The Icelandic Supreme Court ruling, which will see the British and Dutch governments in line to get back the €4bn they spent in compensating depositors in Landsbanki’s online Icesave operation, left the 1,600 out-of-pocket Landsbanki Guernsey depositors with nothing but what the bank’s liquidator, Deloitte, has been able to get them so far, and what it may be able to obtain for them in the future, according to Matthew Dorman, a spokesman for the Landsbanki Guernsey Depositors Action Group, which represents many of the out-of-pocket savers.
The LGDAG today posted a summary on its website of how the verdict is seen as affecting Landsbanki Guernsey depositors.
In arriving at its decision, the Icelandic court effectively ruled that “sovereign governments and government institutions have priority over single individual creditors such as those of Landsbanki Guernsey”, Dorman said, which he noted was all the more disappointing for Landsbanki Guernsey depositors in view of the fact that Guernsey “is part of the Crowns Protectorate and as such, there should be an onus to ensure all of its citizens and dependents are treated equally”.
Icelandic officials characterised the court decision as a final step in the long-running dispute, which had placed Britain and the Netherlands in opposition to Iceland, which now must begin to pay out as much as $11.4bn to foreign depositors in its now-defunct banks.
Iceland’s economy minister, Arni Pall Arnason, was quoted as saying that the British Financial Services Compensation Scheme, which compensated UK depositors in the Icelandic banks in full, would begin to get its first payments “in a matter of weeks”.
‘Heavy blow’
For depositors who lost money in the Isle of Man subsidiary of another Icelandic bank, Kaupthing Singer & Friedlander (Isle of Man), the ruling was “a heavy blow”, a spokesman for the KSF(IoM) Depositors Action Group said.
These depositors had been hoping “that the parental guarantee given to KSF(IoM) by its parent bank, Kaupthing (Iceland), and recently upheld as valid by the Icelandic Supreme Court…would kick in to enable them to recover all or most of the eventual shortfall in their liquidation,” the spokesman, Richard Carter, said.
“[But] as the guarantee is considered as an unsecured, [and thus not a] priority claim, it seems that this ruling will push them further back in the queue, and reduce the value of their claim.
“KSF(IoM) depositors remain the only retail depositors in Kaupthing not to have been fully compensated by government intervention, despite acknowledged regulatory and governmental failures in dealing with the bank’s insolvency.”
Thus far, the Kaupthing Singer Friedlander (IoM) depositors have recovered 73.6% of their savings, with a further minimum 9.5% expected before the end of the year.
For the Landsbanki depositors, some 85% has been recovered, and the liquidator has said that this “may increase to 90p in the pound if we are lucky, but full repayment is impossible, particularly after [Friday’s] Icelandic court decision." Dorman said.
15 depositors died without their savings
A measure of the Landsbanki depositors’ frustration with the lengthy effort to get their savings back, Dorman said, can be imagined when one considers that since it began in 2008, at least 15 of the 1,600 Landsbanki Guernsey depositors – many of whom are older and retired – are known to have died while still not having had their savings returned.
Dorman added that the decision also showed Guernsey’s chief minister Lyndon Trott had been either naïve or misleading when he suggested “on a number of occasions” that he had secured a promise from the UK Government to ensure Guernsey creditors of the Icelandic banks were treated on an equal footing with those in the UK.
Guernsey officials did not immediately respond to requests for comment.
“As the Icelandic court decision looks final, it seems that only legal recourse [now] will be applying to the European courts,” Dorman said.
