“I believe that before too long, new information will come to light which shows just how difficult a position the Icelandic government has been in over this issue,” said Icelandic Finance Minister Steingrimur J. Sigfusson.
Sigfusson made this comment when asked about the former Dutch financial regulator who this week told media that his Icelandic counterparts had simply lied to him outright every time he and his colleagues asked whether Icesave was running smoothly and was well-financed.
The Icelandic FM told Visir.is he has been sworn to secrecy over several pieces of important information crucial to the Icesave issue. The information is, however, expected to become public when the Althingi Finance Committee report is published at the end of this month.
Sigfusson said that when the information comes to light, it will be apparent how difficult it could be for Iceland if the Icesave issue ends up being decided in court.
The oddest thing about this Black Report is just how leak-proof it’s been.
Everything else seems to have been leaked, but not this. And that’s despite the bulk of the report presumably having been finished last year. Still, the waiting should be over in 4-6 weeks.
THE ICELANDIC STATE IS ALWAYS DENYING ABOUT THE ICESAVE PROBLEM THEY JUST WANT A FREE TRAIN RIDE AND MAKE A MOCKERY OF THE WORLD THEY THEY SHOULD BE HELPED BY NOT PAYING THE DEBT BACK IN MY OPINION THE UK IS RIGHT TO IMPLEMENT TERRORIST LAWS AGAINST ICELAND LOWER YOUR STANDARD OF LIVING AND PAY UP YOUR DEBT SEND A ICELANDIC ECONOMIC TEAM TO EAST ASIA AND STUDY THEIR PHILOSOFY.
This constantly on-going secerecy and smoek-screenign and back-room busiensses of our politicians, no matter which party, is really getting to my nerves, and I am sure most of the Icelandic nation feeling the same. For over a years now we have been promised answers and transperancy…nothing has changed compared to the former governemtn. but how should it? i think everybody in Althingi is guilty of betraying the icelandic nation. All ofm them knew what wa sgoing on, nobody of them is brave enough to ask publicly the important quesiotns, and half of our current governemtn has been half of the former governem,tn!!! people seem to forget this as well. When I see peopel like the current Foreign Minister, I am really getting sick! That he is still in a public office is an outrage. How could anybody think that the SDA was fit to lead us out of a crisis they have helped to occur in the first place? How can peopel again root in mayority for the Independence party after there reign for over 2 decades? And what happened to the FM Steingrimur is just sad. he sold out everythign he was elected for. he is just another man of the system now. What w eneed is real change with new people and a new and reformed system.
It wll be interesting to see if Mr. Grim knew about this secret information before he vetoed the legislation. Plus, would it not be wiser to reveal the report and the secret information before th referendum takes place, so that the Icelandic voters are fully informed and Icelanders do not suffer any further embarrassment?
After this recknoing by Eva Joly the Dutch ( and British ) governments are on the defensive.
It will be intersting to see what exactly documentary proof they have of this. WE remember for example that Davið did say he had ensure that recordings of conversations had been held at Central Bank beyond the statuory minimum period that they had to be kept.
Steingrímur and Jóhanna are just trying to cover up they and the ones they appointed insensible incompetence over whole ” negotiations ” process.
I feel sorry for Iceland’s current government. They didn’t focus negotiations on the one point that could have been influenced (ie reducing the interest rate) and was instead diverted by Icelandic MPs into superfluous points that were bound to be rejected by UK and Netherlands. The whole negotiation process became a joke a long time ago. And it’s slightly embarrassing when the Finance Minister tries to defend the government’s negotiating stragety – it’s as if there’s an election coming up…
Jim did write :
>They didn’t focus negotiations on the one point that could have been influenced (ie reducing the interest rate)
The important issues are 3;
1 ) Ragnar Hall issue ( which will gain UK and Holland EUR 0.8-1.2 billions more than was intent of IceSave replayment contract )
2) Rapacious interest rate of 5.5%
3) Making sure that repayment is capped against our exports so we have the foreign EUR and GBP that we must pay back UK and Holland in.
Bjarni did write good posts about this but at moment I can’t find the direct links.
“The important issues are 3″
Different people view a different number of issues as important. My point was that by focusing hard on one important issue (specifically the interest rate), the negotiations could have had a more successful outcome. Put it this way, the negotiation process couldn’t have been conducted worse. I suspect even UK and NL would have preferred liaising with proper EMPOWERED negotiators, so an end result would have actually been an end result. Iceland’s parliamentary approval, presidential approval, and referendums mean the negotiation process is basically a waste of time. Why have parliamentary democracy if the president then just overrides it? Iceland needs to get some management consultants in to streamline its decision-making processes before the country grinds to halt in a tangle of constitutional red tape.
Fisy, you said: ” After this recknoing by Eva Joly the Dutch ( and British ) governments are on the defensive. ”
I do not see it that way nor does anybody overhere feels that way.
Fact is that there is a parliamentary investigation overhere about the whole economic crisis, the Icesave issue being a minor part of this.
Icelandic representatives have been invited to appear before the commitee but they declined to.
I find this a bit strange since Icelanders seem to be so keen to take the whole affair to court.
Now they are offered to plea their cause on an international stage and they decline….weird.
The director of DNB has said in front of the comitee that the icelandic financial authorities consistenly lied when they were asked about the situation of Landbanki.
The reaction of the present icelandic goberment:” We are taking this accusation VERY seriously” .
So they do not deny that lies were being told.
I do not really know what to think of this but probably this statement should be translated as follows: ” Yes , lies were being told but the previous goberment was responsible for that and we do not know yet how to respond to this.”
There are 3 possibilities:
1.-the icelandic side deliberately lied when being questioned about Landsbanki
2.-the icelandic side did not have a clue about the real situation at Landsbanki or how they were supposed to do their job
3.-both 1. and 2.
Knowing Iceland a little bit I think that 3 is the most likely option :-)
Now Steingrimmur comes up with another strange reaction:”“I believe that before too long, new information will come to light which shows just how difficult a position the Icelandic government has been in over this issue,”
Is this a justification for the fact that lies were told?
I just find this reaction very strange.
Iceland is in a very difficult situation both financially and politically and I think that such statements do not help the icelandic cause in any way.
I am really curious about the information that is supposed to surface at the end of this month.
Making sure that repayment is capped against our exports so we have the foreign EUR and GBP that we must pay back UK and Holland in.
It’s already capped to growth in GDP. Isn’t that enough?
Hmm, I may be wrong but I can’t seem to find any reporting on IceNews of the Dutch central bank accusation of ‘lying’ by the Icelandic government and financial regulators regarding Landsbankii. I’m sure it’s just an oversight and we will see the usual hard-hitting and impartial reportage restored ASAP. NOT!
The fact is that no one, world wide, trust’s anything an icelander say’s, and that is a real shame as I have worked with, and for, many Icelanders who have all been 100% stand-up guys, but the bankers and politicians have destroyed Iceland’s reputation to such an extent that if they don’t start getting their house in order now Iceland will be doomed! The world will turn it’s back.
@Andy,
Please have a look at this:
http://www.google.nl/search?q=iceland+lied+about+landsbanki&ie=utf-8&oe=utf-8&aq=t&rls=org.mozilla:nl:official&client=firefox-a
It has been widely reported in the international press.
Bromley also already mentioned the fact that mr. Schilder of DNB accused the icelandic financial authorities of lies.
“no one, world wide, trust’s anything an icelander say’s”
You must have been watching Paxman interview President Grimsson…
Bromley86 says:
It’s (Icesave debt repayment terms) already capped to growth in GDP. Isn’t that enough?
How is it enough, unless the Brits and Dutch will be prepared to accept a few shiploads of Is.kronur?
The debt has to be paid in foreign currency. Foreign currency is generated by a trade surplus.
The GDP figure is a general overall figure for a country output.
Trade balance figures are the actual indicator of a country’s ability to earn foreign currency.
Jim wrote :
>Put it this way, the negotiation process couldn’t have been conducted worse.
No disgreement there. But it reflects badly on UK Dutch negotiators that they did ” try it on ” and continue to do so with the Ragnar Hall issue.
See this post :
http://www.icenews.is/index.php/2010/02/04/icelandic-pm-met-with-eu-commission-president/comment-page-1/#comment-113058
@Niels
“The reaction of the present icelandic goberment:” We are taking this accusation VERY seriously” .
So they do not deny that lies were being told.
I do not really know what to think of this but probably this statement should be translated as follows: ” Yes , lies were being told but the previous goberment was responsible for that and we do not know yet how to respond to this.”
hehehe
“Now Steingrimmur comes up with another strange reaction:”“I believe that before too long, new information will come to light which shows just how difficult a position the Icelandic government has been in over this issue,”
Is this a justification for the fact that lies were told?”
Its funny how the mind can work isnt it, you have in a matter of seconds convinced yourself that its a fact that lies were told,
based on information you dont have, funny stuff.
This whole matter looks like a desparate Dutch government grasping for straws to try to stay afloat in a conflict they will surely loose, to hang your hat on David Odsson who has been fired from the Central bank of Iceland is not likely to be helpful, we tryed that and got burned, lets see how it pans out for the Dutch,
The Icelandic FSA met with the Dutch FSA in August and September 2008 to discuss seeting up a reserve fund for Landsbanki deposits, the motion was not accepted by the Dutch, if it had been, 600 million Euros would have been in the fund when the bank collapsed,
the icelandic FSA had no authority to do this without permission from the Ducth, if the Dutch were as worried about icelandic banks as they now claim to be why did they not accept this offer ?
http://m5.is/?gluggi=frett&id=103675
The EU regulation system regarding deposits is so impaired and badly designed that no deposits in the eurozone are guaranteed,
i believe because of the situation in the eurozone that this will soon be tested for real.
Its possible that when the report comes out that the entire poulation of iceland will be given 2-3 days off from work to read the report, its close to 2000 pages long, between us we know all there is to know about the collapse and events leading up to it, what has been missing is a summary, this report is a base to work from, when it has been revieved and missing or wrong information has been corrected we can trace threads who lead out of the country to Britain and the Netherlands among other places.
It will be interesting to see how this develops as iceland, different from other states, deals with its corruption and also how our investigation will affect politics in other states.
Icelandic president on Al jazeera
http://www.youtube.com/watch?v=V-gHdFhgdC8
on CNN
http://edition.cnn.com/2010/BUSINESS/01/29/iceland.uk.grimsson.davos/index.html
Elvira Mendez about the icesave deal
http://elvira.blog.is/blog/elvira/#entry-1013839
First, I want to start by saying I am neither from the UK, or Iceland. I am sure there are many British who are angry about loosing their money they had in bank accounts in Iceland. But the fact of the matter is, these accounts and the money in them were protected by a finite amount of money. It should not be the responsibility of the government of Iceland, or the tax payers of Iceland to pay back money which was being held in savings accounts or investments with any of the banks of Iceland.
I have been to a great many countries, and the one thing I have noticed time and time again, is British people belly aching about something. I was in Manchester and had a viewing at a home to rent, as it turned out I was not given the number of the agent (who was a friend of a friend) but she was given our number. We ended up finding a place to rent through a different agent, and that agent failed to confirm with us before our appointment to view if we were still coming. She ended up calling us ten minutes after our appointment to view complaining how it wasn’t fair that we didn’t call, I explained that we were not given her number and she continued to complain, so I simply told her, you should have been doing your job and called us to confirm the appointment before hand, then hung up the phone.
That is typical British style. They go to Cyprus and buy land with no documents, spend their life savings buying a house and then cry and complain after the government of Cyprus tells them they bought a house that was built illegally and that it will be removed and/or returned to the rightful owner of the land.
They go to everywhere in the world, drive up local prices, put their money into risky situations, and then expect someone to bail them out or pay them back if something goes wrong.
