PM writes to Gordon Brown following UK Treasury Committe report on banking crisis



The Icelandic government welcomes the Treasury Committee report and consideres it to be a meaningful contribution to the explanation of the events in October.
Jóhanna Sigurðardóttir, the Prime Minister of Iceland, has written to Gordon Brown the Prime Minister of the UK, asking for his reactions to findings in the Treasury Commmittee report on the actions taken by the UK government early October when the Icelandic banks collapsed. The Freezing Order, issued by the UK government on 8 October 2008 on the authority of the UK Anti-Terrorism, Crime and Security Act 2001, freezes certain funds relating to Landsbanki, including those owned, held or controlled by the Icelandic Government and authorities. Later the UK authorities effectively took over Kaupthing Singer&Friedlander, a subsidiary of Kaupthing, put the bank into administration and transferred most of its retail deposits to the Dutch bank, ING.
The House of Commons Treasury Committee published its first report on the banking crisis on April 4th. The report: Banking Crisis: The impact of the failure of the Icelandic banks – Treasury Contents, notes that the use of the Anti-Terrorism, Crime and Security Act 2001 was too strong an instrument to use against Iceland and the Icelandic banks at the beginning of the banking crisis. Furthermore, the report goes on to critcise the behaviour of the Chancellor of the Exchequer in relation to Iceland.
The report states: ,,The use of the Anti-Terrorism, Crime and Security Act 2001 had considerable implications for the Icelandic authorities in maintaining a functioning financial system. We call on the Treasury to consider how appropriate the use of this legislation would be in any similar circumstances in the future. The use of this Act inevitably stigmatises those subject to it and a less blunt instrument would be more appropriate.”
The committee also examined the conversation between the two finance ministers, Mr. Mathiesen of Iceland and Mr. Darling of the UK, and said it had found no evidence to back Mr. Darling’s allegations that his Icelandic counterpart had said that the Icelandic government would not honour its obligations and therefore it would be necessary to apply the Security Act against Icelandic interests.
The Icelandic government has welcomed the report and considered it to be a meaningful contribution to the explanation of the events in October. According to Mr. S.J.Sigfússon, minister of finance, addressing the Icelandic Parliament, Althingi, the report would possibly make it less difficult to get the now state-run bank Landsbanki removed from the HM Treasury’s list of regimes subjected to financial sanction by the British government, which also includes Al-Qaida, the Taliban and North Korea.
The committee also notes that there migth be flaws in European banking law, referring to issues surrounding the cross-border regulation of financial institutions. The report says: ,,Our Banking Crisis inquiry, and specifically the problem of the failure of the Icelandic banks, has raised issues surrounding the cross-border regulation of financial institutions. Considerable taxpayer support has been required to provide rapid compensation to onshore UK depositors in Icelandic banks that ‘passported’ into the UK. This area of European law requires further consideration, and we will return to this topic in our future inquiry onto the banking crisis within its international context, with specific reference to the regulation of subsidiaries and branches of cross-border financial institutions.”

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