There is an increasing number of parliament members in Iceland deciding against the Icesave-agreement, according to the news source Bloomberg. 34 members are currently expected to vote against the proposition. Last month, a straw poll indicated that 33 members out of 63 would be against. In an interview with Bloomberg, Minister of Finance Steingrimur J. Sigufsson said that he is not panicking over the vote.
According to Bloomberg, Iceland will likely not receive any loans from the International Monetary Fund or other Nordic nations until the Icesave deal is finished and mutual agreements have been made with Britain and the Netherlands. Sigfusson says it is not possible to tell when the talks in parliament will be finished and says the third round of talks will continue sometime next week.
Great thread. A lot of info to digest, even though it’s a bit dated. I take exception to George Cowell’s comment though…
Multi-national conglomerate companies like WalMart and Home Depot that are publicly traded operate in their own fiscal world. They are beholden only to shareholders, and the health of whatever national economy they are in doesn’t matter to them. They report to shareholders, not any government… Not any society either, no social contract exists. Do they benefit the US? Only the 1%. They keep their money out of the US to avoid paying US income taxes. They are not US Citizens even though there has been the egregious Citizen’s United Supreme Court Decision granting corporations the rights of citizens.
The operating agreements each nation establishes for them sets the rules by which they profit and remove profits from the local economy to distribute to shareholders…
To remain independent, truly independent, multinational corporations beholden to only shareholders, must be contained.
The best way to lose sovereignty is to take money from the IMF.
The next thing to happen is to have foriegn big box U.S. companies forces into your local economy.
It is not worth it.
I am from Canada. Most of our local companies are gone, due to the infestation of us by U.S.companies, such as Walmart and the like.
They dictate the rules, and the way Countries do thier business.
Be very thoughtful about taking any IMF money.
IMF,WTO = big trouble. It means welcome to the “New World Order”.
Pass along this tidbit of info. We in Canada are being bought out by U.S. companies and friends of local Governments.
REMAIN INDEPENDAND.
Christianne is either a shill or someone overcome by the propaganda. The FDIC is broke. It is now a leech on the taxpayer, plugged directly to the pockets of bankers.
I support an Icelandic default. In fact, it would cause me to have even more respect for your nation. My only fear is that your politicians are playing games with you, and in the end they will capitulate somehow.
If the other countries and whoever else want the money back, get it out of the hides of those bankers…leave the everyday citizen of Iceland alone!
Remember that we in the UK have our own debt per capita at nearly the same as Iceland, yes, we and you have to pay. But, I think Iceland is far too vunerable to be held up against crippling demands and therefore some long term plan needs to be beaten out between Iceland, UK and the Netherlands. This has to be on realistic terms which in my opinion would probably never pay it all back but would be preferable to bailing out Iceland with emergency funds.
The bottom line here is to pay back your debts as outlined by your own Government Laws! Your government regulated the banks, the banks took your citizens money as well as citizens of other countries monies and squandered it. Your government regulations was clearly lax, but that happens everywhere.
You bank went bankrupt and now your government does not want to honor its obligations and the citizens agree with this for the most part. To offer protections for its own citizens in a global economy is foolish, short-sighted and foolhardy. Guess what, the time for a closed economy is over folks, you either get with the program or lose in the economic sense. Hmm…does Iceland want to be a 3rd world country? I suppose you do. How very xenophobic of you.
I propose here in the US where we have FDIC insurance for such a situation, that we issue regulations that in the event of a bank default, the US only pays back its citizens and disregards the rights of any and all other depositers who are not US citizens…Sounds unfair…well this is exactly what you are doing!
That you for that Brumley. But this just sucks.
We need to see all comments on the * same * long page.
( As it was before. )
I like most other things about new site templates but this is just crushing posters ability to have a good debate here.
Ah, I see. If there’s a Trackback showing, the Older Comments link disappears.
Posting or clicking on a direct link to a comment (i.e. where it says February 4th, 2010 at 7:24 am) seems to get rid of the trackback (or move it to the first page, the currently-viewed page being the last page). That allows the Older Comments link to display in the blank box between the Trackback text box and the Leave a Reply box.
