FSA censures Kaupthing Singer and Friedlander, Please see my comments at the bottom

  • mikeexpat
  • 31/10/08 31/05/09
  • a depositor
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Posted: Tue, 26/06/2012 - 16:53

link: http://www.international-adviser.com/news/uk/fsa-statement-on-kaupthing-...

The Financial Services Authority (FSA) has issued a final notice against Kaupthing Singer and Friedlander Limited (KSFL), the UK based subsidiary of the Icelandic banking group Kaupthing Bank Hf (KBHf).
The FSA stated that the publication of this notice was “to ensure that other regulated firms understand the importance of complying with the FSA’s liquidity guidelines.”

It added that “where compliance is dependent on liquidity arrangements with a parent company, the ability to exercise these arrangements is rigorously tested rather than assumed."

The backdrop to this notice was the failure of the Icelandic parent company, and the UK subsidiary being placed into administration on 8 October 2008. This was followed in 2009 by the Manx High Court putting Kaupthing Singer & Friedlander Isle of Man into liquidation which in turn triggered the Crown dependency's compensation scheme, and the KSF IoM Depositors’ Action Group sought costs from the Isle of Man Treasury.

After the UK subsidiary was placed into administration, the FSA started an investigation into the conduct of KSFL and its senior management during the period immediately prior to the bank’s failure.
In particular, the FSA considered KSFL’s liquidity management in the context of its relationship with its Icelandic parent company KBHf. The FSA did not investigate the wider issues around the solvency of KSFL’s Icelandic parent company or the group as a whole, as these entities were not regulated by the FSA.

The notice states: "Specifically, between 29 September and 2 October 2008, KSFL breached Principle 2 of the FSA’s Principles for Businesses, which requires a firm to conduct its business with due skill, care and diligence. KSFL was found to be in breach because it failed to consider promptly and properly whether liquidity stresses in KBHf in Iceland would have a detrimental effect on its own liquidity position.

The FSA further outlines how KSFL did not give proper consideration to, or properly monitor, a special financing arrangement with its parent company in Iceland, under which it could draw up to £1bn at short notice: "KSFL assumed it could rely on receiving this £1bn ‘liquidity transformation arrangement’, if needed, without testing that assumption. In addition, when it started to have concerns about this liquidity arrangement, it failed to discuss these concerns with the FSA in a timely manner.”

"While the ultimate insolvency of KSFL cannot be attributed to the failure to monitor promptly and properly the liquidity transformation arrangement, the FSA considers KSFL’s failings to be serious as they occurred at a critical period for the financial markets and at a time when the FSA was particularly concerned to ensure it was fully informed about all banks’ liquidity".

Following the conclusion of the investigation, Sigurdur Einarsson the former non-executive Chairman of KSFL, Hreidar Mar Sigurdsson former non-executive Director of KSFL and Armann Thorvaldsson the former CEO of KSFL have provided undertakings to the FSA that they will not perform any significant influence functions requiring the approval of the FSA at any UK authorised firms for a period of five years from 8 October 2008, the date KSFL was placed into administration. The FSA has not made any findings of regulatory breach against them and they have not made any admissions.

The closure of the FSA investigation into UK based KSFL is independent of any ongoing investigations surrounding the Icelandic parent company, KBHf, currently being carried out by other UK and international overseas agencies.

My Comments

We are the only Kaupthing Bank Depositors (not investors, wrong name used by even some depositors on this Forum) in Europe; including EU countries and non EU countries (i.e. Switzerland, Norway) who were not immediately compensated in 2008. Even in bankrupt and tiny Iceland not one Kaupthing Bank depositor lost even one penny.

FSA clearly states that KSF UK was guilty of negligence. Even guiltier is Government of IOM by allowing KSF IOM to deposit huge amounts of cash in KSF UK. If this money was not deposited in KSF UK, KSF IOM would have been a liquid Bank and we would not have to go through the horrors of liquidation.

