Iceland’s National Audit Office sent out a statement yesterday saying that questions surrounding the Central Bank of Iceland’s lending to financial institutions last year remain unanswered and should be directed to the Althingi Parliamentary Investigation Committee.
The statement focuses on the Central Bank’s losses due to collateral loans granted to financial companies in 2008. At the end of 2008, the Bank’s liabilities due to such loans amounted to ISK 345 billion (USD 2.7 billion at today’s rate). The bank lost ISK 75 billion outright and the government took responsibility for the other ISK 270 billion.
In the months leading up to the banking crisis, the three largest banks, which would soon collapse, secured loans from smaller financial companies, which then secured loans from the Central Bank against the uninsured shares. In August 2008, the Central Bank tightened its rules on collateral insurance, thereby pushing the banks towards trying this method of acquiring capital. According to the National Audit office, it should be asked why the Central Bank was not alarmed at this practice which ended up significantly worsening its, and the entire nation’s, financial position.
The report calls for Althingi to find out the answer to the above question, while stressing that it is a general point of interest and that no finger of blame is being pointed at this stage.
Maybe Mr Davið Oddsson can try to answer some of these questions… if he is not too busy in editing articles in morgun blaðið… or writing beeeutiful poems… sorry to annoy you Mr Oddsson with these petty things.
“no finger of blame is being pointed at this stage”
Who was head of the central bank at that time?! The only question is whether David Oddsson’s terrible decisions were incompetent or criminal. His lack of financial education, knowledge or skills may play to his advantage in a criminal trial.
“the bank lost ISK75 billion outright and the government took responsibility for the other ISK 270 billion”
What a shame! It just showed how stupid and ignorant the bankers and the political leaders are in this country. And it’s unfortunate for us taxpayers who will shoulder this “responsibility of the government” for our entire life.
this auditor should have raised the flag then not now when the damage has been done.David oddsson and partners will not see inside of courtroom in the near future.The c.e.o of icelandic stock of exchange should also explain why insider trading went on under his nose causing investors billions of kronas
how could that politician become the head of the CBI? did he have a certain education and experience? Or was it just a nice well paid place to put himself into while away from active political life?
Here is one for Mike ( UK Nordic Analyst ) to criticize me for posting as long he does it with some details..
( Of coruse my purpose in posting comparison is to give reader some ability to see how Icelandic banks and burecrats was doing in comparison with other banks in EU and other countries and other regulating burecrats. For some reason Mike particularly does not like me doing that. )
So we have situation that from start of 2008+ did the then governors of Icelandic Central Bank causing collateral to be closer in type as European Central Bank did accept ( before then, and after August it was stricter ).
+www.lanasysla.is/assets/nyrlanasysla/fyrirgrjan08en.pdf
And so does the Icelandic Central Bank now have this debt because of the ” collapse “.
But then we also have the situation of Kauthphing and Landsbanki collateral given by ECB ( Euros ) that was then called in.
Now Kaupthing and Landsbanki were not worst offender here — it was the Spanish banks as every one knows — so this later calling ins did make the attempts of those two banks raising money at that time and cash flow worse.
Still there has no ( what I would call knowelagable ) person touching this issue — including Mike. So would some one please explain why I am wrong in my asserting in this thread about actions of ECB :
http://www.icenews.is/index.php/2009/02/06/the-banking-crisis-in-iceland-in-2008/
“In 2008, the European Central Bank responded sharply to what it
considered excessive borrowing from the ECB by Icelandic banks
through subsidiaries in EMU countries. The loans concerned had been
taken in compliance with the ECB’s rules on liquidity facilities for
financial undertakings in EMU countries, but the ECB demanded that
the Icelandic banks repay, quite quickly, a large share of the facilities
of which they had availed themselves in good faith. Those repayments were funded at least partially with deposit accumulation in foreign branches [ IceSave ].
Early in October, two Icelandic banks received sizeable
margin calls from the ECB. The ECB demanded that they be met
immediately, which would have driven the banks to collapse. The
news of these margin calls spread widely. For reasons that were not
explained, the ECB withdrew the margin calls at the last moment, in
spite of the fact that the Central Bank of Iceland had been informed
that such decisions by the ECB were irrevocable.”
I missed this link at end of my above post — my mistake :
http://www.icenews.is/index.php/2009/02/13/former-icelandic-pm-haarde-on-hardtalk/#comment-64707
Fisy. You may remember myself and Niels asking you to make a case, rather than throwing around loose accusations.
You’ve yet to do that, which makes confirming or denying what you say to be pretty hard. Although, as you say, someone with Mike’s level of knowledge may be able to.
Where I can help however is with this statement:
The judicial review into the transfer of KSF has now taken place. So we now know for certain that the statement “Kaupthing was strong” is incorrect. Kaupthing could not transfer the funds required by the FSA to KSF. A large part of those that were transferred were immediately transferred out to shore up other parts of the group in Europe.
http://www.icenews.is/index.php/2009/10/21/kaupthing-loses-claim-against-british-government/
Fishy said
“Of coruse my purpose in posting comparison is to give reader some ability to see how Icelandic banks and burecrats was doing in comparison with other banks in EU and other countries and other regulating burecrats. For some reason Mike particularly does not like me doing that. )”
I think its not so much he doesn’t like it, as he finds it your attempts to defend such badly run banks quite startling.