Wierd. I was just able to access them via an “Older comments” link above the Reply box. But now I can’t see it.
When I could see it, there was no “Newer comments” link, which meant you could only travel one way through the history.
Let’s see if by posting this it will make the template view all the comments.
This will be so great if there is only one loan…
>I guess the point is all moot after Hannibalsson himself said, “Iceland cannot solve the problems that it is facing by itself”.
But then as a long-time supporter of Iceland joining the EU, he would say that. It’d be more relevant if Benediktsson said something similar.
Anyway, a link to the article where he made that statement (these guys don’t believe in obsure URLs :) ):
http://www.cidob.org/en/news/europe/iceland_and_the_eu_the_road_ahead_european_breakfast_with_jon_baldvin_hannibalsson_ex_minister_of_foreign_affairs_and_international_trade_of_iceland
>>>I do not think the EU should be blamed for the fact that the icelandic banking sector grew totally out of control. This was an icelandic problem and if Iceland so eagerly wants te demonstrate its independence it should also have taken care of this itself in this matter.
I guess the point is all moot after Hannibalsson himself said, “Iceland cannot solve the problems that it is facing by itself”.
Bjarni – Yes, I think we’re actually in-sync after all on that point!
Fisy, you said:
”
There was nothing that EU regulations supervised by FME allowed for the banks to be stopped.
And do not forget that this wonderful split of the Central Bank and the financial regulator that was done here was done in copying what Mr Brown did in the UK. It was a copy of the same regulation model.
How wrong we were to copy Mr Brown.
”
I do not think the EU should be blamed for the fact that the icelandic banking sector grew totally out of control. This was an icelandic problem and if Iceland so eagerly wants te demonstrate its independence it should also have taken care of this itself in this matter.
I frankly do not know which model of the regulation of financial markets is best: it can be seperated like in the UK, or all of it can be in the hands of the national bank (as in the Netherlands) but what I think is essential is : the quality of people working there and the authority which this institution (whatever this structure) has to enforce its policy.
I think this has been the problem in Iceland: people working for national regulatory institutions (a few of them excepted) had no clue what they were doing and did nothing, thinking that the icelandic economic miracle would go on forever.
Moreover, it seems there has not been a real willingness to take on the banks: apparently they were too powerful. When in 2008 the icelandic national bank finally realized something was very wrong and tried to fix things it was already too late.
Ignoring for the moment whether governments anywhere would have the will to do it, is your position that the Icelandic government was prevented by EU legislation from taking any action?
Because I’m pretty sure that the threshold conditions used to close down KSF came from UK law and not the EU. Regardless of what you personally think of that action, it would tend to support the position that states can regulate according to their own laws and not central EU ones.
It’s good to see you accept responsibility for your actions, even if you manage to blame someone else whilst doing so :) .
I wonder if Iceland’s president will soon call a national referendum on the Icesave bill. After all, that’s his duty if he thinks it appropriate. Anyway, I guess the UK and Netherlands are now waiting to see whether the president decides to either sign the bill or refer it to a referendum.
To Jim:
>>>>I disagree. A controlled transfer for foreign deposit accounts to a European bank (with government guarantees) in 2007/8 would have allowed slimmed-down Icelandic banks to focus on domestic accounts instead. The outcome would undoubtedly have been better than what happened last October; the outcome could not have been worse!
I still think you are misunderstanding my main point. If you read my earlier response to you:
https://www.icenews.is/index.php/2009/07/29/more-members-of-parliament-against-the-icesave-deal/comment-page-4/#comment-91090
you will notice that item c) is very similar to what you are suggesting. The problem was that both the UK and the Icelandic governments did not fully appreciate the problem at the time and certainly did not realize how potentially dangerous the situation was. If they had, they would definitely have stepped up their efforts in moving/transferring the IceSave accounts under FSCS jurisdiction.
Instead, during most of the summer of 2008, everything was delayed by stupid argument on how much money Landsbanki would have to pay the FSCS to allow the transfer and receive the UK deposit guarantee.
My actual point with item e) was that just closing down the bank, as had been suggested by Peter – London was not really a realistic option, but all the others items a)-d) mentioned in the post were. If at at least some of them had been implemented in 2007/2008, we would very possibly have avoided the banking crash in Iceland or at least lessened its consequences.