We should not allow guilty governments / banks / organizations / people get away with it. For example to date cost to the main guilty party, IOM Government is minimal. Our Liquidator returned to them 91% of all DCS payments and will return more in future. The final cost for IOM Government for this disaster will be only a couple of Million £, or nil if return is 100%.
The only way to finalize this criminal affair is to sue guilty governments / banks / organizations / people etc. If each of us contributed 0.2% to this Legal Fund we should have £ 1,000,000 (£ 500,000,000 x 0.2% = £ 1,000,000). For somebody who had £ 100,000 deposit cost would be £ 200, for somebody who had £ 1,000,000 deposit cost would be £ 2,000. For this money we should get the best legal brains in the country who should decide suing whom would give us the highest possibility of success. Of course guilty party must be able to pay at least £ 100,000,000 to £ 150,000,000. 0.2% for Legal Fund could be deducted from all of us still not fully compensated by Liquidator Mike Simpson.

Although I very much appreciate detailed information provided by GORDON 45, ARINGAULT and others we should realize that all this activity did not increase our return by even one penny.

I really do not care if my final return is 97.7% or 97.5% (after contributing 0.2% for lawyers). What I care about is that we should do everything in our power to find, prosecute and punish guilty parties to this criminal affair. If on top of this we could be awarded compensation for capital and interest losses plus personal damages it should be considered as a bonus.

But above is my personal opinion and to proceed as recommended above would require a support of majority of depositors.

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A slap on the wrist, where a noose is called for.

  • librasaver
  • 12/10/08 n/a (free)
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  • Tue, 10/07/2012 - 05:01

The IOM government and financial authorities deserve to sink, and the UK Labour politicians , who at the time
did all they could to avoid compensating savers, should also each suffer a personal tragedy. Greed and lack of discipline and morals throughout the proudly British financial industry have brought us where we are today.
If the British authorities did not have the balls to censure their crooked buddies in 2008, they will not do so now, even with the world's best lawyers on their tails.


UK Kaupthing directors banned from senior roles

  • glen07
  • 21/10/08 n/a (free)
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  • Mon, 09/07/2012 - 22:04

UK Kaupthing directors banned from senior roles

Posted on07 July 2012.

The three directors of the British arm of Iceland’s collapsed Kaupthing bank have escaped a fine after a three-and-a-half year investigation, but they will not be allowed to hold senior jobs in the British banking sector for another year. Kaupthing Singer & Friedlander’s (KSFL) former non-executive director Hreidar Mar Sigurdsson, former non-executive chairman Sigurdur Einarsson and former chief executive Armann Thorvaldsson were told this week by the Financial Services Authority (FSA) that they cannot hold senior financial roles in Britain for five years, although the restrictions date from October 2008.

The FSA confirmed that if KSFL was not already in administration, it would have imposed a “significant” penalty on it.

“The FSA considers KSFL’s failings to be serious as they occurred at a critical period for the financial markets and at a time when the FSA was particularly concerned to ensure it was fully informed about all banks’ liquidity,” the FSA stated.

The Iceland’s banking sector collapsed in 2008 after the failure of Lehman Brothers caused a global crisis of confidence. When Iceland’s third-ranked bank Glitnir had to be bailed out by the government, KSFL moved its liquidity status to ‘code red’.

However, the FSA found that the British arm failed to utilise an agreement by which they could draw money from their Iceland parent company in an emergency.

http://www.icenews.is/index.php/2012/07/07/uk-kaupthing-directors-banned...


Iceland banking collapse: diary of a death spiral

  • glen07
  • 21/10/08 n/a (free)
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  • Wed, 27/06/2012 - 06:11

Iceland banking collapse: diary of a death spiral

Despite rescue attempts, Iceland's banking crisis and its effect on the UK was sucked into panic and chaos of the financial crisis

Dark clouds over Reykjavik, Iceland's capital, where the international operations of Kaupthing bank began to unravel in late 2008. Photograph: Catherine Karnow/Corbis

Shortly after dinner on 5 October 2008, Gordon Brown spoke to Iceland's prime minister, Geir Haarde, in a frantic phone call. The world was in the grip of the most serious banking crises in living memory. Within 48 hours Iceland would experience a system-wide banking meltdown and British taxpayers would commit £500bn of bailout funds to help UK banks avoid a similar fate.