The fact of the matter is, they should have known the risks of sending their money over seas. They lost money, tough luck. There are a lot of people in the world who think it’s not fair, again tough luck.
I hope the Iceland government refuses to pay, and I hope the people of Iceland decide once and for all not to pay. England is an over priced and out of date has been super power and they still think they are the great British Empire of yesteryear.
Stand up to the bully nation, it was their choice to take their money out of UK banks and send it to a different country. It was their choice to try and get higher interest returns than they could at home. It is their problem, and the UK government was not required by law to give back the money these people lost in Icesave. That was a decision taken on by the government of the UK, and frankly, that’s where it ends.
How is it enough, unless the Brits and Dutch will be prepared to accept a few shiploads of Is.kronur?
Well, I assumed that any real growth in GDP would have to be from exports.
Not that I mind whether it’s linked to growth in GDP or net trade balance (or anything else, for that matter). However, why did the Althingi bother linking it to growth in GDP back in July/August if it wasn’t suitable?
But the fact of the matter is, these accounts and the money in them were protected by a finite amount of money.
This whole case would have been much clearer if that was the definitively the case. It is not.
The current balance of probability is that a state guarantee was required by EU/EEA law, although there’s a good possibility that if it did go to court it would go the other way.
But it’s certainly not as clear as you seem to believe. Neither was the money “sent overseas”. It was a branch in the UK.
Bromley86
“Well, I assumed that any real growth in GDP would have to be from exports.
Not that I mind whether it’s linked to growth in GDP or net trade balance (or anything else, for that matter). However, why did the Althingi bother linking it to growth in GDP back in July/August if it wasn’t suitable?”
I think Fisy was commenting on 3 important issues to do with Icesave,
the 3rd one was,
( “Making sure that repayment is capped against our exports so we have the foreign EUR and GBP that we must pay back UK and Holland in” )
you seemed unsure of that one and I was just making an attempt to clarify the important difference between GDP and trade surplus.
I can’t answer your question as to why Parliament agreed to a GDP relationship,
if it was me or Fisy, we would have been sure to cap that one like that baby bear and move on to trade surplus
@Axel,
you said:” Its funny how the mind can work isnt it, you have in a matter of seconds convinced yourself that its a fact that lies were told,
based on information you dont have, funny stuff.”
Well,I would like to repeat my argument (that you did not go into): If NO lies were told, then why doesnot the icelandic goberment deny that lies were being told.
Suppose that somebody accuses your son of telling a lie and you would know that he did not lie, what would you reply:
-I take your accusation very seriously
or
-He did NOT lie ?
And please, like I replied to Andy, just google on ‘ iceland lied about Icesave’ and look at the results.
If you think in terms of ‘ winning or losing’ it seems Iceland has already lost the ‘ propaganda battle’, just like it already has brought itself in a losing position in october 2008.
As for David Oddson/Noud Wellink, they represent completely different interests but still they gave the same account of the content of their conversation so I do think that this represents the truth.
And the link you gave to some obscure and crappy weblog does not convince me at all. For an accurate and concise account of the whole communication between DNB and the icelandic side I refer you to the official report as it was presented to dutch parliament.
http://www.minfin.nl/Actueel/Kamerstukken/2009/06/Evaluatie_Icesave
I recommend you to download the first pdf which gives a timeline of the whole affair. Google translate will get you a long way.
Some highlights:
-DNB had big reservations
-the icelandic side claimed that Iceland would easily be able to cover the first 20k of every account
-Icesave attracted far more depositors than agreed
-Landsbanki constantly pointed to EU regulations in order to force DNB to allow Icesave to the dutch market
-whenever DNB expressed concern the icelandic side came up with denials and empty promesses
-repeated urges from DNB to stop attracting depositors or to lower the interest rate offered : Landsbanki refuses to comply (again by pointing at EU law)
Finally , Landsbanki offered to form some pool of liquidity but these were empty words too since by then the complete icelandic economy was already failing.
It is like a completely bankrupt person boasting to his creditors that he will repay with absolute certainty while he does not have a single penny anymore.
The liquidity that the dutch side asked for was liquidity to cover the first 20 k. As we all know Iceland completely failed to comply.
With hindsight one can say that Landsbanki was both arrogant and incompetent: had it followed the advice of DNB, Iceland would not face the present Icesave mess.
Just look a bit at this report and tell me: who has the weak position?
Axel, you said: “This whole matter looks like a desparate Dutch government grasping for straws to try to stay afloat in a conflict they will surely loose,”
You are sounding like the Iraqi minister of information:
http://www.youtube.com/watch?v=CXl1GkWWGmA
“But the fact of the matter is, these accounts and the money in them were protected by a finite amount of money”
Under EU law, the minimum guarantee for deposit accounts is not protected by a finite amount of money. It is protected by the state in which the legal entity resides. That’s the way banking law works everywhere in EU, apparently apart from Iceland…
“It should not be the responsibility of the government of Iceland, or the tax payers of Iceland to pay back money which was being held in savings accounts or investments with any of the banks of Iceland”
So, I assume you think the UK taxpayers shouldn’t have bailed-out foreigners’ accounts in RBS, Lloyds TSB, NatWest, HBOS, etc? UK taxpayers don’t hold referendums to decide whether to bail-out those foreign accounts. The UK abides by EU law in treating its domestic and foreign retail account holders the same.
“they should have known the risks of sending their money over seas”
There should have been no risk up to the amount per account guaranteed by EU law. That’s the point. The risk of Icelanders not honouring that guarantee is, indeed, apparent now. And that’s why no-one in the UK will risk depositing money in Iceland for at least a generation.
“I hope the Iceland government refuses to pay, and I hope the people of Iceland decide once and for all not to pay”
So, I guess you hope that Icelanders bite of their nose to spite their face? Better to spend a decade or two in financial isolation with increasing poverty than to honour guarantees? Have pride in not honouring guarantees?
Until now I can not understand the kind of reaction FM Steingrimur Sigfusson had when he said,” Secret info to jeopardize Icesave
Court hopes”. I thought that after the new government was formed after the collapsed with Johanna and Steingrimur on the top, being ellected by the people their concern if ever, was for the majority but it seems otherwise. How about laying all cards on the table for a common good. To me, it seems a waist of time and money to be officially spending the meagre income of the treasury for negotiations and meetings in the official capacity and hiding some facts behind. This is strange and what is the purpose of prolonging the agony ?
It is a common knowledge that the population is much lesser now, GDP is also affected and aggravated by the balance of trade due to the fact that the British and the Dutch have blocked any loans to Iceland. What meager income is not sufficient to support the population much more to pay the said account if ever. Life as it is, is very hard for the people but not for the few who stash the millions in foreign accounts mostly in Britain where they lavishly live, while most of those businessmen living in Iceland have declared bankruptcy. Will this businessmen if ever, ever help or will the government have the necessary authority to take some of the liquid assets lurking and hidden behind because in criminal investigation often a criminal visits the crime scene.
Pleae be fair and bring the truth in the open and also give due considerartion for those who choose and trusted you.
“You are sounding like the Iraqi minister of information:”
7 years later the USA/UK still have not won the war, how much have they spent so far ? $ 1 trillion?.
here is another idiot for you
http://www.youtube.com/watch?v=z8pvU1iyT3c
the funniest part is that the joke is on us, as he turned out to be right.
Nils Bjartur said:
>This constantly on-going secerecy and smoek-screenign and back-room busiensses of our politicians, no matter which party, is really getting to my nerves, and I am sure most of the Icelandic nation feeling the same.
Yes I for example as it does bring my blood temperature to the boiling point.
It is ridiculous how they keep on going this way after they have screwed up so badly in IceSave ” negotiations ” and have just wasted the time we had during 2009 on EU application ( that no one in country except for Social Democrat supporter i.e.. less than 30% Icelanders do want ) and they pet projects like banning lap dancing.
But that is the way of the old hard leftists. They dont know any other way.
Niels said :
>I do not see it that way nor does anybody overhere feels that way.
I am not commenting on the committee, I am commenting on the thinking in the halls of the ” IceSave ” negotiating team after Eva Joly has been poking at them in public and also via machinery of EU parliament in her position as MEP.
What Eva Joly did say about the responsibility of Dutch is reflected in this aspect of facts of 2008, Icelandic FME did meet with Dutch DNB ( Central Bank ) about this joint fund similar to what they were talking about with the UK prior to it that last fate full weekend when the GBP 200 millions was asked for and agreement with UK Treausury that was ” not entered into “.
>Fact is that there is a parliamentary investigation over here about the whole economic crisis, the Icesave issue being a minor part of this.
But of course it is part that is whipped up to act as a nice thin layer floating on top of the blame to deflect from the problems with Fortis and ING.
It is understandable that this Dutch politicians want to redirect blame away from they failures there. But it is distasteful that this ” lying ” quote is what does make the head lines.
Niels said:
>Icelandic representatives have been invited to appear before the commitee but they declined to.
I find this a bit strange since Icelanders seem to be so keen to take the whole affair to court.
Now they are offered to plea their cause on an international stage and they decline….weird.
If you committee ask ex-Central Bank Governors including Davið you can be sure they would testify.
Current government ( the Social Democrats this is ) really does NOT want to appear as it will force them to releveal and discuss issues with the margin calls of the European Central Bank to Landsbanki — and they do not want to talk at all about it. Because that does make the EU look like an actor ( it was ) in downfall of the banks.
As mentioned in my post Thursday Davið did make his warnings ( and now I see he comes out and has been clear about what his warnings to Icelandic government were ) and so also his telling Wellink.
http://icelandreview.com/icelandreview/daily_news/?cat_id=16539&ew_0_a_id=357445
So it is unfair to make the accusations against Central Bank as some poor journalists have published they stories about.
But against Björgvin G. Sigurðsson ( Minsiter of Business in 2007 – 2009 ) who was in charge of FME during that period I think we will find it is not so unfair to talk about lying.
A reason that Jóhanna and her fellow Social Democrat does not want to be involved in any testimonies as they own people hands are all over it from 2007 onward.
Niels wrote :
>The director of DNB has said in front of the comitee that the icelandic financial authorities consistenly lied when they were asked about the situation of Landbanki.
If only we had not followed Brown and split up the Central Bank powers to give to the FME then ( our Financail Services Authority that we did create then in 1999 ) and had followed the Dutch how they did it then things would have been so different.
As to when and what these statements are, it is not the Central Bank of the time, that is for sure despite all the lying left wing 2 minutes of hate continually thrown at Davið Oddsson.
Wellink did clearly get this idea that Icelandic FME and Minister of Trade was lying to them after he did talk to Davið in confidentially in September 2008 :
>”I’ve been hoping for a long time that they just didn’t see it, but to be honest after the words of my colleague [ Davið Oddsson in September 2008 ] that it was several months before that he had warned them, I thought they have lied to us,” Wellink said.
Again this does back up what Davið has been saying for so long that he did try to stop the situation and that he did warn the Geir Haarde / Ingibjörg Sólrún government many times.
http://www.icelandreview.com/icelandreview/daily_news/?cat_id=28304&ew_0_a_id=357410
I think another reason that Jóhanna and Steingrímur J are making this ” strange ” statements — it is because it does not justify the actions against Davið and other two of the Central Bank. And they know it.
( But Nout Wellink, has he made more specific quotes about who and when this lies is ? Can you enlighten us Niels — I find the testimony link you sent hard to follow. )
>Now Steingrimmur comes up with another strange reaction:”“I believe that before too long, new information will come to light which shows just how difficult a position the Icelandic government has been in over this issue,”
>Is this a justification for the fact that lies were told??>I just find this reaction very strange.
He is trying to cover for his complete incredible way of supporting the Social Democrats against his own party supporters voters and principals.
The difficulty comes from that the Social Democrats want to join the EU at any cost and that Steingrímur J does want to stay in his powerful seat and so has supported them in this government.