Personally I thinks its rather sad – its plain to see how bad they were and the evidence is all over.
Fisy writes
“For some reason Mike particularly does not like me doing that” (comparisons)
I don’t like or dislike it – it is just pointless. Amongst the principles we try to adhere to (not always successfully, and I fall down quite often – but I try, I do try) is:
Treat every deal on its own merits.
Treat every investment on its own merits.
and most importantly
Treat every indvidual on her or his merits.
Those principles will ensure that you don’t make any huge mistakes. There are always choices to be made and opportunity costs to be faced – and thus comparisons to be made – but they shouldn’t be the driving forces. Financially, in the long term things which are “inherently good” (however you interpret that value-judgement) tend to be profitable. Conversely, one of the causes of “bubbles” is the constant and driving desire to compare – if someone is doing something maybe I should do it, if only because I can see someone else doing it.
In Iceland fashion, prejudice, and conformance – each of which is concerned with comparison – are valued more highly than consistency, openness and individuality.
When faced with criticism Icelanders always adopted the tactic of deflection through comparison – it became a bit of a joke amongst ourselves. They would find something, anything, no matter how ancient or inapplicable, and trot it out. (Witness some recent posts on the British Empire and colonialism – come on! Is that serious? I would never dream of berating a German because of what the Nazi’s did. I would treat the guy on his merits: Is he honest, truthful, straightforward, knowledgeable, experienced, skilful? Does he have personal integrity? Do others respect him? I’m not interested in history, I’m looking to the future. etc etc)
In Iceland though that constant jostling of people, looking at each other, eyeing each other, comparing each other, deriding each other, copying each doesn’t seem to have gone away.
Another way of putting this is as follows: never compare yourself with others, there will always be a better and there will always be a worse. So comparisons rarely reveal anything of any note. However, looking at the true and inherent value of something or someone will always be revealing. That is what financial analysis is all about.
Here endeth the homily.
“never compare yourself with others, there will always be a better and there will always be a worse. So comparisons rarely reveal anything of any note”
I disagree completely! I guess you’ve never worked in a management consultancy, for example, and been involved in the staff assessment process (including peer review, laddering, and forced-percentage banding). The comparison with others reveals strengths and weaknesses, appropriateness of role scope for level, etc as well as defining performance rating and determining salaries, bonuses and promotions. Everything is relative in a competitive meritocracy…
Oh! Oh! Management consultants! Abandon ship! Abandon ship!
:-)
Jim said
>I disagree completely! I guess you’ve never worked in a management consultancy, for example, and been involved in the staff assessment process (including peer review, laddering, and forced-percentage banding). The comparison with others reveals strengths and weaknesses, appropriateness of role scope for level, etc as well as defining performance rating and determining salaries, bonuses and promotions. Everything is relative in a competitive meritocracy…”
Fisy disagrees by slinging multiple links – a process of attrition. You throw a lexicon of jargon!
As for the first section of Mikes post – I found it interesting, in that some fundamental principles of valid decent and honest and honourable business behaviour are part of the equation.
More importantly for me – Mike offered a view of the Icelandic psyche. I have found this helpful – especially the reference to the Icelandic tendency to ‘deflect by comparison’ – I fell for that one in a recent response to Fisy.
Above all Mike spoke of assessing long term qualities, which are – “inherently good.”
Although you speak about –
“staff assessment process (including peer review, laddering, and forced-percentage banding). The comparison with others reveals strengths and weaknesses, appropriateness of role scope for level, etc” – Whatever that means!
And although the factors you raise may be relevant – I would be disappointed if such a narrow view prevailed.
Its silly to compare, but pretty common, even a analyst needs to know history and compare every once in a while.
looks like Uk is more miserable than Iceland acording to the misery index, USA is almost as miserable.
http://ftalphaville.ft.com/blog/2009/12/15/112331/moodys-sees-sovereign-states-a-suffering/
Really good article in the Huffington post
it does have Vikings in it though.
http://www.huffingtonpost.com/ellen-brown/eu-imf-revolt-greece-icel_b_389409.html
I re-read my comment and, yes, there’s way too much consultancy jargon – I need to be de-programmed…
Axel
“huffingtonpost”
What a laughable article. It quotes Ambrose Evans-Pritchard, who is quite simply an idiot.
Mike UK Nordic Anlayst wrote :
>Treat every deal on its own merits.
>Treat every investment on its own merits.
>
>and most importantly
>
>Treat every indvidual on her or his merits.
>
>Those principles will ensure that you don’t make any huge mistakes.
A good philosophy of generalness. But incompleted one.
In all analyst reports for example we do see sector by sector comparison which does place a specific company for example against norms in its sector.
Of course must look at the inherent values of some thing that you would buy into. But to reach that decision you must also compare it against other in the sector and the norms of those same sector — as it is part of the assessment of risk.
Most Analyst do sell they advice to brokers and this is standard part of that business in those reports.