The conversation concerned Iceland's big three banks, Kaupthing, Glitnir and Landsbanki, which were locked in a death spiral as international investors stampeded out of high-risk financial institutions around the world.

It was clear Iceland was too small to offer a state bailout; the three banks had combined assets almost 10 times the size of the GDP. Brown urged his counterpart to immediately seek a rescue loan from the International Monetary Fund, a suggestion that within days became inevitable.

But Brown had a more pressing interest in the health of the tiny island economy that extended well beyond offers of sympathy to a far-flung friend.

Panic was spreading among hundreds of thousands of British savers who had put money into the Icesave online deposit accounts offered by Landsbanki. Depositors had been attracted by industry-beating interest rates and reassured that their savings would be covered by an Icelandic state guarantee scheme that was "fully funded".

By early October it was becoming increasingly clear that the capacity of the Icelandic government to stand behind the country's deposit guarantee scheme was in doubt. A run on deposits had begun as nervous British savers scrabbled to repatriate their cash.

These were difficult subjects Brown wanted to discuss, though they came as no surprise to Haarde. But then the British prime minister changed tack. He began to ask questions concerning Kaupthing Singer & Friedlander, a British bank owned by, but trading at arms-length from, Iceland's Kaupthing.

KSF had also attracted hundreds of thousands of British depositors with its own high-interest online account Kaupthing Edge. Because of its Icelandic ownership, panicky UK savers had begun emptying their accounts.

On the face of it this seemed irrational. KSF was a British bank, reporting to the UK Financial Services Authority, and its fortunes ought to have been distinct from those of the Reykjavik-based parent, Kaupthing. Moreover, retail depositors could be comforted that their savings were covered by the UK Financial Services Compensation Scheme, not the in-doubt Icelandic equivalent.

Brown dropped his bombshell. He explained to Haarde that there was a gaping hole in KSF's liquid funds, leaving the bank ill-prepared to deal with a deposit run. He pointed to £1.6bn which the FSA had informed him had been transferred from KSF to Kaupthing in Reykjavik in breach of British laws.

KSF was a British bank, reporting to the FSA, which had taken €3.5bn (£2.8bn today) in deposits from British savers since the launch of the Kaupthing Edge account eight months earlier.

In effect, Brown was telling Haarde that the equivalent of more than half of these cash deposits had been illegally spirited off to Reykjavik — an allegation that would later be withdrawn. "It was clear that he considered this a very serious matter," Haarde later told an Icelandic truth commission.

Brown's assertions took Haarde by surprise; he had been aware of a regulatory dispute over liquidity but nothing of this magnitude. He had understood from Kaupthing that the matter was much smaller, and that the bank had come to an agreement with the FSA over how it could be resolved.

After putting the phone down, Haarde contacted Kaupthing executives. He recalls being told that the bank was already aware of the £1.6bn sum referred to by Brown. The lion's share of the shortfall stemmed from a complex £1.1bn deposit arrangement KSF entered into with Kaupthing described internally as a "liquidity swap".

Under FSA rules, KSF was allowed to count these deposits with Kaupthing towards its liquidity requirements. Indeed, as soon as the liquidity swap was set up in early 2008, KSF management point out, it was included in liquidity reports that went to the FSA.

In truth, however, by the time the FSA was focused on the crisis facing KSF, it was clear to all that the liquidity arrangements with crisis-stricken Kaupthing could not be relied upon. On Tuesday the FSA published its finding that KSF failed to alert the regulator to the seriousness of the issue for several days. It made clear this had not been deliberate or reckless.

