Here are chilling words for anyone with a bank account in the Channel Islands. “The Administrator will be working towards an orderly repayment to depositors…(but) we cannot say how much or when.” This particular statement came last week from the liquidator of Landisbanki Guernsey and marked the first time that many depositors realised that Guernsey lacks an investor compensation scheme. UK savers with the Icelandic bank’s subsidiary, Icesave, are covered by Alistair Darling’s pledge to extend the UK’s Financial Services Compensation Scheme to cover 100% of their deposits due to “exceptional circumstances”. But anyone with deposits held with Channel Island branches of the bank (which includes Guernsey, Jersey and the Isle of Man) isn’t covered by either the UK or Icelandic schemes.
What’s more, other investments such as offshore bonds are excluded too, leading one Guernsey resident who had been drawn in by the 7% interest rate on offer to report, on Iwantmymoney
landsbanki.com, that he had lost his life savings in the form of a £65,000 one-year bond.
There’s some good news for Isle of Man investors: the protection scheme for local and international investors has been increased to cover £50,000 of losses. That may not help everyone (minimum deposits can exceed that level and claims are limited to one per firm), but it’s something. And anyone investing in Guernsey and Jersey needs to watch out – Jersey is finalising an investor compensation scheme that will safeguard all deposits with local banks, but only for Jersey residents. While there are plans to introduce a scheme in Guernsey, nothing has yet been set up. So if in doubt, get your money out and move it onshore. When you do so, remember that if you are UK-domiciled you should have been paying tax on any income in your offshore accounts. If you haven’t been, prepare for another shock – this time in the form of a call from the taxman.