Why he stays in with them instead of those he has more in common with like Independnce Party or Progressive Party even amazes me.
But maybe after the referendum on IceSave he will be forced by his party to break the coalition.
Certainly he and Jóhanna is doing nothing to make the re-negotiations of IceSave before March which is what would be for the best.
Fisy, you said:” But Nout Wellink, has he made more specific quotes about who and when this lies is ? Can you enlighten us Niels — I find the testimony link you sent hard to follow. )
”
I can understand that google translate will have problems to make some english from the burocratic language from the official report.
I am referring to the timeline of the contacts between dutch financial regulators and Landbanki/icelandic regulators, the first pdf in this link:
http://www.minfin.nl/Actueel/Kamerstukken/2009/06/Evaluatie_Icesave
I will refer to dates which are backing the dutch claim that Icelandic officials were lying (if you want some specific translation please tell so):
23-05-2008: Iceland claims it can easily compensate the first 20 k of an account
30-05-2008: Icesave puts false information on its website which is removed after complaints from DNB
14-08-2008: being seriously worried about the situation of Landsbanki a delegation of DNB visits Iceland: they are told that basically everything is fine and that Icesave should even grow further. DNB also visits the icelandic fund for financial guarantees asking a number of questions which remain unanswered.
15-08-2008: email from icelandic authorities expresses amazement at dutch worries since ‘ everything is fine with the icelandic economy’. The whole tone of this email is rather arrogant.
27-08-2008: Landsvanki delegation visits DNB giving presentation, again claiming that everything is fine. Landsbanki delegation makes a rather unclear offer for the formation of some pool of liquidity. DNB answers that this does not solve the fundamental problem of the entire financial sysem in Iceland.
Furthermore DNB expresses its frustration because Icesave continues to attract more depositors in spite of the fact that they have been told to stop with this.
23-09-2008: letter from Landsbanki to DNB. Landbanki uses legal arguments in order to defend itself against dutch demands to stop its expansion. Landsbanki uses EU laws to block this demand from DNB and continues to claim that there is no reason to worry about the icelandic economy.
Fisy, this is a very short outline from this large document (he timeline consists of 21 pdf pages) but I think it clearly demonstrates how untrustworthy the icelandic side was.
as it will force them to releveal and discuss issues with the margin calls of the European Central Bank to Landsbanki — and they do not want to talk at all about it. Because that does make the EU look like an actor ( it was ) in downfall of the banks.
Well, it would be nice if someone would substantiate your claim :) . Even you haven’t to date.
Sounds like they are all covering their backsides including Nout Wellink.
Isn’t he under serious investigation and severe criticism over his actions as President of the Dutch Central Bank.
In short, when the EU put into force banking deregulation, letting the banks regulate themselves, the office of the Finance Regulator in every EU country was no more than a dog on the bank’s leash.
“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.”
http://sedlabanki.is/lisalib/getfile.aspx?itemid=6795
“We were a couple of days away from a complete catastrophe which would have been ten times worse than the current situation. The risk of a collapse in the European banking system was high,” admitted Finland’s Finance Minister, Jyrki Katainen, in an interview with the Finnish newspaper Savon Sanomat on September 8, 2009. The decision to sacrifice Iceland probably contributed to saving the EU banking system at the last minute.”
http://www.brusselsjournal.com/node/4204
Its a good thing the general public of the EU dont realize that no deposits in EU are state guaranteed and its optional if governments pay compensation or not, the decision to inrease UK compensation from 20k to 50k and the NL increase to 100k euros was made out of fear, and for a valid reason.
Knowless, you said:” Sounds like they are all covering their backsides including Nout Wellink.
Isn’t he under serious investigation and severe criticism over his actions as President of the Dutch Central Bank.
”
Yes, there is a parliamentary investigation about the way dutch authorities handled the crisis and there has been a lot of criticism on Wellink, partly for Icesave, partly for his general attitude during the crisis which was deemd too passive.
I must say, even while not being a fan of Wellink, that the criticism regarding the way he handled the Icesave affair (up to the bust in oct 2008) is not justified IMO.
Fact of the matter is that DNB (correctly) was highly critical about the solidity of landsbanki when it wanted to introduce icesave on the dutch market….but Landsbanki used legislation of the much-hated EU in order to have its way, forcing DNB to give them a banking license. There was simply no legal way that DNB could have stopped Icesave.
So DNB opted for a ‘ soft’ approach, trying to make appointments with Landsbanki behind the screens in order to avoid a disaster…but Landsbanki simply failed to live up to its agreements.
I just do not know what Wellink could have done otherwise: he had no legal way to stop icesave and if he had made a public warning , it would have led to a bank run on icesave, probably immediate bankruptcy of landsbanki and a lot of icelandic whining, like in the case of Darling / Brown / Kautphing.
You also said:” In short, when the EU put into force banking deregulation, letting the banks regulate themselves, the office of the Finance Regulator in every EU country was no more than a dog on the bank’s leash.
”
The irony is that under EU AND Efta law national financial regulators do have power over domestic banks but very little power over foreign banks active in the national market, a loophole whcih Landsbanki abused when it stuffed icesave down the throat of the britons and dutch..
So DNB had very little to say about Icesave, since Icesave’s HQ was abroad.
In fact the total deregulation of the icelandic banking sector has led to the bust of oct. 2008. It was the icelandic deregulation which allowed the previously solid icelandic banks to become overgrown monsters with crooked behaviour and a rotten financial structure.
Fisy, you said:” If only we had not followed Brown and split up the Central Bank powers to give to the FME then ( our Financail Services Authority that we did create then in 1999 ) and had followed the Dutch how they did it then things would have been so different.”
I can only repeat what I replied to this in a previous thread: I do not know if the dutch model of financial regulation is any better than the icelandic, but the only important thing is the competence of the people working there and the power which the institution has (power to take measures in order to force financial stability without political interference, I mean) .
Fisy, you said:” Again this does back up what Davið has been saying for so long that he did try to stop the situation and that he did warn the Geir Haarde / Ingibjörg Sólrún government many times.”
It is not clear to me what point you are trying to make. Does this mean that Oddson did everything right? After all he is the person behind the privatization of (amongst others) the icelandic banking sector.
He was the director of the icelandic national bank and he only gave some warnings. Didn’t he have the power to take real measures that could have prevented the collapse?
And if you are implying that Haarde was warned but did not take measures, it means that he failed isn’t it?
Could you also say what Haarde should have done after he had been warned by Oddson? After all it is unlikely that by mid 2008 any measure could have saved the icelandic economic system.
I am not making this up: just look at the Buiter report, written in april 2008, correctly predicting the icelandic collapse.
Niels says:
“The irony is that under EU AND Efta law national financial regulators do have power over domestic banks but very little power over foreign banks active in the national market”
If you examine the deregulation and their effect on the whole EU banking you will find that the FSA in the many countries of Europe that experienced a banking collapse had either turned into cheerleaders or were emasculated witnesses to the increasing money supply that funded the spiralling property loans needed to cover inflated property values. And if the FSA did squeal a bit, listening to them was an option.
“in fact the total deregulation of the icelandic banking sector has led to the bust of oct. 2008. It was the icelandic deregulation which allowed the previously solid icelandic banks to become overgrown monsters with crooked behaviour and a rotten financial structure”.
Deregulation was only one factor in the crash.
Either you have something personal against Landsbanki or you have a serious tunnel vision over Icesave affecting your overview of the practices of the Banking sector in exploiting the loopholes of EEA banking deregulation all over Europe. Was Iceland’s de-regulation any different to any other EEA member?
Or maybe it is just some amazing coincidence that banks collapsed all over Europe :)
In your opinion what bank around Europe was the most outrageous?
My vote goes to one known as Anglo, AIB in Ireland – makes Landsbanki look like a little gentle naive puppy.
Niels said :
>And if you are implying that Haarde was warned but did not take measures, it means that he failed isn’t it?
Problem is that until the Black Report comes out, or we get more detailed memos release by others such as Dutch or UK we don’t know exactly what it was that Mr Wellink was told that did have him deciding that he was ” lied to “.
But if Geir was warned very specifically in March or April ( by Davið and the others at Central Bank) , and Geir and the Social Democrats in charge of ministry controlling FME ( our FSA ) ie Ministry of Trade did ignore very specific warnings then yes Geir and Ingibjörg Sólrún have a lot to answer for.
But problem is that if the banks did show them contracts for funding then in all of the fairness, they may have evidences that finding was in place.
But it is being implied that no funding was in place, the banks did not provide evidences that funding was there, and that what Wellink seems to be saying — that they * told * him the banks had funding, but * knew * that banks did not.
But really he did not elaborate enough for us really to know. I hope we will get more information about what he actually was refering to.
>Could you also say what Haarde should have done after he had been warned by Oddson? After all it is unlikely that by mid 2008 any measure could have saved the icelandic economic system.
If there was good faith from the UK and Netherlands many possibilities were there.
The Icelandic state had a good credit rating and if the funds would be borrowed and directed to provide liquidity support as was being pushed for by Landsbanki talking with both UK Treasury and DnB.
Still we do not know why the talks did not go any where from both sides on converting IceSave into a subsidiary in both of those countries.
After the unexepcted success of IceSave this was the objective of Landsbanki and also it seem both governemnts form the facts out there. But in both cases the process was stalled.
I hope we will hear more details on this soon. It is the most missing part of the history of what happened so far.
Niels wrote :
>It is not clear to me what point you are trying to make. Does this mean that Oddson did everything right?
I am providing counter balance to the 2 minutes of hate I see in nearly every post elsehwere about Davið.
That does not mean he did every thing right. I just want the facts to be correct.
Fisy,
I remember an account of the kreppa, written by Sedlabanki which was discussed on this site last year. Perhaps you know which one I am talking about.
In it I read that by mid 2008 Sedlabanki was making attempts (rather desperately) to get loans but this failed since the parties that were approached did not want to borrow to Iceland.
It is speculation off course but in my opinion by mid 2008 alarmbells were going off at Sedlabanki because finally people realized that the icelandic economy would fall apart at the first shock.
Perhaps it was the Buiter report (published in april 2008- secretly in Iceland, but known to Sedlabanki), perhaps it were the signals which Oddson got from people like Wellink, but anyhow, Sedlabanki started working…but was unable to secure enough money before october 2008 came.
As for some documentation about the fact that DNB officials have accused the icelandic side of lies, I did some short translations from the icesave report as it was presented to the inestigation commitee of dutch parliament, which do show that the Icelandic side, either willingly or unknowingly, was not being very truthfull.
Like you I am really curious about further documentation to surface.
Knowless,
The only country which had a 100 % banking collapse is
Iceland and yes, it is probably correct to say that Sedlabanki did not function as a financial authority should.
Please have a look a the Buiter report which correctly predicted back in april 2008 that the icelandic economy would collapse .
http://blogs.ft.com/maverecon/2008/10/icelands-bank-defaults-lessons-of-a-death-foretold/
One of the main points is the fact that a national bank should be able to act as a lender of last resort. This is a main difference between Iceland and other european countries: Iceland’s banks had grown too big to be bailed out.
They had even grown too big in order to have the 20k /account that the Icesave dispute is about.
This matter was aggraveted by the fact that iceland had a very small and vulnerable freely floating currency and no euro to fall back on.
Add all this together and you have a recipe for disaster.
Other countries with serious monetary problems are different stories: either inflated real estate bubbles (Spain, Ireland) or too much foreign credit (baltics) .
You said:
”
Deregulation was only one factor in the crash.
Either you have something personal against Landsbanki or you have a serious tunnel vision over Icesave affecting your overview of the practices of the Banking sector in exploiting the loopholes of EEA banking deregulation all over Europe. Was Iceland’s de-regulation any different to any other EEA member?
Or maybe it is just some amazing coincidence that banks collapsed all over Europe :)
In your opinion what bank around Europe was the most outrageous?
