Serious Fraud Office to investigate Kaupthing UK

  • alec
  • 13/10/08 31/05/09
  • unspecified
  • Offline
Posted: Wed, 16/12/2009 - 16:09

From BBC News:

The Serious Fraud Office (SFO) is to investigate the activities of Icelandic bank Kaupthing before its collapse in October last year.

The SFO said it would study whether the bank misled savers to encourage deposits into its high interest Kaupthing Edge accounts in the UK.

More than 30,000 of the accounts were taken up by British investors.

The SFO said it would also investigate why substantial funds flooded out of the bank in the days before it failed.

Kaupthing, once Iceland's biggest bank, collapsed along with a number of Icelandic banks during the height of the banking crisis last year.

British money still tied up in the failed banks became a subject of tension between the UK and Icelandic governments.

The UK was forced to intervene on behalf of savers to ensure money was paid back.

An SFO spokesperson added that investigators would be working closely with Icelandic authorities during the investigation, but was not able to say how long the investigation would last.

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Telegraph - FSA let failing bank move on High Street

  • glen07
  • 21/10/08 n/a (free)
  • a depositor
  • Offline
  • Sun, 03/01/2010 - 12:46

From The Telegraph, 2nd January 2010

FSA let failing bank move on High Street
The Financial Services Authority did nothing to prevent Icelandic bank Kaupthing from setting up British retail operations eight months before it failed because it thought taking personal deposits would be a positive move to boost the bank's faltering liquidity.

By Rowena Mason
Published: 9:10PM GMT 02 Jan 2010
The Icelandic bank set up British retail operations eight months before it failed
The Icelandic bank set up British retail operations eight months before it failed

The revelation comes as Icelandic president Ólafur Ragnar Grímsson balked at signing legislation, already passed by the Icelandic government, approving reimbursement of £2.3bn to the UK government for compensating 300,000 customers of the Icesave arm of Reykjavik-based Landsbanki.

The Serious Fraud Office is now formally investigating Kaupthing under the Fraud Act to see whether the launch of its high-interest Edge retail accounts misled British savers. UK customers deposited £2.5bn in the internet accounts between April 2008 and the bank's collapse 15 months ago.

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According to very senior sources at the regulator, the FSA had worries about the liquidity of Kaupthing's British subsidiary before Christmas 2007.

It did nothing to stop the establishment of the Edge accounts in the April, eight months before its eventual collapse, because the regulator thought it would help the bank's cash position.

It is understood that the British arm of Kaupthing came very close to surviving the crash that sank the Icelandic economy.

But the UK was eventually forced to freeze Kaupthing's assets in the days before its collapse amid fears that money could be transferred back to Iceland.

The FSA, which was in charge of supervising the bank's UK subsidiary Kaupthing, Singer & Friedlander, has refused to reveal whether it is investigating the collapsed institution.

It says it was "impotent" to prevent Kaupthing's takeover of the blue-blooded City investment bank Singer & Friedlander in 2005, despite warnings about the suitability of the new owners.

Earlier this month, The Sunday Telegraph revealed that the Serious Fraud Office had launched a formal investigation into Kaupthing's activities in London.

Tony Shearer, a former chief executive of Singer & Friedlander before it was taken over by Kaupthing, has written to FSA chairman Lord Turner to ask for a public inquiry.

"For the sake of everybody who lost money, we need to know exactly what happened between the takeover and its collapse," he told The Daily Telegraph. "The FSA is partly culpable because this all happened on its watch."

It is thought to be the only financial collapse in which British citizens have lost money.

More than 4,000 UK savers with Kaupthing in the Isle of Man are still waiting alongside commercial creditors to receive full compensation over £50,000 in a process that could take eight years.

Kaupthing collapsed last October, along with two other Icelandic banks, Glitnir and Landsbanki, leaving 300,000 British savers unable to access their money and institutions nursing billions in losses.

The crash was linked to the demise of a number of High Street retail brands, the merger of building societies, such as Yorkshire and Chelsea, and rises in council tax as a result of £1bn of losses at local authorities. Following the crisis, the Treasury had to pay out £7.5bn to compensate UK savers, although £2.3bn of this will be repaid by Iceland over the next 15 years.

The Serious Fraud Office is also looking at transfers made by the bank prior to its collapse.

One source said the aim of was to conduct a full inquiry on behalf of the hundreds of British charities, councils and offshore savers still waiting to be fully compensated a year after the crisis.