Guernsey regulator cleared of Landsbanki mis-handling

A report has cleared the Guernsey Financial Services Commission (GFSC) of any regulatory failure in its handling of Landsbanki Guernsey, which went into administration in October owing £117 million to its 1,600 savers.  

Consultants Promontory Financial Group said they found no evidence of regulatory failure by the Guernsey watchdog. The report’s author Michael Foot said there was no proof GFSC acted knowingly or recklessly to put Landsbanki Guernsey depositors at risk. 

Former Financial Services Authority managing director and Central Bank of the Bahamas inspector of banks Foot said the GFSC understood Landsbanki Guernsey’s business model and had worked closely with other regulators. Members of the Landsbanki Guernsey depositor action group claimed the report was a ‘white wash’ and depositors were unhappy with the terms of reference in the GFSC commissioned report which they said were too narrow.  

The report noted the GFSC was working below its normal strength with nine to 10 staff instead of the normal 12 through most of 2008. Foot said this put intensive pressure on senior staff at the commission. 

GFSC could stop future failures by only granting banking licenses to institutions certain to receive support from their home state, the report said. 

‘I am very pleased that the inquiry has concluded that the commission measured up to good practice and that our actions were wholly justifiable having regard to the facts known at the time and what could reasonably be foreseen,’ said Peter Neville, GFSC director general.  

Neville said he had sympathy for Landsbanki Guernsey depositors and noted the report would do nothing to reduce their distress and hardship. Foot is also chairing a Treasury review of offshore financial centres including the Isle of Man and Jersey.