My vote goes to one known as Anglo, AIB in Ireland – makes Landsbanki look like a little gentle naive puppy.”
I do not have anything personal against Landsbanki. In fact my old father even took advantage of the fact that Icesave appeared on the dutch market. He threatened his (solid dutch) bank to move his savings to icesave if they would not offer him a beter interest rate. After this his interest rate was hiked up from a lousy 2,5 % to 4,5 %
In the case of my father’s savings this means a very considerable amount of money on a yearly basis.
So in fact, I have nothing against Landsbanki and I even would like to offer them flowers the next time I visit iceland, thank you very much :-)
I think you are making the mistake to regard criticism as a personal issue. I do not have anything against Landsbanki or the icelandic people but if somebody or something messes up this should be addressed.
” Was Iceland’s de-regulation any different to any other EEA member?”
YES it was. The whole icelandic situation was very different (with the present mess as a result). Just read the article of Buiter, a truly leading international economist (just like von Mieses :-))
” Or maybe it is just some amazing coincidence that banks collapsed all over Europe :)”
You are mixing up cause and result. There has been a world wide crisis and the countries which had the weakest economic structure were hit hardest. this resulted in a 100 % banking meltdown in Iceland while in other european countries most banks survived or could be bailed out.
In his paper Buiter argues that Iceland’s economy will collapse at the first shock: this is exactly what happened.
“In your opinion what bank around Europe was the most outrageous?”
This site is called ICEnews and discusses news from Iceland and the nordic country so I do not think that fingerpointing at other banks which might have been even worse, makes any sense.
Thank you for this posts Niels, allways enjoy you perspectives.
>but known to Sedlabanki), perhaps it were the signals which Oddson got from people like Wellink, but anyhow, Sedlabanki started working…but was unable to secure enough money before october 2008 came.
He was worrying warning lot longer than just then according to public articles :
In the Central Bank reports and also for example in this interview from March 2007 he keeps on making the same points — that the banks are too large and should cut down they dare devil expansion abroad.
http://icelandreview.com/features/politics_and_business/?ew_news_onlyarea=&ew_news_onlyposition=11&cat_id=21123&ew_11_a_id=267595
DO: “.. Nobody can forecast the economic situation for a long, long time. You can try, but you are not likely to be right. We at the [Central] bank tell people in commerce that they should slow down a bit. Rapid expansion can be shaky for everybody.
KM: Why? What could happen?
DO: The Icelandic banks are funding themselves from loans from abroad, mostly. While the money is enormous like it is today in every market there is no problem that anyone can see.
But this can change. The easy access to money may not be as easy as it has been for a long time. And that could be a problem. Even if the credit ratings of the bank and state are good, you should try to play it a little bit softer.
But these are fine young men. They should know the wind is not always at your back. You should beware of that. This is the Central Bank’s role to play. Everyone else is playing another game, and we are sitting here in the bank saying, ‘Hey guys, slow down a bit.’
Despite what is said by 2 minutes of haters, he was not any cheerleader for the huge over seas expansion of the banks.
http://www.icenews.is/index.php/2009/07/01/iceland-icesave-deal-“there-is-no-plan-b”/comment-page-1/#comment-84576
Niels, thank you for your posts.
>Fact of the matter is that DNB (correctly) was highly critical about the solidity of landsbanki when it wanted to introduce icesave on the dutch market….but Landsbanki used legislation of the much-hated EU in order to have its way, forcing DNB to give them a banking license. There was simply no legal way that DNB could have stopped Icesave.
Alain Lipietz disagrees, although my assumption is still that EU regulations / directives said that the Landsbanki branches could not be stopped.
This application of the EU ” freedom of establishment ” should never have been applied to banking. It should have been subsidiaries only. Huge failure of the EU burcecrats and EU parliemtn that did rubber stamp the laws. We of course will never know who because that is how the EU does like it.
Of course it should be right of each sovereign nation to decide what bank should be allowed to take deposit from they citizens. And so only allowed as subsidiaries.
>So DNB opted for a ‘ soft’ approach, trying to make appointments with Landsbanki behind the screens in order to avoid a disaster…but Landsbanki simply failed to live up to its agreements.
We heard from report of Ingimundur Friðriksson ( one of the then board og governors of Icelandic Central Bank ) the that this was largly because of the ECB margin calls. Landsbanki had to pay back for the paper they left with ECB for collateral and it was done from deposit accumulation in they branches.
>I just do not know what Wellink could have done otherwise: he had no legal way to stop icesave and if he had made a public warning , it would have led to a bank run on icesave, probably immediate bankruptcy of landsbanki and a lot of icelandic whining, like in the case of Darling / Brown / Kautphing.
Landsbanki would have complained. But did Wellink criticise EU regulations ( as he should rightly do ) for the situation he was put in ?
I could not tell Niels from trying to read the reports, can you tell us if he did ?
As to Kaupthing Singer and Friedlander that was regulated in the UK as a proper subsidiary ( how these things should ) but still the UK FSA did take it for no good reason.
Alain Lipietz disagrees
+http://www.icenews.is/index.php/2010/01/12/lipietz-rejects-rejection-of-his-icesave-rejection/
As to Kaupthing Singer and Friedlander that was regulated in the UK as a proper subsidiary ( how these things should ) but still the UK FSA did take it for no good reason.
You’ve yet to substantiate this claim Fisy. Compare to what Lord Justice Richards said:
“Finally, it has not been contended that the actual decision to make the Transfer Order was an unreasonable one on the information available to the Treasury, and any such argument would be plainly doomed to failure. For my part, I have difficulty in seeing what other decision the Treasury could reasonably have taken in the circumstances.”
@Fisy,
You said:
“This application of the EU ” freedom of establishment ” should never have been applied to banking. It should have been subsidiaries only. Huge failure of the EU burcecrats and EU parliemtn that did rubber stamp the laws. We of course will never know who because that is how the EU does like it.
”
I find it curious that you are blaming the ‘EU burocrats’ and not Landsbanki. I mean, first of all, the ‘EU burocrats’ did not FORCE Landsbanki to set up Icesave.
I made an analogy, in an earlier post, with the fact that the german highways do not have speed limits.
It is possible to say that this is dangerous but if people who drive there know about this and adapt to it, it actually works and gives the opportunity to travel really fast (just like the EU law has a good basic principle: it is possible to do business in another country without facing protectionism).
I have been driving a lot in NL and Germany and generally I feel safer in Germany I must say .
However, if an inexperienced idiot starts driving with a car that has too many horsepowers he will have a terrible accident.
And who should be blamed then? The idiot who does not know how to drive, or the lawmakers who decided to abolish a maximum speed?
Another analogy: if your landlord does not provide you with the best possible lock on your door and a thief enters your appartment the landlord does have a degree of responsibiliy, but don’t you think that the thief deserves most of the blame?
You said: “But did Wellink criticise EU regulations ( as he should rightly do ) for the situation he was put in ?
”
Yes, there is a consensus that this regulation was not good and this has also been written in the full report and it is likely that this will be changed.
Furthermore there is something unclear to me about David Oddson.
You are drawing attention to the fact that he made repeated warnings about the situation of the icelandic banks.
But doing nothing more than making warnings is not very much isn’t it?
I do not know the exact regulations in Iceland but DO was president of the national bank of Iceland for several years,meaning that he was the highest financial authority in the country.
His powers must have been greater than just ‘making warnings’right?
He must have had the power to take measures against icelandic banks who were messing up.
Only making warnings and not taking consequences when these warnings were not being listened to…I do not find this in accordance with the kind of personality I see in DO.
If he really believed that the icelandic banks were playing a dangerous game he should have stepped in much more forcefully.
@Fisy,
You said: “Alain Lipietz disagrees
”
Well, I could not care less. I find it a bit strange that somebody who always strongly attacks the ‘crazy left greens ‘ now has become a full supporter of former maoist and ‘green economist’Lipietz.
btw the guy is also a member of the european parliament.
http://en.wikipedia.org/wiki/Alain_Lipietz
Niels wrote :
>I find it a bit strange that somebody who always strongly attacks the ‘crazy left greens ‘ now has become a full supporter of former maoist and ‘green economist’Lipietz.
I no fanclub member of Alain Lipietz and as you will see from my previous posts I am skeptical of his ideas.
However that does not mean that he is wrong as he was one of Euro MEPs that did sit on the councils that did rubber stamp this particular EU legisalation.
http://www.icenews.is/index.php/2010/01/10/icesave-explored-from-different-angles-on-icelandic-tv/comment-page-1/#comment-110069
Alain Lipietz ( Euro MP for many years from Left Green party ) was rapporteur and shadow rapporteur++ on the making of the 2002 directive ( EU laws ) which is controls the supplementary supervision of credit institutions, insurance undertakings and investment firms in a financial conglomerate;
proof here quickly from the EU parliament website for the professional dis believers ( UK ) on this forum :
http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//TEXT+REPORT+A5-2002-0367+0+DOC+XML+V0//EN#title1
” At the sitting of 14 March 2002 Parliament adopted its position at first reading on the proposal for a European Parliament and Council directive on the supplementary supervision of credit institutions, insurance undertakings and investment firms in a financial conglomerate and amending Council Directives 73/239/EEC, 79/267/EEC, 92/49/EEC, 92/96/EEC, 93/6/EEC and 93/22/EEC, and Directives 98/78/EC and 2000/12/EC of the European Parliament and of the Council (COM(2001) 213 – 2001/0095 (COD)).
At the sitting of 24 September 2002 the President of Parliament announced that the common position had been received and referred to the Committee on Economic and Monetary Affairs (9754/3/2002 – C5-0424/2002).
The committee had appointed Alain Lipietz rapporteur at its meeting of 6 November 2000.
+http://dagskra.ruv.is/sjonvarpid/4472547/2010/01/10/
++Authors of reports made by committees of the European Parliament are known as rapporteurs. People assisting or helping the rapporteur are called shadow rapporteur.
Like all this use of term ” competence ” and other words in special language, it is all from the original designs of EU made by French architects Jean Monnet and Valéry Giscard d’Estaing mainly.
>I do not know the exact regulations in Iceland but DO was president of the national bank of Iceland for several years,meaning that he was the highest financial authority in the country.
>His powers must have been greater than just ‘making warnings’right?
He must have had the power to take measures against icelandic banks who were messing up.
>Only making warnings and not taking consequences when these warnings were not being listened to…I do not find this in accordance with the kind of personality I see in DO.
>If he really believed that the icelandic banks were playing a dangerous game he should have stepped in much more forcefully.
As to the legal problem it is that the Central Bank of Iceland like UK did get split its powers into the FSA ( Icelandic FME) with supervision powers taken from the Central Bank.
So formal power of Central Bank for this aspect of supervision is with the FME, not the Central Bank.
Remember that I have made clear I do not give any one free pass but I do wish the factual and fair ness.
We will know finally ( hope ) that the Black Report will explain much of what we currently have not seen in details.
What is clear is that Central Bank was under the Prime Ministry. The FME was under the Ministry of Trade.
For the time of the worst bubble excesss this meant that from 2007 it was Social Democrats that was in charge of the FME, ie. under Björgvin G. Sigurðsson.
Kaarlo Jännäri Report gives us best informations so far on all this :
http://eng.forsaetisraduneyti.is/news-and-articles/nr/3581
Much of this is critical that the FME follow the Brown model of regulation and supervision too much. But still as yet Red-Green government has not bothered to move on it recommendations.
That is becasue Social Democrats dont care. They just think the EU at any cost is the panacea of all things.
Despite that the EU regulations is what did get us into this mess with IceSave in first place.
Niels write :
” >I made an analogy, in an earlier post, with the fact that the german highways do not have speed limits.
>It is possible to say that this is dangerous but if people who drive there know about this and adapt to it, it actually works and gives the opportunity to travel really fast (just like the EU law has a good basic principle: it is possible to do business in another country without facing protectionism).