An examination of the collapse of Kaupthing and KSF by an Icelandic independent truth commission, convened by parliament two years ago found the liquidity swap was not subject to a formal written contract but sketched out in KSF and Kaupthing emails.

In the final days before the Icelandic bank's official failure on 9 October, Kaupthing executives worked around the clock looking for ways to plug the widening liquidity black hole at KSF and placate the furious FSA. In the space of a few days a KSF rescue by Barclays or JC Flowers was contemplated, as was a merger between Kaupthing and parts of the crisis-stricken Icelandic bank Glitnir.

It had been made clear to Kaupthing that without rapid repair of the £1.6bn black hole, the FSA would be forced to put KSF into administration, a move that would trigger default on many of Kaupthing's bonds and, therefore, spell the end for the Icelandic parent too.

Desperate promises of to shore up KSF's position were made to Hector Sants, FSA chief. Kaupthing chief executive Hreidar Mar Sigurdsson said Iceland's three largest pension funds, which were big shareholders in the bank, had agreed to sell assets and bring €500m-€1bn of foreign currency into Kaupthing.

Iceland's central bank was also preparing a €600m loan guarantee for the bank, secured against a basket of bonds and mortgages, despite having agreed a €500m facility for Kaupthing just days earlier. Neither would come to pass.

Back in London, KSF bosses threw themselves at the mercy of the Bank of England seeking help from the "lender of last resort". Given the state of relations with the FSA, however, the request was swiftly rejected.

On the morning of 8 October, a frantic conference call was held between Kaupthing, KSF and FSA boss Hector Sants. The Icelanders saw a glimmer of hope in the Treasury's announcement hours earlier of an unprecedented £500bn package of bailout funds for British banks.

Sigurdsson, suggested KSF was surely among likely candidates to receive access to this liquidity. Sants' response was curt. "Those funds are not for you."

Some liquidity had been found by this time, notably by calling in a huge loan from Kaupthing to the business empire of the Mayfair-based billionaire Robert Tchenguiz, the Icelandic bank's biggest borrower. Unable to meet a colossal repayment demand from the bank, Tchenguiz had forfeited swaths of his investments, including huge stakes in two blue-chip companies listed on the London stock market, J Sainsbury, and Mitchells & Butlers, the pub operator behind O'Neills, All Bar One, Harvester, Browns and many other well know bar and restaurant chains.

In a falling market a fire sale of these shares generated a fraction of their value the previous year, but Kaupthing bosses felt they had little choice. They had to get liquid funds to KSF to appease the FSA at all costs.

The episode was extremely costly for Tchenguiz, who claims to have personally lost about £1bn in the failure of Kaupthing. The British investor was one of biggest losers of Iceland's banking crisis.

Meanwhile regulators were watching deposits gushing out of the bank. About £95.5m had been withdrawn from Kaupthing Edge accounts the previous day. Being an internet-based account, there were, of course, no snaking queues outside bank branches as there had been a year earlier with Northern Rock. But this was just as acute a loss of confidence.

The situation was untenable. At 2.49pm that afternoon KSF was placed into administration. The Treasury announced that, acting on the advice of the Bank and FSA, the chancellor had used emergency banking stability laws to transfer Kaupthing Edge retail deposits from KSF to the ING Group.

At the same time, in exchange for taking on these deposits ING received a Treasury guarantee. As administrators from Ernst & Young entered KSF's headquarters on Hanover Street in Mayfair, it quickly became clear the UK taxpayer was now KSF's largest creditor. Back in Iceland, Kaupthing was formally toppled the following morning.


source & link?

  • anrigaut
  • 19/10/08 30/10/09
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  • Wed, 27/06/2012 - 17:02

Hi Glen07,

Please can you supply source and link for this article?

Thanks.

UPdate: OK - just found it. Guardian:
http://www.guardian.co.uk/business/2012/jun/26/iceland-banking-collapse-...


