Update from former Iceland PM trial

A second former governor of the Central Bank of Iceland, Ingimundur Friðriksson, took the witness stand this morning at the Culture House in Reykjavík – where the trial of former Prime Minister Geir H. Haarde is taking place.

Alþingi prosecutor Sigríður Friðjónsdóttir started the questioning by asking him whether he had been aware of the danger one or more banks would collapse in 2008, and how he came to be aware of that. Ingimundur answered that the danger was first and foremost apparent because of restricted access to loans.

RÚV reports that there are many fewer spectators in the public gallery today than there were yesterday afternoon, when Davíð Oddsson gave his three-and-a-half hour testimony. Geir Haarde is in attendance today and is sitting with his defence, Andri Árnason.

Ingimundur went on in his answers to echo the sentiments of other witnesses called since Monday, including Geir Haarde, that affirmative actions taken in 2008 to reduce the size of the banks would have led to their collapse.

Ingimundur told the court that the authorities were interested in making the banks smaller, but pushing them up against the wall would have made things difficult and forced them to fail.

He added that he is not sure what level of manoeuvring room the authorities had within law to force such changes on the private banks. The banks’ own room for manoeuvre was also highly restricted by 2008.

Ingimundur said he believes Geir Haarde, then-Prime Minister, wanted to make the banks smaller, just like others in power. It was, on the other hand, not easy for the banks to sell assets at the time.

Ingimundur said it was also the will of the Central Bank of Iceland that the banks reduce in size, but it was not in the Central Bank’s power to force them. Neither could it force them to move their headquarters overseas. Banks do not move their headquarters to other countries on a whim and such moves need to be done in co-operation with the receiving country’s authorities. The process is slow and expensive, the former Central Bank governor told the court.

(Homepage photo of Culture House: www.VisitReykjavik.is)