Holding bankers to account – Iceland leads the way

  • anrigaut
  • 19/10/08 30/10/09
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Posted: Thu, 19/12/2013 - 15:18

Last week, over 5 years after the collapse of the Icelandic banks, an Icelandic court convicted 3 top Kaupthing bankers and the bank’s second largest shareholder to prison sentences of up to 5 1/2 years for market manipulation and breach of fiduciary duty in the run-up to the crash. The same three Kaupthing managers are among those charged in another large market manipulation case which is due to come to court at the end of January. Similar cases involving managers from Landsbanki and Glitnir are also ongoing. Those convicted last week are expected to appeal. But whatever the final outcome, these cases show the determination in Iceland to hold bankers to account. http://grapevine.is/Home/ReadArticle/Four-Kaupthing-Executives-Sentenced...

In contrast, and despite a seemingly unending stream of financial scandals, no top bankers have been held to account in the UK. Last week's verdicts were reported briefly in the Guardian and in rather more detail on the website of the BBC: http://www.bbc.co.uk/news/business-25349240. But in the rest of the mainstream UK press (including notably the Daily Telegraph and the Times), the silence has been deafening. A clear case of nothing to see here, move on!

The events in Iceland have not however gone un-noticed elsewhere. Links to several relevant articles and blogs have been posted on this site as News items, but I thought it might be helpful to collect them together here.

In her excellent Icelog, Sigrun Davidsdottir raises the pertinent question “Why are bankers investigated in Iceland and not so much elsewhere?” http://uti.is/2013/12/why-are-bankers-investigated-in-iceland-and-not-so...
Tony Shearer - well-known to us as the former CEO of Singer & Friedlander whose dire warnings prior to the disastrous takeover of the bank by Kaupthing in 2005 were unheeded by the FSA and whose evidence to the Treasury Select Committee after the collapse was disparaged by Hector Sants – has some clear ideas on the question, with which it is hard to disagree:

We know that in the UK the Serious Fraud Office has a catastrophic record, but it seems clear that the political will simply does not exist to make these prosecutions. The UK banks and the 4 big accounting firms have effectively corrupted the politicians, regulators, and civil service. They have so placed their partners and former partners into the system, and their level of lobbying, secondments, and work that they do for these people is so great that they have undue influence. It seems to me that, as a result, the Chancellor of the Exchequer and the UK Prime Minister as well as the heads of the UK regulatory bodies and the civil servants regularly make the wrong decisions.
We will continue to have scandals involving the UK banks until such time as the senior politicians and senior civil servants clear out from the system those people in the banks and major accounting firms who have the wrong legal and moral attitudes.
The Chancellor, supported by the Prime Minster, has hung a large sign over the City of London to say that we are open to business for crooks and those with low morals. Iceland has hung out a sign to say the opposite. By the actions of the Icelanders and the inactions of the UK, the undesirables will avoid Iceland and chose London.

It's good to see Tony taking up his pen again. He has also commented on several of the blogs linked to below.

A business leader in The Observer headlines “Financial offenders must be named if bank reforms are going to work” and continues “The shocking tale of Lloyd's mis-selling culture ended with a deserved £28m fine. But not one person was singled out for blame. As Iceland shows, that's got to change”. http://www.theguardian.com/business/2013/dec/15/financial-offenders-name...

But Prem Sikka – professor of accounting at Essex University – sees little chance of that: “Iceland has sent four former directors of its bank Kaupthing to prison for fraud. But the chances of similar legal action happening in the UK are low, where fraud investigators have a poor record.” https://theconversation.com/hamstrung-sfo-not-capable-of-holding-bankers...

Also relevant are recent blogs by Ian Fraser (which pre-dates the Icelandic verdicts): http://www.ianfraser.org/victoria-chick-the-financial-system-has-gone-co... and Rowan Bosworth-Davies (on the return of Bob Diamond) http://rowans-blog.blogspot.co.uk/2013_12_01_archive.html
Interestingly, Rowan has invited Tony to contact him.

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ANRIGAUT ANALYSIS

  • Wombat761
  • 30/01/09 20/03/15
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  • Sat, 01/02/2014 - 12:38

Thanks Anrigeut


Gambling for resurrection in Iceland

  • anrigaut
  • 19/10/08 30/10/09
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  • Tue, 07/01/2014 - 20:01

"Kaupthing’s culpable strategy was a part of a large gamble for resurrection by Kaupthing and the others during the last year of their existence. "

Good article, with graphs and figures, on the shenanigans of Kaupthing (and the other Icelandic banks) as they gambled to survive in 2008, by Economics professors at Reykjavik and London:
http://www.voxeu.org/article/gambling-resurrection-iceland

As the authors conclude:
"The Icelandic banks were too big to fail, but too big for the state to rescue. So they did fail, with devastating systemic consequences in Iceland, though the international effects were small relative to the simultaneous global crisis. The Icelandic bankers are paying a personal price, more than financial, as some others have in the past (e.g. many officials of US ‘thrifts’ in the 1980s). But elsewhere, there have been no high-profile prosecutions of individual executives of financial institutions that failed or were bailed out in the 2008 crisis. In this regard, Iceland may seem a special case played out in a tiny country. But as a classic case of gambling for resurrection, for which we now have detailed evidence, the lessons of the rise and fall of the Icelandic banks are very general indeed."

Also reproduced in Naked Capitalism with the comment:
"We’ve featuring a nice piece of crisis-related forensic work. Too bad we’ve seen so little of this sort of thing. The article describes some of the desperate and illegal measures pursued by one of the big Icelandic banks, Kaupthing, before its collapse. It draws some important lessons, including regulatory failures, both of the rules themselves and of lax oversight."
http://www.nakedcapitalism.com/2014/01/gambling-resurrection-iceland.html


Anrigaut - Gambling for resurrection in Iceland

  • Gordon 45
  • 22/10/08 n/a (free)
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  • Tue, 07/01/2014 - 21:48

Hi Anrigaut,

Another tragic but brilliant post on the state of the corruption at Kaupthing and the other two large Icelandic Banks that were players, prior to the collapse in October 2008..

Gordon 45


Hello Angela, Your

  • ianw
  • 14/10/08 n/a (free)
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  • Fri, 20/12/2013 - 09:44

Hello Angela,

Your interesting post eloquently summarises the position. I will be writing to my MP to press for action. However, for all the reasons you describe, there is no independent oversight. I wonder whether it's worth trying to collect signatures on a thread on the No 10 website in the hope that there will be sufficient support to force a debate. However, even if this were to happen, the power of the lobbying, corruption and infiltration is likely to overwhelm any action.

On a separate note, do you know why it's now the 20th of the month and PWC haven't got around to posting the outcome of the November figures? Surely, it's a minimal task. however, they are still being paid and the date is continually slipping.

Many thanks for your continuing support. I suspect like many, I don't often post now, but still keep up to date.

Happy Christmas!

Ian


To Ianw - Nov figures just out

  • Gordon 45
  • 22/10/08 n/a (free)
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  • Fri, 20/12/2013 - 15:34

Hi Ian,

That's the Nov figures just out. not a lot to see. Will do my monthly update and issue my thoughts as soon as I can.

Cheers,

Gordon 45


Holding Bankers to Account

  • Wombat761
  • 30/01/09 20/03/15
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  • Wed, 01/01/2014 - 03:24

Thanks Anrigaut!
You are , as always, an avenging angel and we have no means but to say "Thankyou very much" for all your onngoing research,

Happy 2014
Wombat761