Former Landsbanki Director Sentenced to Prison

  • glen07
  • 21/10/08 n/a (free)
  • a depositor
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  • Wed, 27/06/2012 - 06:14

26.06.2012 | 00:15

http://www.icelandreview.com/icelandreview/daily_news/Former_Landsbanki_...

Former Landsbanki Director Sentenced to Prison

Haukur Þór Haraldsson, former managing director of Landsbanki’s operational division, was sentenced to 18 months imprisonment for embezzlement by the Reykjavík District Court on Monday, visir.is reports.

It was the third time that the case was heard by the court. Haukur Þór had earlier been acquitted of the charges and then later sentenced to two years in prison.

According to visir.is, Haukur Þór was charged with having transferred ISK 118 million (USD 935,000; EUR 750,000) from Landsbanki’s subsidiary, NBI Holdings Ltd., to his own account following the banking collapse in October 2008.


Legal matters and representation

  • SpeedySA
  • 04/02/09 31/05/09
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  • Wed, 27/06/2012 - 05:49

I read the co summary of posts, sent daily, from the sound and informative submissions of Anrigaut and Gordon, ..., but I have never read such a sound, well expressed, post as this one of Mikeexpat. You have got it dead right, old son, and summed it up beautifully.

[ng: Edited. Please do not make derogatory comments about other members]


Wrong!! SpeedySA.

  • follow_the_tao
  • 11/10/08 31/05/09
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  • Fri, 29/06/2012 - 03:48

... The problem with Kaupthing was being signalled by the CDS market for the whole year preceeding the events MikeExpat has chosen to concentrate on. Look up Buiter, LSE chief economist Citi, ftalpahville, if as is likely you disbelieve me.
I'm just out of patience. ...
The banks were looting. All of them.
This investigation:
http://www.rollingstone.com/politics/news/the-scam-wall-street-learned-f...
and this:
http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/9363445/...

The immensity of the looting is, I admit, difficult to grasp. But, go on, make a real effort. I don't recognise your 'apodo'. Just where have you come from? All of a sudden.

From detail comes the big picture. ...

I personally think Anrigaut deserves infinitely more praise than MikeExpat.

The issue comes down in any analysis to Cashen and Gelling managing politically to overrule the IoM regulator who needs to hang his head in shame. It is apparently one event. But that one event occurred in an ambience of greed, and crisis as the Manxes were really little boys slow off the block. You can listen to the current Treasury Minister trying to repudiate culpabilidad by going to Anrigaut's most recent post. He sounds like a slow seven year-old schoolboy. He is so pathetic and sorry sounding that you almost feel sympathy but the reality is that behind him are the ones that count, and they are still bent on screwing us. The IoM government has been purchased. Look up Brown's sell out on tax. Naievely corruptible doesn't even touch on Brown's actions. Who owns what is the question.

You get that, mate? Greed, selfishness, short-sightedness, negligence, repeated instituional IoM failure to address the danger,

... But please keep on posting. It enlarges the debate.

Su amigo, ftt

[ng: Edited. Please do not make derogatory comments about other members]


Neat summary ftt

  • anrigaut
  • 19/10/08 30/10/09
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  • Fri, 29/06/2012 - 08:27

"The issue comes down to ..." encapsulates it neatly, as I see it. I hadn't actually listened to the audio-clip of the Treasury Minister until now. How fumbling he sounds. As a result I have submitted a second comment - not yet showing. As the previous one took over 24 hours to appear, I'll copy the latest here:

"Mr Teare says the FSC acted "prudently". No Mr Teare. While that was clearly their intention back in May 2008, it was simply not translated into the appropriate action by the Directors of KSFIOM. Tricky Dicky wonders why. That is indeed THE question. Could the fact that one of those Directors was also vice-chairman of the FSC possibly have had anything to do with it? The CEO of the FSC should hang his head in shame."

http://www.isleofman.com/News/article.aspx?article=46294&c=pending&c=pen...

I rather suspect that Mr Aspden does hang his head in shame (how could he not?) - but only in private of course.