millions? Was there any concern that the web of cross-holdings and opaque structure of investment vehicles behind the banks could collapse like a house of cards? And lastly, why should we put our complete faith in another regulator to monitor banking services conducted in the UK just because its country is a member of the European Economic Area?

5th August 2009


Mr Van Leuvan received a nine page document laying out the proof regarding a lack of due dilligence as regards the GFSC when it was assessing Heritable for the upstreaming of funds from Landsbanki Guernsey. He still refuses to address the points made in that document



     The Guernsey Financial Services Commission

As seen through the eyes of the Landsbanki Guernsey Depositors


A secret non-transparent organisation who hides behind confidentiality clauses to protect its own shortcomings.

Who commissioned an enquiry into themselves, almost immediately after Landsbanki Guernsey went into Administration (Enquiry January 2009), by the Promontory Financial Group, under the GFSC's own terms of reference and paid for by them.

So soon after, in fact, that information and evidence is still coming to light as to the full circumstances of the way the debacle was handled in the preceeding months.

The sole purpose of an early enquiry being to exonerate the Commission by showing no Mal intent on their behalf and therefore negating the possibility of legal action against them and also allowing Guernsey's Government an easy get out excuse .

Promontory's report was extremely shallow to say the least and many other areas that have come to light warrant a full in depth independent investigation. 

Peter Neville

Director General of the Guernsey Financial Services Commission during the Landsbanki Guernsey Crisis, who retired in May 2009 and left the landsbanki depositors none the wiser as to what the GFSC had done to assist them.


Nik Van Leuvan

Former Procurer of Guernsey, took over as the new Director General of the Guernsey Financial Services Commission and has had to pick up the pieces left behind by his predecessor


Landsbanki Guernsey

Depositors can only expect to recover between 85% and 90% of their deposits without Guernsey Government intervention

5th August 2009

Today Landsbanki Guernsey depositors have received information that they will receive a further 25% repayment of their deposits. This now brings the total repaid to 55%, leaving 45% still outstanding. They have issued a press statement.

Landsbanki Depositors continue fight.

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 fact 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.

Chief Minister's photo usurps LGDAG Press release

The Guernsey Depositors Compensation Scheme

Site Administrators blog




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 



    Quick Links




                                              OF  NEGLIGENCE 




                                                                                  25th August 2009

In response to the Guernsey Financial Services Commission [GFSC] Director General’s assertion that there was no proof of Landsbanki Guernsey Depositors’ Action Group’s [LGDAG] assertions of negligence on the part of the GFSC and that the Group’s claims were ‘unfounded’, LGDAG would like to clarify this matter.  The facts appear to show that the GFSC was negligent and as such the Chief Minister Lyndon Trott should stand by his statement that, should there be indications of regulatory deficiency, he would re-open the Landsbanki Guernsey case.


It is a matter of record that early in 2008 the GFSC became concerned as to the continued financial stability of the Icelandic banking system and hence Landsbanki Guernsey. The GFSC therefore communicated its concerns to the FSA (the UK Regulator) requesting confirmation that Landsbanki Guernsey’s sister bank, Heritable, in the UK, had sufficient 'ring-fenced' funds to cover any liabilities it may have, i.e. that Heritable was, in fact, a stand-alone operation and not dependent on Landsbanki Islands hf (Iceland) to survive.


The Financial Services Authority (FSA) replied to the GFSC indicating that there was a two-way movement of funds, and based on this reply, the GFSC allowed Landsbanki Guernsey [LG] directors to enter into agreements and transfer LG depositors’ money to Heritable Bank, UK.


LGDAG asserts:

§   That by failing to carry out the normal and required levels of due diligence, the GFSC was negligent.

§   That by accepting unsubstantiated assurances from third parties, rather than relying on available documentation, the GFSC did not fulfil its duties as Regulator.

§   That the action of the GFSC, considering that it had concerns about the Icelandic banking sector - by allowing LG to transfer money to, and enter agreements with, Heritable when both Banks shared a common parent, Landsbanki Islands hf - contributed in part to the failure of LG.


