Thousands of depositors who thought offshore accounts were a safe haven for their cash face losing 70% of their savings after the collapse of Icelandic banks.
A rising tide of resentment among offshore depositors is now brewing, with a host of websites and online petitions campaigning to help people get their money back.
Despite the government offering 100% protection to savers in Icesave, the UK-based savings bank that was owned by Icelandic bank Landsbanki, this guarantee does not extend to its offshore sister, Landsbanki Guernsey.
The firm has now gone into administration, and with the island falling outside protection schemes in the UK and the European Union, and with no guarantee of its own, savers now face the grim prospect of waving goodbye to the vast majority of their nest eggs.
According to one website, guernseybanks.com, Landsbanki Guernsey had 2,033 depositors with a collective balance of £120 million before it went into administration om 7 October. The administrators have now promised some redress to affected customers, but with just 30p for every £1 deposited being paid back, their collective loss still stands at £82 million.
Landsbanki Guernsey customers are not the only offshore depositors to be hit by the collapse of the Icelandic banking sector. Kaupthing Singer & Friedlander, on the Isle of Man (KSF IoM), was also declared in administration on 9 October and despite the island having a deposit protection scheme that covers up to £50,000 for both local residents and foreign savers, there is some doubt as to whether people will get their money back.
In the UK the FSCS requires financial firms to pay a levy into a protection pot, which can then be used to make compensation payouts. However, this isn't the case in the IoM and means the 34 participating banks will be asked to raise the money to pay depositors their money. Savers are being warned that this could take months if not years to organise.
For victims of Landsbanki’s collapse, giving up without a fight is not an option. Among the many websites dedicated to their cause is iwantmymoneylandsbanki.com, set up by British couple Daniel Herzberg and his partner Lucy Kinnison, who currently live in Spain and have their life savings in the bank.
Like many Landsbanki Guernsey customers, the couple never intended to deposit their cash with an Icelandic-owned bank – they were originally with Cheshire Building Society (Guernsey), which was bought by Landsbanki a few years ago.
Many depositors were also UK citizens unable to keep their money in a British bank because, like Herzberg and Kinnison, they live overseas.
Another Landsbanki Guernsey saver, who asked to remain anonymous, says her ex-pat status meant a Channel Island bank seemed the safest home for her and her partner’s life savings.
“We did not invest our money in the stock market because we absolutely could not afford to risk losing our hard earned money, but we now find it would have been a far safer home than Landsbanki Guernsey,” she says. “We are not rich, we are working class, ordinary people. At our age, we will never be able to replace that money.”