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Deloitte to seek liquidation of Guernseys Landsbanki subsidiary

Deloitte will apply to a Guernsey court next month to allow Landsbanki Guernsey to be liquidated.

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The news was greeted with dismay by a group representing the Landsbanki Guernsey customers, who are still waiting for the return of 32.5% of their deposits. However, a spokesperson for Deloitte said liquidation would not significantly affect the amount the banks’ creditors ultimately will receive.

By making the application, the joint administrators were seeking to reduce costs, improve returns and "enable an adjudication of claims to take place", the spokesperson added.

The report that Deloitte is expecting to seek to liquidate Landsbanki Guernsey comes a day after news that the UK government had rejected a petition by the depositors’ group for compensation, on the grounds that Landsbanki Guernsey was "not a subsidiary of a UK bank, but of an Icelandic company". The petition, which had been signed by 433 depositors, had been made by Landsbanki depositor and Landsbanki Guernsey Depositors Action Group (LGDAG) member Matthew Dorman.

Further distribution of 7.5p

In its statement, Deloitte said the joint administrators had "notified creditors of their intention, subject to court approval, to place the bank into liquidation, and to make a further distribution to creditors of up to 7.5p in the pound".

It said the plan was to make the application on 7 December, and that the joint administrators would seek to be appointed joint liquidators. The Deloitte spokesperson declined to comment further.

“This is the day that many local pensioners who deposited their life savings in the Cheshire Building Society – which was taken over by the Icelandic bank – or into the ‘Guernsey Icesave’ – have been fearing for the last two years,” said Neil Dickens, chairman of the local chapter of the LGDAG. 

“My assumption is that we’re looking at the bottom range of 85p in the pound, because for the first time, they’re saying that the range could be outside the range of 85p to 91p in the pound," Dickens added, noting that if the bank were liquidated, it was likely "that some of its assets would be put up for sale sooner rather than later", out of concern that waiting might result in the asset prices falling further.

The Deloitte spokesperson said the joint administrators’ forecast of a total distribution of between 85p to 91p had not changed. 

Around 1,600 depositors, more than 90% of them British, had some £120m on deposit in the Guernsey arm of Landsbanki when it collapsed in October 2008. At the time, Guernsey did not have a depositors’ compensation scheme, although it implemented one some months later.

Difficulties keeping UK bank accounts cited

In his petition on behalf of the LGDAG, Dorman argued that the majority of depositors in Landsbanki Guernsey at the time it collapsed in October 2008 had been British citizens and pensioners, many of whom, as expatriates or residents of Guernsey, had been “limited as to where they could deposit their sterling savings, as up to 97% of UK high street banks [would] not allow a British expatriate citizen to open or retain a UK bank account”.

“Britain is the only country in the EU and North America to refuse its own expatriate citizens equal banking rights with their fellow countrymen within their home country.” Dorman said.

In its response, the UK Government admitted that "the number of banks and building societies prepared to offer services to non-[UK] residents is small", but noted that it "cannot offer a referral service to help non-residents find a suitable account". 

It recommended that in the future, expatriates struggling to find such a bank make use of the British Bankers’ Association’s website, which recently introduced an account finder service.

‘Why are we not being made whole?’

Dickens said the Guernsey Landsbanki depositors were dismayed to find that their hopes of receiving even as modest a payment as 90p in the pound increasingly seemed unlikely to be realised.

"What we want to know is, why we are not being made whole, like every other person who deposited in Icesave was," Dickens said.

"Everyone else was bailed out by the British Government, a government which has a constitutional obligation to protect British citizens, whether they be in Guernsey or the mainland, but which has not done so. And the knife in the wound is that we’re not even being treated as preferential creditors, so we’re losing out even more."

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