>I have been driving a lot in NL and Germany and generally I feel safer in Germany I must say .
>However, if an inexperienced idiot starts driving with a car that has too many horsepowers he will have a terrible accident. ”
The most accurate addition to this anaalogy would be an important aspect of liaiblity and insurance.
You analogy is better if we add that the idiot inexperienced driver is insured not at his own expense but by all the other members of his town.
So if he crashes, and causes damange to other cars on the autobahn then he is not the one that has to pay but all of the other members of his home town, because they did implicitly insure him.
* That * is the situation that the horrible EU deposit insurance directives do create. This is the single most wrong thing with how this banking regulations was done by the EU since 1994.
94/19/EC should not have been passed. It creates at best the moral hazard and at worst as it did it allow something like the Landsbanki IceSave branches to get so huge.
That there is the wrong freedom of establishment applied, ie so that the person is allowed on the autobahn without showing they have passed a German driving test.
Because the EU law * prevents * the German traffic authority from stopping the driver from driving.
If this EU regualtions had not been there then IceSave would not have happened the way it did. Instead it would have been as subsidiaries only.
And now as is not surprising given facts of he being in charge of the Ministry controlling the FME ( Icelandic FSA ) 2007 – 2009 :
” Bjorgvin G. Sigurdsson felt compelled to comment openly against Nout Wellink’s recent remarks that Iceland lied to him over Icesave. ”
http://www.icenews.is/index.php/2010/02/11/former-iceland-minister-rejects-dutch-icesave-criticism/
@Fisy,
Adding the concept of insurance and liability to the analogy is a good one but perhaps we should even go into detail a bit further.
The idiot is only admitted to the autobahn when he has an insurance for the minimum liability of 20.000 euro.
He claims to have this and is admitted.
He is asked repeatedly if he knows how to drive and if he really has this insurance and every time he confirms this.
Additional insurance is paid for by the people of his town.
Now the idiot causes a lot of damage. The people from his tow have paid their insurance for damages above 20k and this is paid out.
However, as it turns out, the idiot has NO insurance and is unable to put 20 k on the table.
The people from his town feel sorry for the victims and pay out this 20 k too, however they expect repayment of this sum.
That is the Icesave affair.
BTW perhaps the word ‘idiot’ is a bit harsh but you understand what I mean :-)
@Fisy,
You said:”What is clear is that Central Bank was under the Prime Ministry. The FME was under the Ministry of Trade.
For the time of the worst bubble excesss this meant that from 2007 it was Social Democrats that was in charge of the FME, ie. under Björgvin G. Sigurðsson.
”
Like I said, i do not understand the details of the way the icelandic financial world was governed but Bjarni made a post in which he writes that in fact mr. Sigurðsson had very little to say.
http://www.icenews.is/index.php/2010/02/07/dutch-icesave-anger-%e2%80%98understandable%e2%80%99/comment-page-1/#comment-114213
So I do not really know what to think of this.
Mr Sigurðsson did not appear because it just will make his party look bad and remind every one here of Social Democrats responsibility 2007 – 2009.
Did he do any thing wrong ? Well we have to wait for the Black Report to come out, or Dutch to release letters and documents.
Our favourite lyer Alistair Darling certainly did accusse Bjorgvin of lying, as you can see in the infamous conversation with Árni M. Mathiesen on October 7 2008 :
http://www.icenews.is/index.php/2009/02/16/kaupthing-sweden-sold-to-finns/comment-page-1/#comment-67865
)Those letters references were written from Björgvin ( as minister responsibel for FME ) to UK Treausury and because he had already met with Darling. )
http://icelandreview.com/icelandreview/daily_news/?cat_id=16539&ew_0_a_id=314205
” Mathiesen: This is Árni Mathiesen, Minister of Finance.
Darling: Hello, we met a few months ago, weeks ago.
Mathiesen: No, we have never met. You met the Minister of Trade [ Björgvin G. Sigurðsson ].
..
Mathiesen: Yes, this was explained in a letter we sent the night before last from the Trade Ministry . ]
..
Darling: .. I know you were not at the meeting [ with Björgvin ] and weren’t part of it. We doubted what we were being told then and I am afraid we were right. “
Bjarni’s post is fair
http://www.icenews.is/index.php/2010/02/07/dutch-icesave-anger-%e2%80%98understandable%e2%80%99/comment-page-1/#comment-114213
but I find it interesting that at the late stage it was Árni Mathiesen that was the one talking to Darling not Björgvin.
Something went wrong here. I just wonder if Björgvin found out that Landsbanki had been lying about the funding they were meant to have and so could not continue or for some other reason.
Björgvin was deeply involved in process of crisis despite what Bjarni said.
Really this Black Report cant come quickly enough. Or documents released by Wellink’s colleagues to back up this very harsh lying comment he did make, which now we clearly must interpret as being against Björgvin now.
I would like to think that it would be just against Landsbanki managment but now my doubts are confirmed by the public statement of Björgvin.
>Adding the concept of insurance and liability to the analogy is a good one but perhaps we should even go into detail a bit further.
>The inexperimed driver is only admitted to the autobahn when he has an insurance for the minimum liability of 20.000 euro.
>He claims to have this and is admitted.
Let us be clear the inexperienced driver is Lansbanki here. So clearly there is a burden that the Dutch Dnb must have checked his crediential with the Icelandic FME.
i.e. the drivers shows his insurance document before he is admitted. This is how it of course does happen in EU.
>He is asked repeatedly if he knows how to drive and if he really has this insurance and every time he confirms this.
Again, let us make it clear that the driver says it, but the traffic cops must verify it back to the home authority licensing agency/insurance company.
>Additional insurance is paid for by the people of his town.
You lost me here.
What you mean that the people that own the road he drives did on unilaterlaly raised the insurance for their people if he hits them up to EUR 100K.
( This has nothing to do with the people back in the driver’s home town. )
>Now the idiot causes a lot of damage. The people from his tow have paid their insurance for damages above 20k and this is paid out.
The people who own the road he was driving on pay out.
>However, as it turns out, the idiot has NO insurance and is unable to put 20 k on the table.
Well in the meantime thanks to his actions driving on a UK motorway after he did leave the German autobahn, and the unpleasant actions of the ones that did own that UK motorway his home town suddenly does not have as much assets as they thought.
>The people from his town feel sorry for the victims and pay out this 20 k too, however they expect repayment of this sum.
The people that own the autobahn decide, because otherwise no one from foreign country and not even they own peopel will drive on they road again, they decide to quickly payout the insurance for the damange the driver did cause.
But they dont really ask the permission of his home town who are repsonsible for the first 20,000.
Well that’s more like it I think. I think your modification of my anologuy was close but needed to make some things clearer so it was a accurate analogy.
To Niels:
>>>>Bjarni made a post in which he writes that in fact mr. Sigurðsson had very little to say.
Most of the people involved, including Björgvin, have been relatively silent about what happened before and during the crash. The hope is now that the special investigative report is finally coming out, that somewhere among the 2000 pages they will spill some of the details of who did what.
But it has always been quite clear that the real government power lay with the Independence party, while the Social Democrats were the junior party. And Davíð Oddsson definitely still exerted considerable control over both the party and the government, although he was not really supposed to as the central bank chair.
The PM Geir Haarde would NEVER have considered doing anything that was against the will of his former mentor. This can be seen for example, that he was rather willing to have the government fall, than removing Davíð from the central bank.
It was not really that surprising to hear that Björgvin was kept out of the loop, when Davíð, Geir, and Árni were organizing the “take-over” of Glitnir, which started the whole thing.
Davíð and Björgvin were actually not on good speaking terms and in fact Björgvin said later that he had hardly spoken to Davíð at all in the whole year before the crash. Just think about it, the central bank chair and the trade minister overseeing the FME, not talking together during the runup to the biggest financial crisis of the country!
It was really sad that Ingibjörg Sólrún suffered the brain tumor and had to have the big surgery in New York, few days before the crash, since she, as the leader of the Social Democrats, was the only one that could “potentially” have stood up and stopped this.
Niels wrote :
>I find it curious that you are blaming the ‘EU burocrats’ and not Landsbanki. I mean, first of all, the ‘EU burocrats’ did not FORCE Landsbanki to set up Icesave.
Just in case I did not make it clear — if there is to be regulations that every one does rely on — as is the case that depositors did / do rely on the EU regulations..
..then those regulations must be competent.
Other wise there should be no regulations. And instead people should be buyer beware in they dealings.
Landsbanki should not have been permitted by regulationts to open this branches. It should have been subsidiarues.
I have had some sympathy for UK and Dutch in this as you know in that my knoweldge tells me so far that they could not stop Landsbanki from opening branches like this under EU regulations.
But then we hear from Alain Lipietz MEP that in fact they * did * have powers to stop the branches from taking this deposits under the existing EU directives and practice..
And you will notice since that came up that suddenly we see this shrill pushing of the ” Iceland lied ” story in the press coming from Netherlands.
Let us not be naive here Niels. It is Wellink that has the most to loose from this information about the French and other country ” refusals “.
This must be common knowledge within EU burecracy among those that deal with this and it really does explain a lot of things that were strange about the way EU commission has handle this whole IceSave affair.
Have a look as well at this more recent posts :
http://www.icenews.is/index.php/2010/02/07/dutch-icesave-anger-‘understandable’/
http://www.icenews.is/index.php/2010/02/11/former-iceland-minister-rejects-dutch-icesave-criticism/
Fishy
“Landsbanki should not have been permitted by regulationts to open this branches. It should have been subsidiarues.”
The Icelandic authorities could have stopped them of course as they were taking on billions of potential (or actual as we now know) debts. Why didn’t the icelandic regulators stop them opening as branches.
Why do you always concentrate on what the EU regulations allowed as opposed to what the Icelandic regulator did not prevent?
After all the results for Iceland have been catastrophic yet almost immaterial for any other country and the Icelandic government didn’t try to prevent it; in fact it publicised and encouraged Icesave.
But then we hear from Alain Lipietz MEP that in fact they * did * have powers to stop the branches from taking this deposits under the existing EU directives and practice..
Really Fisy! He’s made totally unsubstantiated claims, has not referred to law or shown his reasoning process. Hardly credible.
It is Wellink that has the most to loose from this information about the French and other country ” refusals “.
You are right to say “refusal” because, from the (very scant) information available, the French did not refuse. They merely filibustered until Icesave collapsed.
Although we’ve not had any detail, I would assume that the expansion attempts into both France and this other country occurred after the entry into the NL. So, on current information, it looks like if Landsbanki had tried to expand into France 6 months earlier, they might have been expected to make it.
@Fisy,
Let me (perhaps for the last time) return to the Autobahn analogy. Yes , there was a missunderstanding since you were meaning the icelandic authority by the hometown of the idiot driver (a logical thought). I was meaning that the hometown-insurers would be the dutch/brittish regulators.
You are saying:”Well in the meantime thanks to his actions driving on a UK motorway after he did leave the German autobahn, and the unpleasant actions of the ones that did own that UK motorway his home town suddenly does not have as much assets as they thought.”
So you are implying that Iceland could not fullfill its obligations because of the freezing order.
I found a really interesting report by Buiter in which he tried to find out how much money (foreign reserve) Iceland should have had in order to meet its obligations.
http://www.nber.org/~wbuiter/iceland.pdf
It makes very nteresting reading especially since you must keep in mind that Buiter wrote it back in october 2008 when the crisis was just starting and he could focus completely on the economic indicators of that time without all the ‘buzz” caused by the events afterwards.
