Iceland Review

Landsbanki Boss: Icelandic Central Bank Torpedoed UK Rescue of Icesave

2008-10-28 (All day)

Landsbanki Owner Provides New Angle on Icesave
Icelandic entrepreneur Björgólfur Thor Björgólfsson, who held one of the largest stakes in Landsbanki Bank, stated in an interview on Stöd 2 news magazine Kompás last night that before Landsbanki was nationalized, the British Financial Supervisory Authority had offered to fast track the process of shifting the responsibility of the Icesave deposits to Britain.

Björgólfsson claimed in the interview that the British Financial Supervisory Authority had been prepared to speed up the relocating of the responsibility for the Icesave deposits provided Landsbanki submitted GBP 200 million (USD 309 million, EUR 249 million) in collateral. Landsbanki therefore applied for a loan of that amount at the Central Bank, Morgunbladid reports.

In response to Björgólfsson’s story, the Central Bank states: “The reason for Landsbanki’s request [for a GBP 200 million loan] in a letter dated October 6 was outflow from deposit accounts. An express treatment by the British Financial Supervisory Authority was not mentioned.”

The statement from the Central Bank goes on to say: “Considering the aforementioned reason it is obvious that the claim made by Björgólfur Thor Björgólfsson that a GBP 200 million payment from the Central Bank of Iceland would have solved all of Landsbanki’s troubles at that time is unfounded.”

In response, Björgólfsson states: “The directors of the Central Bank had full knowledge of the British Financial Supervisory Authority’s offer to fast track the loan and that can also be confirmed by others. Also those ministers in Iceland’s government who have been mostly involved in solving the problems of the Icelandic financial companies were aware of the offer made by the British authority.”

Minister of Industry Össur Skarphédinsson denies Björgólfsson’s claims. “That offer was never presented to the group of ministers who were working on those matters from time to time and I do also not recall that it was discussed in the cabinet.”

Prime Minister Geir H. Haarde also denied having received such an offer from the British Financial Supervisory Authority in an interview with Stöd 2 last night.

Björgólfsson suggested in the Kompás interview that the Central Bank’s refusal to grant Landsbanki the GBP 200 million loan, which would have allowed them to accept the British FSA’s offer, might have caused the anger of British authorities and the harsh measures undertaken to seize assets of the Icelandic banks in the UK. Some believe these measures led to the downfall of Kaupthing Bank.

In Björgólfsson’s opinion, the Central Bank could have prevented the uncertainty surrounding the Icesave deposits in the UK and the subsequent dispute between Iceland and Britain, which has caused considerable damage to Iceland’s reputation, Fréttabladid reports.

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Norway Accuses Glitnir of $US58m Embezzlement, Police Seize Landsbanki Assets

Posted 27/10/2008 - 19:59 by VikingRaider

2008-10-23 23

24/10/2008 | 13:05

Norwegian Agency Accuses Glitnir of Embezzlement
Eksportfinans ASA of Norway, a semi-public export finance agency, accused Iceland’s Glitnir Bank of embezzlement earlier this week and reported Glitnir’s parent company for an alleged misappropriation of NOK 415 million (USD 58 million, EUR 45 million).

According to, Eksportfinans funded loans with Glitnir acting as its agent in 2005, which entails that all loan payments went through Glitnir.

When Glitnir Bank was nationalized by the Icelandic state, Eksportfinans requested that borrowers direct payment to them instead of Glitnir and consequently discovered that borrowers had paid off the loans in full and Glitnir had kept the funds, sending only the regular loan payments to Eksportfinans, as the agency’s director Gisele Marchand revealed.

Eksportfinans is now laying claim to assets in Glitnir’s Norwegian banking operations, which were recently overtaken by Norway’s SpareBank 1.

Glitnir Securities has been taken over by its employees and Oslo-based ship brokerage firm RS Platou, which recently acquired a majority stake in the company and will re-brand it as RS Platou Markets.

Norwegian authorities are backing Glitnir deposits in Norway. They have also taken over the Norwegian operations of Iceland’s Kaupthing Bank, guaranteeing the savings of Norwegian deposit holders there as well.

Morgunbladid reports that the Norwegian police have seized the assets of Iceland’s Landsbanki Bank in Norway as collateral for claims from the state of North Holland, which deposited EUR 80 million (USD 100 million) to the online savings unit of Landsbanki in the Netherlands in July and August this year.