There is ample evidence to validate LGDAG’s contentions:


1.   The Regulatory correspondence includes:

§   Letters from GFSC to FSA initially dated 21/4/2008 and subsequently dated 11/1/2008: Stuart Bailey, GFSC Senior Analyst writes, ' ... Heritable Bank seems ring-fenced from Icelandic risk, but I would be grateful if you could confirm that this is still the case.’

§   FSA Reply dated 18 July 2008: John Brennan of the FSA wrote, ‘I can confirm that our assessment of Heritable’s exposure to Icelandic risk has not changed materially.’

§   The GFSC has stated that this exchange of correspondence was, 'a key determinant in permitting our [sic] funds to be placed with Heritable.'

§   The FSA have made it clear that they advised the GFSC of funding flows into Heritable from Landsbanki lslands hf


2. Documentation Available to GFSC for Due Diligence:


§   Landsbanki Islands hf Annual Report 2007

Fitch affirmed Landsbanki Heritable ratings. ‘. . . these ratings are based on a guarantee of all its obligations by its parent.’


§   Heritable Bank Annual Report 2007

'Liquidity was strengthened by increasing the committed line of credit from £200M to £400M from Landsbanki.'

'. . . . as of 31 December 2007 the company had a bilateral committed line of credit of £400M provided by Landsbanki . . . . and the facility is due for repayment in December 2010.  £178M is outstanding against this facility as at 31 December 2007.’


§   Fitch Ratings (int’l. financial analysts) Report: Heritable Bank Ltd. 26-Sept-2007 

'Heritable Bank Limited's long and short-term lDR's and Support Rating are based on a guarantee of materially all its obligations from its parent Landsbanki Islands hf of Iceland.'

             'Liquidity is tight with only a small proportion of liquid assets on the balance sheet. Mitigating this, Heritable has a committed credit line of £ 200M from its parent.'

             ' . . . liquidity reliant on a committed line from parent'

             To support liquidity Heritable holds a committed credit line of GBP£200M from Landsbanki, which has been extended to December 2008. This is needed as the level of liquid assets on the balance sheet is low. . .'


§   Fitch Ratings - Iceland Special Report 22-May-2008: Re: Problems in Icelandic Parent Banks’ Liquidity and Potential of Sovereign Support

             ‘Given the size of the Icelandic banks relative to GDP (900%) and the lack of foreign parents with deep pockets, it is hard to imagine that the authorities could distance themselves from a systemic crisis, particularly because of banks’ huge net external liabilities (200% of GDP).’


LGDAG therefore concludes that:


§   The GFSC did not complete a suitable level of due diligence prior to allowing LG to enter into substantial agreements with its Sister company, Heritable Bank.

§   There was ample evidence available to the GFSC which showed the dependence of Heritable on its Icelandic parent.

§   This evidence directly related to the queries that the GFSC raised with the FSA.

§   The GFSC preferred to ignore this evidence and rely on an unsubstantiated reply from the FSA which, in fact, did not fully address the GFSC’s concerns.

§   That after raising the issue of the financial independence of Heritable Bank, the GFSC did not follow up its concerns to a defendable end point.



LGDAG has raised these issues on several occasions with Mr Nik Van Leuven, Director General of the GFSC, but rather than clarify the GFSC involvement in the failure of Landsbanki Guernsey, the GFSC has preferred to remain hidden behind banking legislation. 


LGDAG therefore calls for complete disclosure from the GFSC as to its role in the failure of Landsbanki Guernsey and for the Chief Minister to re-open the Landsbanki Guernsey case due to clear regulatory errors.





Extract from article by Rowena Mason 18th August 2009

So the FSA (staff 2,800) relied on the say-so of the Icelandic FME (staff 50) despite the fact that some analysts, journalists and economists were warning that the country’s financial system was looking precarious? Did they take a look at the banks’ annual reports showing loans to related parties running into hundreds of millions? Was there any concern that the web of cross-holdings and opaque structure of investment vehicles behind the banks could collapse like a house of cards? And lastly, why should we put our complete faith in another regulator to monitor banking services conducted in the UK just because its country is a member of the European Economic Area?


The above also relates equally to the GFSC, did they carry due dilligence to the fullest degree, knowing there were problems with the Icelandic Banking system or did they take the easy route and rely just on the FSA?  Would that have been negligent? 

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The Landsbanki Guernsey Fiasco