It is also not just some posting on an obscure weblog. In fact Buiter presented this paper to an audience of icelandic bankers, politicians and regulators (even though in Iceland all these functions seem to converge into a single person sometimes :-))
I especially recommend you to read section 3.1 and 3.2. The findings of Buiter are interesting:
Compares to other coutries Iceland had quite large reserves of foreign currency (related to its gdp) but because of the enormous size of the overblown icelandic banks it was still by far not sufficient. In fact Buiter concludes that it was less than 50 % of what was needed.
Fisy, you said:
”
But then we hear from Alain Lipietz MEP that in fact they * did * have powers to stop the branches from taking this deposits under the existing EU directives and practice..
And you will notice since that came up that suddenly we see this shrill pushing of the ” Iceland lied ” story in the press coming from Netherlands.
Let us not be naive here Niels. It is Wellink that has the most to loose from this information about the French and other country ” refusals “.
I do not think that this is a valid connection to make (Liepnitz- Wellink).
Wellink made his statement when he had to appear in front of the parliamentary investigation.
The timing of Liepnitz’s statement had little to do with this.
You must really keep in mind (others have pointed this out ) that in NL Icesave is a relatively small issue.
Moreover (as I posted before) IMO Wellink handled the Icesave issue relatively well.
From the timeline I posted you can see that DNB really made a lot of inquiries with the icelandic side…and the answers they received were…well not in accordance with the truth.
Most of the criticism Wellink received came from much bigger issues, like the sale of ABN/AMRO to Fortis, the breaking up of Fortis and the bankruptcy of DSB bank.
Really, Liepnitz is not an issue in the debate.
I think that in fact mf. Sigurdsson is responsible for the “Iceland lied” headlines.
After all he came up (safely from behind his desk, not in front of the parliamentary committee) with his strong statements about the ‘french conncetion’.
This has led to a (logical) reaction from the dutch ‘propaganda machine’.
France has officially denied the existence of this ‘french connection’ so now it is up to mr. Sigurdsson to back his claims.
If he fails to do so he can be called, indeed, a liar.
Moreover I think (as far as I understand the issue) that the EU legislation Liepnitz mentioned gives space for a very complicated juridical debate.
As far as I know, Liepnitz mentioned that there is a directive that the ‘host’ state should check if the foreign bank which wants to operate on the market of the host has the means to meet its obligations.
As you can see from the timeline DNB made a lot of enquiries. In fact, a DNB delegation even came to Iceland for this.
So they can argue that they checked but received false information.
Peter (london/Krakow) said:”The Icelandic authorities could have stopped them of course as they were taking on billions of potential (or actual as we now know) debts. Why didn’t the icelandic regulators stop them opening as branches.
Why do you always concentrate on what the EU regulations allowed as opposed to what the Icelandic regulator did not prevent?
After all the results for Iceland have been catastrophic yet almost immaterial for any other country and the Icelandic government didn’t try to prevent it; in fact it publicised and encouraged Icesave.
”
Really, I think Peter does have a point there.
Why always concentrate on the ‘failure’ of UK/NL regulators to stop Landsbanki?
If Iceland had taken appropriate steps (for which it had the jurisdiction) then this whole disaster would have been prevented.
Well, Landsbanki would have probably gone bankrupte early in 2008 but Iceland would not have had the 100 % banking meltdown PLUS the Icesave debt.
>The findings of Buiter are interesting:
>Compares to other coutries Iceland had quite large reserves of foreign currency >(related to its gdp) but because of the enormous size of the overblown icelandic
>banks it was still by far not sufficient. In fact Buiter concludes that it was less than
>50 % of what was needed.
Yes, most of all re reading that report actually makes me sad
It is the report he issued in July 2008 ( update of the one he first presented April 2008 ) with very minor updates for October.
” It does therefore not cover the final speculative attacks on the three interna- tionally active Icelandic banks – Glitnir, Landsbanki and Kaupthing – and on the Icelandic currency. ”
Buiter and SIbert did good work there no doubt but point about taking Euro and EU member ship may have had some validity then but now after events of October we dont have to worry about as Buiter did say it we no longer have our banks :
” [Icelandic banks] having, by the usual metrics, more than adequate capital ratios, liquidity provisions, and profitability of their operations.”
More choice words although I will not post his comments that are very critical of HM Treausruy and Brown and Darling as this is not thread for that.
” The proximate cause of the Icelandic banking crisis was not, however, a deposit run, but rather an extreme interna- tional wholesale liquidity shortage – a liquidity crunch. Icelandic banks were unable to borrow in the interna- tional financial wholesale markets despite having, by the usual metrics, more than adequate capital ratios, liquidity provisions, and profitability of their operations. ”
” It is also clear that the CDS spreads during the current phase of the crisis have ceased to reflect the marginal funding costs of the Icelandic banks.4 Nevertheless, these are some of the highest CDS rates in the world and compare with a 270bps CDS spread for the Icelandic sovereign (on July 17, 2008). ”
” Displaying unusual (and commendable) candour for a central bank, in its latest Financial Stability report [May 2008 ], the Central Bank of Iceland says,
“Critics have asserted that the Icelandic banks have grown too large. This might be true if a major financial crisis was imminent and the Icelandic Government was forced to resolve a critical situation affecting banking operations both in Iceland and abroad.” (May 2008, p. 7)
” Perhaps more worrying, the government’s announced inability to deal with a crisis of significantly large mag- nitude might tempt a few large investors to coordinate deliberately – to collude to launch a speculative attack. “
Any one who has not read Buiters paper already should do so. It will open eyes to a lot of issues.
It is shame that Buiter now has gone to work as economist for Citibank. it is loss to wider world of criticism of central bank policuy that he is now inside one of the US banks.
Niels wrote :
>I think that in fact mf. Sigurdsson is responsible for the “Iceland lied” headlines.
>After all he came up (safely from behind his desk, not in front of the >parliamentary committee) with his strong statements about the ‘french conncetion’.
>
>This has led to a (logical) reaction from the dutch ‘propaganda machine’.
In all respect to you Niels, I think that you see the cart before the horse.
Unless you are in side the political machines and know for sure, I think you are being naive that this is an open and shut case.
Look at the date of the ” Iceland lies ” article that zoomed aroudn the world.
They came well before Björgvin G. Sigurðsson reaction to them.
As to influence of Alain Lipietz comments they are significant because they exposoe new facts that make the UK and Dutch look bad. It is not that Alain Lipietz matters as much as what he has indicated.
And now we have confirmed by Björgvin — that Wellink could have stopped IceSave. And same for HM Treasury.
So far the facts are not out. Björgvin has not been shown to be a lier — far from it. The opposite looks more likely — that in fact the French and the other EU state did what Dutch and HM Treasury could have done — stopped IceSave.
Please see this link to Netherlands press article Niels, it would be very help ful to comment on it as I did not get meaning of translation about Du Perron :
http://www.icenews.is/index.php/2010/02/07/dutch-icesave-anger-‘understandable’/#comment-114698
NIels wrote :
>Why always concentrate on the ‘failure’ of UK/NL regulators to stop Landsbanki?
>If Iceland had taken appropriate steps (for which it had the jurisdiction) then this
>whole disaster would have been prevented.
I focus on the fair analysis which is that it is both the Icelandic regulator and the Uk and Dutch regulators that share responsibility.
This is assuming that both were stopped — as is still my longer term assumption — by horrible EU freedom of establishment regulations.
You will find me most harsh about this EU regulations and burecrats that did make them.
If I appear to be in this thread concentrating on possibilities for UK and Dutch regulators to stop Landsbanki branches from taking deposits that is because of the recent ( January Alain Lipietz comments ) and now this facts related to Mr Wellink testimony where the Du Perron report is highlighted now.
( And of course after that the reaction of Björgvin G. Sigurðsson to Wellink’s comments . )
Both of which being to have me question my assumptions about the powers of the UK and Dutch regulators to stop deposits being taken from they own citizens by a ” foreign ” bank no EU bank.
Nothing has bought into question the Icelandic FME’s inability to stop them because Landsbanki were doing nothing against the EEA regulations and laws as they were at the time.
But.. if the UK and Dutch did have powers then they should have said No as it is their role to protect they own depositors. That should be self evident I hope.
@Fisy,
So you would like some translation from this article:
http://www.volkskrant.nl/economie/article1347844.ece/Wellink_had_Icesave_kunnen_stoppen
I am not a professioanl translator off course but it is more or less like this:
”
France DID refuse Icesave access and Wellink could have done the same.
This is the opinion of prof. Du Perron who investigated the Icesave disaster, at the request of the government.
DuPerron and colleague-investigator De Moor ,in the report, do not mention France but they list some reasons that could have been used to block Icesave, as France has done.
Also during the hearings of the parliamentary investigation France has not been mentioned.
Sigurdsson came up with his claim out of anger aroused by Wellink’s accusations against Iceland (they lied to us).
Accoridng to Sigurdsson Iceland warned in time about its problems and like France, NL could have blocked Icesave.
On tuesday and wednesday DNB was not willing to give a reaction.
Landsbanki made it clear in its statements that it wanted to extend Icesave to other countries.
Landsbani had a strong position in France and also in Germany, Luxembourg, Ireland and Italy.
At least one of these countries refused Icesave but Du Perron would not say which one.
Du Perron denies that DNB put pressure on him in order to skip the part on France. “We did ot want to mention France ourselves. We did not want to damage the trust of the french financial authority…
”
Mind you, this is just a translation…and while I was making it I saw a link on this page which might make this whole article obsolete:
It is THIS article:
http://www.volkskrant.nl/economie/article1348639.ece/Hoogleraar_trekt_Icesave-uitspraak_in
“Professor withdraws Icesave statement”
Now mr.Du Perron is withdrawing his statement about France denying Icesave.
“His sources were outside DNB and proved to be unreliable. Moreover the professor interpreted them wrongly”.
So it seems mr. Du Perron has swallowed his words…..
It remains weird.
Jónas Fr. Jónsson is saying the Dutch central bank was against a request from iceland to set up a guarantee fund for icesave, if it would have been allowed 600 million euros would have been in this fund when the bank fell, this was discussed in August and September 2008,
if the icelandic taxpayer ends up paying this icesave debt then we should sue the Dutch autorities for not allowing this fund to be set up despite their (claimed)knowlege of the banks situation, therefor deliberately causing finacial damage to the icelandic state.
http://www.visir.is/article/20100202/VIDSKIPTI06/139557641
Nothing has bought into question the Icelandic FME’s inability to stop them because Landsbanki were doing nothing against the EEA regulations and laws as they were at the time.
This seems to me to be the core point. You seem to believe that the Icelandic regulator derived its power within Iceland from the EU. That may be the case, but it seems unlikely.
I’d assume that the national regulators derive their authority from their own nations, not from the EU.
Was there any EU regulation that prevented the Icelandic government from introducing a law to limit the size of the banks? Or that prevented the FME from requiring all foreign expansion to be via subsidiary? Or that prevented the FME from limiting the banks’ size?
Certainly, the brief glimpse that we’ve had of the requirements the UK FSA gave to Kaupthing seems to show that they can do pretty-much what they like. As I’ve said before, I’m pretty sure that those powers are granted by the UK government and not the EU.
Axel
“if the icelandic taxpayer ends up paying this icesave debt then we should sue the Dutch autorities for not allowing this fund to be set up despite their (claimed)knowlege of the banks situation, therefor deliberately causing finacial damage to the icelandic state.”
Funny. Why not sue your own government and regulator becuase they knew exactly the situation, demanded that the Dutch open their markets and then actively promoted and advertised Icesave?
To Bromley86:
It would probably be overstating it to say that FME “wanted” in to stop the expansion of the banks. The general view in Iceland at the time, was that these were private companies, and what they did abroad was not too much of our concern. FME along with both DNB and FSCS, all believed that according to the EU regulations, they would not be able to stop them from opening up Icesave anyway.
Apparently, the French thought differently and decided to thwart Landsbanki´s efforts, by using their own way of saying Non through delaying tactics.