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Kaupthing's Lawyers Request Reykjavik's Help to Recover $US830,000m From HMG

2008-10-23 23

24/10/2008 | 13:10

Lawyers hired by the executives of the old Kaupthing Bank requested a meeting with the trade commission of Iceland’s Althingi parliament yesterday, proposing that the government provide funds so that Kaupthing can sue the British government.

“Whether the government will participate in this case in some way has simply not been decided,” chairman of the trade committee Ágúst Ólafur Ágústsson told Fréttabladid.

As revealed in an earlier report on this matter, British lawyers who are preparing the lawsuit on behalf of Kaupthing believe that the bank may be entitled to ISK hundreds of billions in compensation (ISK 100 billion = USD 830 billion, EUR 670 billion).

They estimate that there is a good chance that the executive order of the British Chancellery on October 8 with regard to Kaupthing Bank be declared unlawful. They also believe that British authorities may be found guilty of misfeasance in public office and negligence.

“It is not only about money, because we Icelanders also have a possibility to reclaim our self-respect with this lawsuit,” said Reykjavík Economics MD Magnús Árni Skúlason, who is cooperating with the British lawyers on this case.

“The lawyers believe we have suffered injustice and that needs to be investigated. At the same time we would be improving our image, which the British government has damaged,” Skúlason added.

Jón Daníelsson, an Icelandic economics professor at the London School of Economics (LSE), said in an interview on RÚV’s news magazine Kastljós yesterday that it is highly unlikely that Kaupthing Bank would have gone bankrupt had it not been for the actions of British authorities. They should therefore be taken to court.

Click here to read more about the development of the relations between Icelandic and British authorities and here to read a transcript of a conversation between Icelandic Minister of Finance Árni M. Mathiesen and UK Chancellor Alistair Darling, which is said to have sparked the actions of British authorities against Kaupthing Bank on October 8. Click here to read about a lawsuit being prepared by the Icelandic government against British authorities.

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Posted 24/10/2008 - 08:22 by IceCrusher

2008-10-24 (All day)

Darling / Mathiesen converstion before Anti Terrorism used against Iceland...

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The Darling - Mathiesen Conversation before Britain used the Terrorist law against Iceland

Posted 24/10/2008 - 07:14 by sabsy

2008-10-24 (All day)

24/10/2008 | 00:04

The Darling - Mathiesen Conversation before Britain used the Terrorist law against Iceland publishes a complete transcript of the October 7 phone conversation between Icelandic Minister of Finance Árni M. Mathiesen and UK Chancellor Alistair Darling.

The day after this conversation Britain froze assets of Icelandic banks in Britain with reference to the so-called terrorist law. According to Icelandic newspaper Morgunbladid on October 9 this conversation is what sparked this act, according to sources in the British Chancellery.

Mathiesen: Hello.

Darling: Hello.

Mathiesen: This is Árni Mathiesen, Minister of Finance.

Darling: Hello, we met a few months ago, weeks ago.

Mathiesen: No, we have never met. You met the Minister of Trade.

Darling: Alright, sorry.

Mathiesen: No problem.

Darling: Thank you for taking the call. As you know, we have a huge problem with Landsbanki, we have a branch here, which has got four billion pounds worth of deposits and it has now been shut and I need to know exactly what you are doing in relation to it. Could you explain that to me?

Mathiesen: Yes, this was explained in a letter we sent the night before last from the Trade Ministry. Since then, we have set out a new legislation where we are prioritizing the deposits and where we are giving the FME, the Icelandic FSA authorities, the authority to go into banks, similar legislation to what you have in England, and the Landsbanki is now under the control of the FME, and they are in the process of working out how to do these things, but I think this legislation will help in solving this problem.

Darling: What about the depositors you have got who have got deposits in London branches?

Mathiesen: We have the insurance fund according to the Directive and how that works is explained in this letter and the pledge of support from the government to the fund.

Darling: So the entitlements the people have, which I think is about sixteen thousand pounds, they will be paid that?

Mathiesen: Well, I hope that will be the case. I cannot visibly state that or guarantee that now, but we are certainly working to solve this issue. This is something we really don’t want to have hanging over us.

