Icelandic banking crisis claims offshore victims

Savers with offshore accounts in the Isle of Man and Guernsey have been dragged into the Icelandic banking crisis.  

Icelandic-owned banks Landsbanki Guernsey and Kaupthing Singer & Friedlander (Isle of Man) have gone into administration, leaving savers scrambling to recover their cash.  

Kaupthing savers will be able to claim back a maximum of £50,000 from the Isle of Man’s Depositors’ Compensation Scheme but Guernsey savers have no protection. 

The Guernsey Financial Services Commission would not reveal how much money or how many savers were with Landsbanki Guernsey, but said it was one of the smallest banks on the island.  

The Chief Minister of Guernsey, Lyndon Trott, said Landsbanki Guernsey depositors have not lost all their savings because ‘substantial’ assets could be recovered from the bank.

The bank’s administrator, Deloitte, said cash was easily recoverable because Landsbanki Guernsey had cut its exposure to its parent company Landsbanki and its UK subsidiary Heritable over the last six months.

Now offshore investment hotspots Guernsey and Jersey are planning to set up depositor compensation schemes. 

‘The introduction of a depositor protection scheme in Guernsey has not been sparked by recent events,’ said Charles Parkinson, Treasury and Resources Minister Deputy for the State of Guernsey. ‘Plans for a bank-funded depositor protection scheme were being progressed back in the summer, but have now been accelerated by the global financial crisis.’ 

The details of the proposed scheme, including the extent of the protection, have not been released. The plan will be put in front of Guernsey’s legislature in November and there are no plans to make it work retrospectively. 

None of the nationalized Iceland banks had a presence in Jersey but despite this the island has guaranteed all residents' deposits in case of bank default. The government of Jersey has discussed setting up a compensation scheme since September but the plans will only apply to island residents with deposits at a Jersey institution.