Fisy,
you said:”
It is the report he issued in July 2008 ( update of the one he first presented April 2008 ) with very minor updates for October.
” It does therefore not cover the final speculative attacks on the three interna- tionally active Icelandic banks – Glitnir, Landsbanki and Kaupthing – and on the Icelandic currency. ”
”
(about the Buiter report). This is an important point. Buiter presented this report (first version) in APRIL 2008 to the financial elite of Iceland. They did not disagree. Instead they asked him to keep the report confidential.
This means that the icelandic bankers , but also politicians and regulators cannot claim ignornace of the fact that the Icelandic financial model was unviable and would collapse at the first shock.
And Buiter did point out that in case of such speculative attacks, the icelandic economy would collapse, because of its fundamental weakness:
- a very small free floating currency (which invites such attacks)
-an overgrown banking sector
- a financial authority which is unable to act as a lender of last resort.
You also said (in a later post):”I focus on the fair analysis which is that it is both the Icelandic regulator and the Uk and Dutch regulators that share responsibility.
”
It still is ot clear wether UK and dutch regulators actually had the means to stop Icesave. The report of Du Perron concludes that under EU regulations dutch authorities did not have enough legal means at their disposal to do this. (and the same would be true for UK authorities)
And apparently mr. Du Perron has withdrawn his statement that France managed to stop Icesave.
But in spite of this, the UK compensated all savings over 20 k and the dutch compensated savings between 20 k and 100 k.
Iceland is responsible for the first 20 k.
Bjarni says:
“The general view in Iceland at the time, was that these were private companies, and what they did abroad was not too much of our concern. FME along with both DNB and FSCS, all believed that according to the EU regulations, they would not be able to stop them from opening up Icesave anyway. ”
Firstly, Icesave wasn’t abroad. The Icelandic regulator and government must have been very aware of it as they made a point to emphasise it.
Secondly there is a fundamental difference between the icelandic regulator and other countries regulators when it comes to icelandic banks; theta is they are responsible for regulating them. You know like removing their banking license if they don’t do as they a told to.
Can you please stop this ridiculous attempt at claiming that the Iceland were not in complete control of their banks, because if what you claim is true then you are admitting that Iceland is incapable of governing itself.
Is it?
To Peter – London/Krakow:
Icesave was definitely operating abroad. In fact there are were no Icesave accounts ever offered in Iceland and most people here had in fact never heard of them. The Icelandic regulators and the government were of course perfectly aware of Icesave, but since it was operating solely outside Iceland, it was not much on their radar until the very end.
It is your opinion that the Icelandic regulators were the only ones responsible for the foreign operations of the Icelandic banks. This opinion is not necessarily shared by many other people, both in and outside Iceland. There was never any question of removing the Landsbanki banking license, since there was no proof at the time that they had broken any laws.
It is already very clear that the Iceland was NOT in complete control of the foreign operations of the Icelandic banks. It just didn’t have the necessary understanding or enough experience of international banking to maintain actual control.
Even in Iceland, it was having trouble fully controlling the banks, as the they were systematically hiring the employees of FME at double their existing salaries, so it ended up mainly being staffed by relatively young experienced kids. They certainly didn’t have the means to effect real control of foreign operating banks.
To Niels:
If the Icesave agreement would be renegotiated, so the first 20k would actually be paid first by Landsbanki recoveries, we could probably resolve this dispute in a heartbeat.
“Icesave was definitely operating abroad. In fact there are were no Icesave accounts ever offered in Iceland and most people here had in fact never heard of them. The Icelandic regulators and the government were of course perfectly aware of Icesave, but since it was operating solely outside Iceland, it was not much on their radar until the very end. ”
Icesave were operating under the passport scheme which meant that in effect they were operating in Iceland . It was regulated and guaranteed by Iceland.
Are you trying to claim the the Icelandic regulator didn’t know about that? The Icelandic government certainly knew about it, after all, one of your ministers even gave a magazine interview promoting Icesave and promising that it was guaranteed by Iceland.
I accept that you personally, and most of the general population, had no idea about Icesave but claiming that the Icelandic regulator and government were ignorant of both it and the implications is ridiculous.
“Even in Iceland, it was having trouble fully controlling the banks, as the they were systematically hiring the employees of FME at double their existing salaries, so it ended up mainly being staffed by relatively young experienced kids. ”
You are making a strong argument that Iceland is unsuitable as a country to be operating banks or any other industry for that matter. I have to agree with you.
If the Icesave agreement would be renegotiated, so the first 20k would actually be paid first by Landsbanki recoveries, we could probably resolve this dispute in a heartbeat.
I’ll be amazed if anything like this happens :) .
That’s an effective interest rate of zero and the one thing that’s been clear is the UK/NL’s requirement that Iceland stand by its guarantee now. Which means Iceland pays the guarantee, reclaims that from Landsbanki and bears the financing cost.
There was never any question of removing the Landsbanki banking license, since there was no proof at the time that they had broken any laws.
But, using that argument, we can excuse all of the regulators. Which then takes us back to the central point that the Icelandic government is responsible for the effects of the poor regulation of its own banks.
After all, the British government can’t complain that EU regulations didn’t restrain UK banks correctly. It was up to the UK government to do that.
I’ve yet to see one supported argument that Iceland was not entirely responsible for regulating Icesave. For example, there’s no fact sheet like this one where the FSA claim any responsibility for Icesave and I’ve not seen anyone make a case based on law (even to the superficial level that we go to on IceNews :) ) that they were responsible:
http://www.mfa.is/media/Yfirlysingar/The_Icesave_Issue_-_Fact_Sheet.pdf
The fact that Iceland proved incapable of regulating its banks (and you paint an appalling picture) is entirely Iceland’s responsibility.
The only possible defence that I can see is in claiming that these faults should have been apparent to foreign regulators who had to satisfy themselves that their Icelandic colleagues were capable, and that at that point those foreign regulators should have acted to close down Icesave.
This is where the Dutch “lie” claims come into it. If it was obvious enough for us to reasonably expect the UK/NL regulators to make that call, it would have been definitively known by some or all of the Icelanders that they dealt with. Apparently the Dutch feel that they were consistently given the best possible interpretation of situations, rather than a truthful representation.
“If the Icesave agreement would be renegotiated, so the first 20k would actually be paid first by Landsbanki recoveries, we could probably resolve this dispute in a heartbeat.”
Obviously that impossible as its illegal under Icelandic law to give preferential treatment to one creditor over another.
To Bromley86:
We are actually closer to resolution here than you may think. It is already accepted that most of the deposit guarantee payments (current estimate 88%) will come from Landsbanki (LBI). The only thing missing is resolving the Ragnar Hall issue, and then 100% of the guarantee payments will automatically come from LBI.
The only thing then left to resolve will be the interest payments to cover the delay, which will automatically be much lower due to double the speed of recoveries from LBI (as they not shared with with UK/NL anymore).
Regarding the poor regulation, this may indeed have been part of the problem. The FME, was bound by the Icelandic laws and EU regulations. It was therefore not permitted to interfere with the operations of the banks, as long as they did not break those laws. This may be different in other countries, were regulators are not necessarily bound by just following the laws.
As for the shared responsibility of supervision, it is not something I have so far delved into in much detail. But it is currently being thoroughly debated and discussed in the Icelandic blog-sphere and media, especially after Alain Lipietz came out with his opinions. The main references I have seen made so far, are:
Deposit-guarantee schemes (the old favorite :-))
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:31994L0019:EN:HTML
Supplementary supervision of credit institutions
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32002L0087:EN:HTML
No one is saying that the Icelandic regulators are absolved of all responsibility, but the question being debated, is whether they bear the sole responsibility or whether it is shared with UK/NL regulators.
To Peter – London/Krakow:
All bankruptcy laws give preferential treatment to priority claimants. That is indeed why they are called “priority claimants”.
The 20k question is not about whether one claimant has priority, but rather whether a single deposit guarantee claim can be broken into two or more claims, each with equal priority. This is the “Ragnar Hall” issue, we have discussed repeatedly before, so I will not go into details here. But in short, according to Icelandic bankruptcy laws, this breakup of claims is not allowed, which means TIF should get the first 20k of each claim BEFORE claims for amounts above 20k are paid.
What is the ” Ragnar Hall ” issue ? — some readers may be thinking..
.. here is it visualized, it is result of the UK ( followed by Dutch ) negotators ” trying it on ” to gain EUR 0.8 – EUR 1.2 billions * more * than is the intention of the IceSave deal as it was negotiated :
http://www.slideshare.net/hjalli/the-icesave-dispute-priorities-and-division-of-claims
( They did manage to get it past the idiots sitting in our government chairs and they so called ” negotiating team ” led by the hard left friend of Steingrímur J., Svavar Gests. Then IceSave agreement was made public after our parliement did finally read it and Icelandic lawyer Ragnar Hall did point out basics of the ” trying it on ” in there. )
To Peter – London/Krakow:
If you read my quote you are referring to in your comment, it specifically says “The Icelandic regulators and the government were of course perfectly aware of Icesave”, so clearly I am NOT “trying to claim the the Icelandic regulator didn’t know about that?”
What I was saying, is that even if they knew about Icesave, they did not have necessary means or the legal authority to effectively limit and/or control the expansion of the banks outside Iceland. I am just stating the facts, as they are here in Iceland.
With perfect 20/20 hindsight, it is now perfectly clear that Landsbanki should never have been “allowed” to use the passport scheme to open up branches in UK/NL. But at the time, NONE of the regulators (ICE/UK/NL), thought they were able to do anything stop them from doing this, nor did they think this was “their role”, based on the EU regulations that were in effect at that time.
Apparently, the French didn’t let that small “technicality” get in the way. :-)
Niels wrote :
>“Professor withdraws Icesave statement”
>
>Now mr.Du Perron is withdrawing his statement about France denying Icesave.
>“His sources were outside DNB and proved to be unreliable. Moreover the
>professor interpreted them wrongly”.
>
>So it seems mr. Du Perron has swallowed his words…..
>
>It remains weird.
Thank you for the efforts in doing the translations.
This actions by Du Perron looks to be that it is the same as that state ement trying to find out about Björgólfur Thor and the GBP 200 millions guarantee claim.
The right question has to be asked or you get a correct but misleading answer.
http://www.icenews.is/index.php/2009/03/16/kaupthing-uk-legal-case-makes-high-court-progress/#comment-69220
In this case you can feel the behind scenes pressures working. It is probably that the information about the French regulators came from an off record source under this Chatman House rules.
And as Wellink did make his lying comments it blew the issue up.
Brumley wrote :
” >>Fisy : Nothing has bought into question the Icelandic FME’s inability to stop them because Landsbanki were doing nothing against the EEA regulations and laws as they were at the time.
>
>This seems to me to be the core point. You seem to believe that the Icelandic regulator derived its power within Iceland from the EU. That may be the case, but it seems unlikely.
>
>I’d assume that the national regulators derive their authority from their own nations, not from the EU.
>
>Was there any EU regulation that prevented the Icelandic government from introducing a law to limit the size of the banks? Or that prevented the FME from requiring all foreign expansion to be via subsidiary? Or that prevented the FME from limiting the banks’ size?
>
>Certainly, the brief glimpse that we’ve had of the requirements the UK FSA gave to Kaupthing seems to show that they can do pretty-much what they like. ”
If you want to be in the the single market, the customs union, you have to under EEA agreement that Norway, Liechtenstein and Iceland did sign along with EU ( Swiss is in EFTA but did not sign into EEA ), include the relevent EU directives in your own laws of the country and abide by them.