Fisy – You are getting excited about my comment to Bjarni, but I suspect you missed my “now in retrospect” ie with hindsight and given the lessons learnt from the past year. I agree that most regulators were similarly negligent (including the UK). I was merely emphasising that a controlled transfer of foreign deposit accounts (supported by government guarantees if necessary) in 2007/8 wouldn’t necessarily have resulted in systemic collapse in Iceland; domestic banking could have continued. However, the fallout from the banks’ fraudulent corporate loans is a different matter…
P.S. Reigning in did actually happen with Icelandic banks, such as Kaupthing abandoning purchase of Dutch bank NIBC in early 2008 but then Kaupthing was never a problem bank. At all. ( And Darling knew it )
It is true that Glitnir and Landsbanki that were doing poor risk management with what they were going to owe in the future. But that is why they began deposit taking. To improve they credit rating.
It is just that due to EU regulations we are liable for Landsbanki IceSave and not for Glitnir, even though Glitnir was in far worse shape.
Jim wrote :
> Remember
>that, when several British banks and building societies were on the verge of
>collapsing, their accounts were transferred (with state guarantee) to other
>(British, Spanish, whatever) banks; that solution worked…
Of course it worked so well for LLoyds shareholders and depositors didnt it ? After it was forced to take HBOS.
And RBS just needed a little bit of taxpayer cash didnt it, to bring it back into profits, just a little bit of moneys to tide it over for a month or three.
( Just in case people wonder, that was sarcasm.
LLoyds and RBS are still losing hundreds of billions of pounds despite the huge bailout money Darling threw at them. Northern Rock too.
Just horrible risks the bankers took there at those banks in the UK . )
But this was exactly what was being planned for Lansbanki — it to be bought by Kauthping. But then Darling and Brown took Kaupthing Singer and Frieldander for no good reason. And that was the end of the Icelandic banking system.
I am against bailouts as it is just throwing tax payer money down the gurgling drain of bank balance sheet to enrich other bankers.
UK’s regulators — specifically the FSA –did make exactly the same systemic mistakes as Icelandic FME.
As to bankers themselves the bankers that failed in the UK were far more reckless in the assets they did invest in than the Icelandic bankers.
Northern Rock, RBS, HBOS, Bradford and Bingley were all in subprime mortgages in huge way and Darling and the FME did nothing to make sure that they were reigned in.
So it is easy to say, ” A controlled transfer for foreign deposit accounts to a European bank (with government guarantees) in 2007/8 would have allowed slimmed-down Icelandic banks to focus on domestic accounts instead. ”
We can all be what Americans call ” Monday morning quarterback ” and use the benefit of hind sight to give advice.
But neither in Iceland or UK was there any chance of this kind of reigning in happen, primarily because it would require new legislation. And that kind of legislation has to come from the EU commission.
And where were the EU burecrats at this time ? That is a big question as yet unanswered.
European Central Bank was certainly up to things ( see posts above ). But where were the competent burecrats in EU watching and reviewing the results of the system that * they * created with the input of people like Brown who are the architects of the system ?
Where were these clever fellows watching out for people of EU like they say is they prupose.
Where were they ?
Peter London wrote:
>It should have prevented the banks from getting too big and threatening >the stability of the countries economy.
>
>Iceland absolutely had the power to do anything it wanted to with its banks >as it regulated them.
>
>To suggest otherwise is ridiculous, the Icelandic parliament was required >to vote on the Icesave agreement yet was powerless to control its banks?
>
>Impossible.
>
>Of course, nobody in Iceland wanted the banks to rein in their behaviour.
>
>Iceland wasn’t merely reckless in its over borrowing, it was lunatic.
>
>That was something the Icelandic regulator could and should have >prevented.
>
>To suggest otherwise is ridiculous,
Peter here you go again with you deliberate muddying of waters and imprecise language.
Iceland did not take deposits. Landsbanki, and Kaupthing did. They were private banks registered in Iceland and regulated according to EU laws ( directives ) by Icelandic government regulator FME.
Yes the Icelandic regulator, the FME , should have been looking at the systemic risks of the bank lending. But they were not alone in Europe innot doing the job correctly.
