Landsbanki Guernsey administrator tries to salvage depositor cash

Landsbanki Guernsey administrators Deloitte is trying to untangle a web of loans and guarantees to try and salvage depositor money. 

The Icelandic-owned bank’s 1,600 savers are still waiting for their cash after Landsbanki Guernsey went into administration in October.

A Deloitte report refused to estimate how much could be recovered but said depositors could expect ‘substantial’ payments but warned the earliest possible date for cash to be returned was the end of 2009.

Recovering the £120 million depositors had on deposit depends on what can be recovered from the bank’s £52.5 million property loan book and Deloitte will ask Landsbanki's 27 commercial borrowers to refinance rather than sell the loan book.

The report revealed that the Guernsey arm had taken loans from another member of the Landsbanki group - UK-based Heritable. Heritable was also holding at least £36.3 million of Landsbanki Guernsey deposit money when it went into adminstration. Depositors will have to sue Landsbanki if they want to enforce a £81.9 million parental guarantee for its Guernsey subsidiary, Deloitte noted.

The report said the best solution for savers was for the States of Guernsey to lend Landsbanki Guernsey enough money to repay depositors and then slowly sell off its loans. Discussions between the Guernsey government and Deloitte have been suspended while the administrators re-value the properties in the bank’s loan book. 

The States of Guernsey and the Association of Guernsey Banks rejected proposals from Deloitte to cover Landsbanki Guernsey savers under the depositor protection scheme which is currently being set-up on the island.  

‘No formal, written response has been received to our letter from the States of Guernsey,’ Deloitte’s report said. ‘However, discussions with the chief minister indicate that the States of Guernsey is not willing to support such a scheme.’ 

Deloitte will hold a meeting for depositors on 20 January, where elections will be held for an informal creditors committee. The Landsbanki Guernsey Depositors Action Group also met with State of Guernsey chief minister Lyndon Trott on 7 January to push for government support.  

Deloitte offered depositors 30p in the pound for their savings in October and had paid out £33.3 million by 30 November 2008. Deloitte has so far run up costs of £1.1 million while acting as the bank’s administrator and has budgeted for another £1.4 million in 2009.  

Consultants Promontory Financial Group cleared the Guernsey Financial Services Commission of any regulatory failure in its handling of Landsbanki Guernsey.