A report by Danish lawyers on the fall of Denmark’s Roskilde Bank points to the likelihood of the bank’s previous management breaking the law on many occasions. The report could be very useful in Iceland as well, according to the country’s special bank collapse investigator and the head of the FME, the Icelandic financial supervisory body.
Roskilde Bank fell into the control of the Danish state around a year ago and the bank’s resolution committee commissioned a legal investigation into the dealings of the previous management in February this year. The lawyers working on the report have now come to the conclusion that financial laws were probably broken on many occasions and that they have gathered various pieces of evidence.
Among the accusations is probably abuse of power by former bank director Niels Hansen, who the report saddles with the largest share of responsibility for what happened. Abuse of power is punishable by law and happens when somebody, in this case the bank’s director, abuse their position to benefit personally at the expense of their clients.
The report details a history of illegal activity in share dealing – by which mean the bank itself, and closely connected parties, managed to take control of a large proportion of the bank’s shares in an illegal manner. There are also apparent indications of the bank deceiving financial regulators and the general public including breaking the law on information that must be supplied to the authorities. Some of the offences are considered criminal offences. It is thought that the bank’s high-risk and shady investments could also have broken the laws governing limited companies.
It will now be decided, in co-operation with Denmark’s financial regulator, whether formal legal proceedings will be take up against the bank’s former management, with possible criminal prosecution.
Gunnar Th. Andersen, head of Iceland’s FME, says that it is not possible to say whether the same laws were broken in Iceland, but that it would be very interesting to see the report.
“We have, for example, seen huge loans being made without collateral, loans issued to prop up share prices – plain abuse there – and large scale insider trading.”
Many cases have already been referred to the office of the special investigator, Olafur Thor Hauksson.
Andersen says the Icelandic authorities should try to see as many examples of similar cases as possible – especially as Danish law is so similar to Icelandic law, including large swathes of European regulation.
Olafur Thor Hauksson says he intends to carefully research the Danish report and see how its findings can be used in Iceland.
The EEA should buy an island, ship all bankers onto it, and then surround the island with floating mines and man-eating sharks. Let the bankers live off each other for a few months and then nuke the island. Maybe the idea should be put to a referendum.
“The EEA should buy an island, ship all bankers onto it, and then surround the island with floating mines and man-eating sharks. Let the bankers live off each other for a few months and then nuke the island. Maybe the idea should be put to a referendum.”
The best idea i have heard for a long time :)
Does a bank collapse happen when the bank has so large a deficit that it can’t pay all the depositor? Or there are other reasons for a collapsed bank.
maybe it would cause panic
bank collapse, becoming rountine this year.
A bank could collapse for MANY reasons. Remember that all banks lend more to customers that they’ve taken in deposits. Retail banks typically lend 10 times more than they’ve taken and, for investment banks, that ratio is 20-50 times. Therefore, the viability of every bank is merely a confidence game. If enough of the depositors want their money back, the bank will inevitably collapse because it can’t pay them all. Each one is just a house of cards.