But you are dead wrong about the following even after I correct to what to are trying to say :
>[ The Icelandic FME and government ] absolutely had the power to do
>anything it wanted to with its banks as it regulated them.
Only in your mind Peter. Icelandic government and FME has the power to do anything it wants in the same way that the UK government and regulator FSA has the power to do anything it wants.
ie. * only * if what it wants is not against EU directives, and pillars of EU.
Iceland is the same in finance because it did incorporate into its laws 99% of the same legislation ( EU directives ) for finance.
The difference is that if Iceland as member of EFTA deviates it gets censured by the EFTA Surveillance Authority/EFTA Court, not the EU commission as happens for EU country like the UK, Ireland, etc.
For example, you will have noticed at times that EU commission had to be asked by Darling for agreement that what he was doing was not ” State Aid ” against EU principals.
As long as Icelandic banks kept to their capital adequacy of Basel II ( which they did ) and this EU directive was implemented in Iceland ahead of most other place in Europe, and they kept reporting what they were doing ( which they did ) and there was a deposit guarantee fund — there was.
There was nothing that EU regulations supervised by FME allowed for the banks to be stopped.
And do not forget that this wonderful split of the Central Bank and the financial regulator that was done here was done in copying what Mr Brown did in the UK. It was a copy of the same regulation model.
How wrong we were to copy Mr Brown.
Jim wrote:
>If such an action seems unthinkable for Icelanders even now in retrospect, >then I understand why they just let the problem grow and grow!
It is as unthinkable as to other countries including the UK who did nothing to stop the growth of their banks until it went horribly wrong.
Probably because they were just making too much tax money ( the governments ) to want to stop it. And I mean the UK here first and foremost.
Northern Rock clearly went to hell in 2007. But still Darling did nothing about RBS and Bradford and Bingley until the banks where bankcrupted and about to fall in a mind blowingly large way.
Read this by John Lancaster in LRB.
If you dont understand what hes saying overall, get someone to explain it to you :
http://www.lrb.co.uk/v31/n10/lanc01_.html
Clearly you havent bothered to read it even though I bought it to your attention at least twice before.
“whether bank can be legally shut down, just because it has too many depositors”
A bank doesn’t have to be shut down. If foreign deposits were excessive relative to ability to service deposit guarantees, then foreign deposit accounts could have been transferred in a controlled fashion to another bank (with the support of government guarantees). The Icelandic regulators should have forced (if necessary by introducing new legislation) that outcome in 2007/8 instead of burying their heads in sand and letting the problem get worse.
“the point was that it this would be a bad idea due to the risk of complete collapse it would automatically create”
I disagree. A controlled transfer for foreign deposit accounts to a European bank (with government guarantees) in 2007/8 would have allowed slimmed-down Icelandic banks to focus on domestic accounts instead. The outcome would undoubtedly have been better than what happened last October; the outcome could not have been worse!
“It is very easy for people from other countries to say, “well, just shut the bank down”. But such a drastic action will have concequences”
Oh dear… I am 100% certain that transferring the foreign deposit accounts in 2007/8 (probably supported by an Icelandic state guarantee) would have been the least bad solution. If such an action seems unthinkable for Icelanders even now in retrospect, then I understand why they just let the problem grow and grow! Remember that, when several British banks and building societies were on the verge of collapsing, their accounts were transferred (with state guarantee) to other (British, Spanish, whatever) banks; that solution worked…
Bjarni said:
“Unless EU introduces new banking rules, which somehow puts limits on the size of the banking sector compared to the underlying economy of the “home” country, the fact remains it will be very difficult to stop banks from growing.”
Ridiculous. Thats the task of the Icelandic regulator not the EU.
You seem to think that banks are above the law; absolutely not. They are supposed to be very strictly control with the full force of the law to prevent a systemic risk to the host country.
Otherwise, banks can bring down a nation. Maybe you noticed?
Bjarni
“Setting aside whether bank can be legally shut down, just because it has too many depositors, the point was that it this would be a bad idea due to the risk of complete collapse it would automatically create.”
.
.
.