( Freedom of establishment horror for banks comes from Articles 43 to 48 EC. )
As to banking you need to have passed in your own laws :
The First and Second Banking Directives Directive 77/780/EEC and 89/646 EEC as amended by Directive 2000/12 EC, the Own Funds Directive 89/299/EEC as amended and codified by Directive 2000/12 EC and Solvency Ratio Directive 89/647/EEC as amended and codified by Directive 2000/12 EC , Large Exposures Directive 92/121/EEC as amended and codified by Directive 2000/12 EC, the Consolidated Supervision Directive 92/30/EEC as amended and codified by Directive 2000/12 EC , the Deposit Guarantee Scheme Directive 94/19/EC as amended and the Annual Accounts and Consolidated Accounts of Banks Directive 786/635/EEC.
( It seems that for example talking of Kaupthing and the reason that 2008 loan book was leaked+ was to try and show that Icelandic FME did not under stand implementation of the Large Exposures Directive but problem with that dirt flinging is that FME * did * follow this regulations to letter. )
All of this Directives and more recent ones was passed in Iceland as our own laws. This area of finance was area where we did implement nearly all of regulations from EU.
This like EU member states is frame work in which we must regulate credit institutions, and they branches. There is no deviaties allowed from this standards if we do want to have our banks operating in the various ways ( not just branches ) but all the kinds of things banks must do in the normal courses of business.
You are right in the general sense that Icelandic parliament is sovereign and if wishes it can get rid of this EU directive frameworks — in same way that UK can leave the EU if the will is for it — by passing laws that repeal European Communities Act 1972 and laws that came after.
( Still know one has explained to me why exactly UK stay as member state of the EU and why it doesn’t go back out to EFTA that it founded :
http://blogs.telegraph.co.uk/news/danielhannan/100020456/ten-reasons-to-leave-the-eu/ )
But issue is that if you do not make your regulations more strict than the EU minimums of other member states you are relying on that the EU burcrats did get it all correct, and that the other member states did too.
Unfortunately we copied wrong member state. We should not have copied Brown ideas in this.
Instead kept with the Dutch modelmore that we did have and maybe the reserve requirements of Spain although that didn’t save them from the horrible boom in property lending that is going to sink they banks in bad loans this year. ( The Spanish have hidden the bad loans they have by lending more money to the ones with the bad loans. Eventuall that musical chairs must stop .)
There already was some discussion from Mike Nordic analyst before on this and it was clear that he did agree that Iceland regulators had all of the standards in place. He was saying that there was lack of supervision but did not come up with any examples of that.
( But we do know that the Icelandic FME did not understand or watch for systemic risk. But they were not alone in Europe. )
Bear in mind that until the middle of 2008 our collateral requirements were more strict than the European Central Bank was.
Then we did copy their standards and that is why we are left with this huge Central Bank debts.
Another example were we should not follow the standards of others. In this case ECB under Jean Claude Trichet..
But we did follow the standards of the others in Europe, and not some crazy country like Greece or Italy or some thing but the most established banking center I know of the UK and City of London ways.
Sadly under Brown the City of London has been bought to its knees wit rest of country with it.
+http://www.icenews.is/index.php/2009/10/15/uk-sfo-iceland-trip-bearing-fruit/#comment-96439
Fisy, you said:”It is probably that the information about the French regulators came from an off record source under this Chatman House rules.
”
This is a bit of speculation off course and I do not know what to think of it myself.
It is well possible that Du Perron, during his research had contact with french regulators and heard them mention that they ’stopped Icesave’.
However, so far there have not been any records of contacts between Landsbanki and France.
You must know that dutch and french in general do not communicate very well and very often, in bilateral contacts between both countries, one side says one thing but the other side replies that they meant something different.
Not only 2 very different languages but also 2 very different characters.
Thanks for that Fisy. It seems that you’ve established that Iceland had the ability to set more stringent conditions but chose not to.
It is irrelevant which state, member or otherwise, that Iceland chose to copy. If a nation of 300k wants to use a nation of 60m, and one that has an unhealthy reliance on financial services to boot, then that is their affair and responsibility.
Bjarni says:
“What I was saying, is that even if they knew about Icesave, they did not have necessary means or the legal authority to effectively limit and/or control the expansion of the banks outside Iceland. I am just stating the facts, as they are here in Iceland.
With perfect 20/20 hindsight, it is now perfectly clear that Landsbanki should never have been “allowed” to use the passport scheme to open up branches in UK/NL. But at the time, NONE of the regulators (ICE/UK/NL), thought they were able to do anything stop them from doing this, nor did they think this was “their role”, based on the EU regulations that were in effect at that time.
Apparently, the French didn’t let that small “technicality” get in the way. :-)”
The EU prevents any country *other than Iceland* interfering with banks regulated in Iceland. EU regulation DO NOT stop the regulating country, Iceland, for controlling its *own* banks.
Do not group Iceland regulator with any other countries regulator with regard to the Icelandic banks operating under the passports scheme. Iceland had a responsibility to control its banks and IT COULD have Landisbanki operating Icesave if it wanted to. If you are claiming that the Icelandic regulator DID NOT have to power to regulate the Icelandic banks, then that’s Iceland’s fault – Icelands government should have given the regulator the power to do so.
It is no other countries regulator’s fault, stop claiming otherwise.
“Then we did copy their standards and that is why we are left with this huge Central Bank debts.
Another example were we should not follow the standards of others. In this case ECB under Jean Claude Trichet..”
As Mike said, Iceland went through the motions of applying banking standards and ‘models’, but was utterly clueless in regulating those standards and applying the ‘models’.
Its now very obvious to everyone that Icelanders have no idea how to run a banking system and were merely going through the motions without understanding there consequences of their actions.
Learn by experience, eh?
To Peter – London/Krakow:
Well, in the end it doesn’t really matter that much who is ultimately at fault. Just pointing the finger at us doesn’t really change the picture. You will probably end up paying for most of the losses anyway, so you might want to consider being a little bit more proactive on the regulating the next time around.
We will cover our fair share of the losses, as much as we possibly can, but it will unfortunately always be just a small percentage of the total.
Brumley wrote :
> It seems that you’ve established that Iceland had the ability to set more stringent conditions but chose not to.
If you do read into the details you will discover that the main bone of this contending about the Landsbanki branches is an area where there was * not * this kind of discretion because of the freedom of establishemnt pillar ( Articles 43 to 48 EC ) :
p. 16 “Had the?supervisory authorities tried to intervene and forcefully tried to stop this development, they would in?all probability have failed, as they lacked the legal authority to intervene. Iceland, like the other?Nordic countries, is a nation where the actions of the authorities must be based on law.?Discretionary powers are strictly limited. In retrospect, it is easy to assert that the Icelandic banks’?expansion abroad should have been restricted, but in the European Single Market framework and?with the European Passport, this was simply not something that could be readily accomplished within?the existing legal environment.”
http://www.icenews.is/index.php/2009/09/24/david-oddsson-becomes-newspaper-editor/#comment-103454
If you want to dispute this with meaning you need to cite the reason why the freedom of establishment ( pillar ) part of EEA framework could have been amended in the Icelandic laws to stop it happening.
Kaarlo Jännäri makes other specific points about supervision and what Icelandic could have done more on top of, but this is one area where no discretion was.
But.. it seems not to be the same at the other end — the host nation end ie UK and Holland did have more powers, because of what we have heard about French and other one EU member state so far not named that did stop it..
..and with no specific rebuttall of Alain Lipietz said about the supplementary supervision of credit institutions, insurance undertakings and investment firms in a financial conglomerate that did amend Council Directives 73/239/EEC, 79/267/EEC, 92/49/EEC, 92/96/EEC, 93/6/EEC and 93/22/EEC, and Directives 98/78/EC and 2000/12/EC that does apply on top of the other directives particuarlly the Deposit Guarantee Scheme Directive 94/19/EC which you notice above has ( “as amended” ) after it which is amended by what Alain Lipietz was the leader of writting the reports on in the EU parliament.
http://www.icenews.is/index.php/2010/01/10/icesave-explored-from-different-angles-on-icelandic-tv/#comment-110069
“This actions by Du Perron looks to be that it is the same as that state ement trying to find out about Björgólfur Thor and the GBP 200 millions guarantee claim”
This is the reason why Darling demanded 200m GBP from Matiesen
http://www.icenews.is/index.php/2009/12/16/landsbanki-under-restriction-due-to-fsa-regulations-before-terrorist-laws-applied/
No attempt seems to have been made to solve this bank problem, the British closed Landsbanki and a few days later they enforce Terrorist laws and tell the world they will seize icelandic assets where ever they can, that brought down KB and the rest of the banking system.
Fisy
“Freedom of establishment” is for the general principle of business but banks are a very special case and are regulated by their host country.
Please point to me where its says the icelandic regulator cannot be give complete control over its banks by the Icelandic Parliament?
After all, Iceland nationalised its banks so it obviously has control over them, if it wanted to.
However, claiming that ‘Iceland was powerless to stop Icesave operating abroad”, is ridiculous given the fact that the icelandic authorities were DEMANDING that Holland and the UK allow Icesave in. Plus, lets not forget, your beloved party while in government was publicising Icesave and the depositors guarantee.
But.. it seems not to be the same at the other end — the host nation end ie UK and Holland did have more powers, because of what we have heard about French and other one EU member state so far not named that did stop it..
A fallacy Fisy.
All the information available to us indicates that the French (and presumably the other country, although that’s by inference only as we have nothing on it) merely managed to delay the Icesave entry into their market. Once there, the supervision and regulation would have been entirely in the Icelandic court. How you can argue otherwise is a mystery, especially if you believe that the lead regulator in the home state is restrained by EU legislation.
Which leads on to:
Landsbanki branches is an area where there was * not * this kind of discretion because of the freedom of establishemnt pillar ( Articles 43 to 48 EC )
Having plumbed the depths of the introductory paragraph on Wiki, I noticed this. “With the proposed legislation, the Commission wants to reduce the barriers to cross-border trade, principally by doing away with the service industry regulations of individual EU Member States, unless those regulations are non-discriminatory; objectively justified on the grounds of public interest; and proportionate.”
http://en.wikipedia.org/wiki/Directive_on_services_in_the_internal_market
Seriously, I’m getting flashbacks to when you asked me to read up on ECB regulations to prove your assertion that the ECB had tried to take down Kaupthing.
Regarding the Jaanari report, my reading of it is that he merely says that the Icelandic banks could not be restrained given the way the Icelandic regulatory system was set up. Nothing to stop the government changing Icelandic law so that discretionary powers were not strictly limited. That interpretation is backed up by statements like “[The IMF] concluded as well that the authorities’ legal powers are weak, as the FME does not have the authority to intervene and take over a bank” [p.18], which indicates that it was within the Icelandic government’s power to grant that to the FME.
See also:
The FME, too, was too small to supervise a complex banking system like that in Iceland. The powers of the supervisors were too limited, and the Nordic tradition of jurisprudence did not allow much leeway into discretion.
and
The supervisors were too timid and lacked legal authority in their
efforts to intervene in these developments, but the overall national pride in the success of the banks would probably have made it futile even to try while the going was good and success followed success. [p.37]
Both those seem to me to be pinning the blame on Iceland’s system, rather than saying that the EU forced it to do (or not do) anything.
> that brought down KB and the rest of the banking system.
What rest of the banking system? Iceland had already done for 2 out of 3 of the banks before the UK got involved.
And the court review of the decision to close KSF shows that there were a lot of extremely serious problems before the freezing order against Landsbanki. Sure, the freezing order and associated comments may have nailed it, but last time I read the report that really didn’t appear to me to be decisive.
Bromley86
“Both those seem to me to be pinning the blame on Iceland’s system, rather than saying that the EU forced it to do (or not do) anything.”
And don’t forget that far from trying to stop the banks the Icelandic government was publicising and justifying the opening of Icesave in a road show in the City of London. As Mike (Nordic Analyst) said the regulator argued very strongly that Icesave was a good idea.
Claims from Icelanders that the FME ‘couldn’t stop the banks expanding’ are irrelevant if they didn’t want to stop them and in fact positively encouraged them.