>Conversely, one of the causes of “bubbles” is the constant and driving desire to compare – if someone is doing something maybe I should do it, if only because I can see someone else doing it.
No disagreement to be made there. It is as much about fear of losing out what others might be gaining. A simple human weakness.
>In Iceland fashion, prejudice, and conformance – each of which is concerned with comparison – are valued more highly than consistency, openness and individuality.
I would agree that interest in fashion is indeed some thing that is Icelandic trait.
Perhaps consistency and openness but I would disagree on individuality. Like UK people of old, Icelander are in fact some of most individualist people culturaly that you can find on earth.
Despite what Jóhanna would tell us,
>When faced with criticism Icelanders always adopted the tactic of deflection through comparison – it became a bit of a joke amongst ourselves.
I think that you are very skilled in rhetorical arguing here Mike. You do come up with a clever way to try and disdirect from the qurstion I was asking.
Of course if I do not agree with you — it must be that I am being that ” deflecting ” Icelander.
I could also of course say that a UK Nordic analyst trait is to deflect also away from actual question I do ask about ECB.
Because based on your patterns of posting here, it does show. It is in frankly — not first time it has been done by you Mike on this ECB issue.
But of course — you do not have to answer any thing at all. I know it does take time to make these posts away from other things that you are doing in your life and main job of representing interest of you clients here that did have the investments in Iceland.
But if you do take time to give an answer it would be appreciate by me at least to comment on specific issue at hand.
I of course do enjoy the rest of posts you make.
>The judicial review into the transfer of KSF has now taken place. So we now know for certain that the statement “Kaupthing was strong” is incorrect.
Actually not. The review decision did in fact bring to light more facts that did confirm it.
But that is for when I have time to give detailed reply in that post because need to pull together few facts from annual report etc as Mike did recommend before then I will post for you here :
http://www.icenews.is/index.php/2009/10/21/kaupthing-loses-claim-against-british-government/
One thing though that I will take out from facts came out in high court that relevent to this thread is this October 3rd UK FSA email quote :
” KSF has used its liquidity position to fund circa £500m of margin calls of its parent ”
What margin calls were these ? To who were they for ?
>What margin calls were these ? To who were they for ?
This is a very familiar line of argument from you Fisy. I assume that I’m meant to think, “Wait, this is that ECB thing that Fisy has been talking about!” But, as with your orginial ECB point, you fail to join the dots.
If you have something to say, say it. It’ll be interesting to see how you reconcile your ECB with your Treasury conspiracies.
Apologies Fisy – I haven’t, and I didn’t, answered your points about the ECB. The reason? I simply don’t know about the issue to make a statement.
There are two things which are a mystery to me: the gold market and the ECB (in which I include the euro).
I am baffled by people’s desire for gold – it serves very few useful purposes in the world. It only has value because people crave it – a useless inert metal, no matter how rare it is, is useless. It cannot act as a basis for anything, least of all a currency, because it cannot “stand in the stead” of something. It has no ability to represent productive value, and its limited availability is a problem rather than a benefit for its use as a base currency.
As for the ECB (your topic Fisy) I admire the sentiments of the ECB but in watchmaker-mode I cannot see how the euro can operate in such a diversity of fiscal environments. Please be careful with what I say. I am not criticising the ECB or the euro project – it’s just that I see unresolved technical tensions. My hope is that those tensions can be resolved, but as for how it all operates: well, it’s a blank page for my limited mind. (That’s one of the reasons I’m neutral about Iceland and the EU. Membership or not? It matters little right now, membership aint going to help Iceland in the short term. The issue that the ISK is a completely dead currency is a separate issue in my mind. And that really is a big big problem for Iceland. Think ISK denominated bonds.)
And as for the comparison thing – if you read what I posted I did say that comparisons have a role to play: to repeat there are choices to be made and opportunity costs to be considered. The point is that these come later in the analysis – they are secondary. If you are into comparisons big time then the danger is that you compare two cr*p investments and chose the better of the two – but it’s still a cr*p investment. The correct methodology is to identify the “good” investments and if you end up with more than one then you can make a comparison.
Finally, I really would take issue about the individuality issue. I found Icelanders incredibly homogeneous in their thought patterns and behaviour. Young, old, rich, poor, IP or eco-warrior, man, woman – all you needed to do was scratch the surface and there was a very strong sense of self-identification and collectiveness. Even the nature of the squabbles/political-arguments are carried on within the confines of a narrow set of shared assumptions. (The most obvious is the widely held view that Iceland is somehow unique or special.)
As for being miserable – of course we Brits are miserable. Always have been, always will. It’s the phlegmatic approach to life we have. Read the poem “If” by Kipling to understand the British mentality. It is a bit sentimental, and you can quibble about Kipling’s Imperial views (oh no! British Empire again) but the poem remains a powerful statement about how we behave. (It also explains some of the gulf between Icelanders and Brits. Icelanders haven’t exactly displayed all the characteristics described in the poem.)
Here’s the poem:
http://en.wikipedia.org/wiki/If%E2%80%94
Oh! I hear the strains of Rule Britannia! Let me get down the pub and grab a pint of Pride (that’s London Pride – an ale brewed by Fullers).