Darling: People are asking us already, what is happening there? When will you work that through?

Mathiesen: Well, I really can’t say. But I think it is the best thing that the FSA be in close touch with the FME about this to see how the timeline works out in this.

Darling: Do I understand that you guarantee the deposits of Icelandic depositors?

Mathiesen: Yes, we guarantee the deposits in the banks and branches here in Iceland.

Darling: But not the branches outside Iceland?

Mathiesen: No, not outside of what was already in the letter that we sent.

Darling: But is that not in breach of the EEA-treaty?

Mathiesen: No, we don’t think so and think this is actually in line with what other countries have been doing over recent days.

Darling: Well, we didn’t when we had the problem with Northern Rock. It didn’t matter where you saved money, we guaranteed your savings.

Mathiesen: Well, yes, that was actually in the beginning at least debated. I am sure you cleared that up in the end.

Darling: The problem, I do understand your problem, the problem is that you have people who put their money into a bank here and they are finding that you have decided not to look after their interests. This would be extremely damaging to Iceland in the future.

Mathiesen: Yes, we realize that and we will be trying as we possibly can to make this not a problem. We are in a very, very difficult situation ...

Darling: I can see that ...

Mathiesen: ... and just this week, since we can’t cure the domestic situation we can’t really do anything about things that are abroad. So we must first deal with the domestic situation, and then we will certainly try to do what we possibly can, and I am personally optimistic that the legislation that we passed last night will strengthen this part of it. And we, of course, realize what could happen and don’t want to be in ...

Darling: yes ...

Mathiesen: but the point is also, Chancellor, that we have for months been trying to talk to everybody around us and trying to tell them that we were in trouble and ask them for support and we have actually gotten very little support.

Darling: I understand that, but I have to say that when I met your colleague and these others, basically, what we were told turns out not to have been right. I was very concerned about the London banking position and the kept saying there was nothing to worry about. And you know, with the position we are now in, there will be a lot of people in this country who put money in and who stand to lose an awful lot of money and they will find it difficult to understand how that has happened.

Mathiesen: Well, I hope that won’t be the case. I wasn’t at the meeting, so I can’t say ...

Darling: Well, I know that. Can you tell me this, if the insurance fund you refer to, does it have money to pay out?

Mathiesen: They have some money, but as is with most of these funds, it is very limited compared to the exposure.

Darling: Yeah, so you don’t know. See, I need to know this, in terms of what I tell people. It is quite possible that there is not enough money in that fund. Is that right?

Mathiesen: Well, yes, that is quite possible.

Darling: Well, that is a terrible position to be in.

Mathiesen: Yes, we are in a terrible position here and the legislation we were passing through last night is an emergency legislation and, as I say, we are just trying to ensure the domestic situation so that we can then secure other situations.

Darling: What I ... I take it therefore that the promise Landsbanki gave us, that is was going to get 200 million pounds of liquidity back into it, has gone as well.

Mathiesen: Yes, they didn’t get that liquidity.

Darling: Well, you know, I do understand your position. You have to understand that the reputation of your country is going to be terrible.

Mathiesen: Yes, we do understand that. We will try our utmost to avoid that. We need to secure the domestic situation, before I can give you any guarantees for anything else.

Darling: Obviously, I would appreciate any help you can give.

Mathiesen: Obviously ...

Darling: Sure ... We would have to explain to people here what has happened. It will, of course, no doubt, have repercussions for others. It really is a very, very difficult situation where people thought they were covered and then they discover the insurance fund has got no money in it.

Mathiesen: Yes, as we said in the letter ...

Darling: OK, I will appreciate whatever help you can give.

Mathiesen: Yes, we will need for the FSA and FME to be in touch on the ...

Darling: Oh, I know the most certainly will. I know you were not at the meeting and weren’t part of it. We doubted what we were being told then and I am afraid we were right.

Mathiesen: Yes, that can be.

Darling: Anyway, please keep in touch. Whatever you can do to help, that will be very helpful indeed.

Mathiesen: Yes: if there are any areas on your side, please be in touch.

Darling: Alright. I will do that. Thank you very much indeed.

Mathiesen: Thank you.

Darling: Goodbye.

M. Bye.

The transcript was featured on RÚV TV show Kastljós on Thursday night.

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