“NO deposit insurance fund or government has enough funds to cover their respective guarantee”
Well, thats where Iceland had a problem, didn’t it?
It should have prevented the banks from getting too big and threatening the stability of the countries economy.
Iceland absolutely had the power to do anything it wanted to with its banks as it regulated them.
To suggest otherwise is ridiculous, the Icelandic parliament was required to vote on the Icesave agreement yet was powerless to control its banks?
Impossible.
Of course, nobody in Iceland wanted the banks to rein in their behaviour.
And comparing Iceland to other countries… sure the depositor protections schemes don’t have enough money in them but they can borrow from the government and repay with future charges against the industry. This can’t happen in the Iceland becuase the level of debt was 10x GDP against even the most reckless countries 5xGDP.
Iceland wasn’t merely reckless in its over borrowing, it was lunatic.
That was something the Icelandic regulator could and should have prevented.
On Jul 30, 2009, Easy said:
“Dont worry this is just a show, unfortunatelly they will accept it, mark my words!!!”
So, did they accept it or not? so, more members of parlament aginst what? do you still belive there is a parlament that decides? They just follow orders and try to make it beliveble.
As Bjarni says :
>I am not sure if you understood my point [ Jim ]. Setting aside whether
>bank can be legally shut down, just because it has too many depositors, >the point was that it this would be a bad idea due to the risk of complete
>collapse it would automatically create.
And you have to ask same kind of question of European Central Bank as well because it * did * act in this kind of way :
Why did ECB “.. [ demand ] that the Icelandic banks repay, quite quickly, a large share of the facilities of which they had availed themselves in good faith. Those repayments were funded at least partially with deposit accumulation in foreign branches.”
And then ( clumsily at best motive ) ask for margin calls in October then rescind them after making sure all in market knew of this ?
https://www.icenews.is/index.php/2009/07/29/more-members-of-parliament-against-the-icesave-deal/comment-page-4/#comment-91028
To Peter – London:
>>>>Wouldn’t that point have been before the Icesave accounts were started? The Icelandic government didn’t have the funds to cover the Icesave guarantee
and it must have known that from the very beginning.
EVERY European government knows this, as NO deposit insurance fund or government has enough funds to cover their respective guarantee, in the case all or some of their largest banks were to fail (unless the guarantee is very limited).
It is easy to check this for each country, simply locate the Annual Reports for each bank, add up all the deposits, and then compare with the size of the corresponding government from public reports.
To Jim:
>>>>I disagree. Once it became clear that the Icelandic regulators had failed to control bank deposit taking, it was inevitable that a government (whether British, Dutch or Icelandic) would have to step in and transfer the deposit accounts to other banks. Not transferring such accounts would only exacerbate a systemic crash.
I am not sure if you understood my point. Setting aside whether bank can be legally shut down, just because it has too many depositors, the point was that it this would be a bad idea due to the risk of complete collapse it would automatically create.
One of the fundamental thing to understand about all banks, is that they receive short money (deposits, borrowings), and then lend it out long. This means you can never just shut down a bank, unless some larger entitity (bank or government) takes it over to cover the short-term liabilities while waiting for the loans to get repaid.
Anyway, Iceland never really had this option available, since all the banks were bigger than what the Icelandic government could cover (they found this out the hard way, when they foolishly trying to take over even the smallest bank, Glitnir).
As mentioned in various earlier posts, Iceland is not the only country in this potential situation. I seriously doubt, for example, that UK could realistically just “shut down” the HSBC, or Netherlands the ING, or Switzerland the UBS. And if any of them tried to do so, it would almost certainly lead to collapse of the banking system, with possible devestating concequences for the whole world.
It is very easy for people from other countries to say, “well, just shut the bank down”. But such a drastic action will have concequences, and most of those concequences will land on the population of the home country, as we are now finding out here in Iceland.
Unless EU introduces new banking rules, which somehow puts limits on the size of the banking sector compared to the underlying economy of the “home” country, the fact remains it will be very difficult to stop banks from growing.
Another option would be to have somehow special EU banking rules for smaller countries, that cannot possibly back up their banks, that operate outside their home market. But this would break one of the basic rules of EU, that is equal access to markets for everyone, irrespective which country you are from.
Bjarni said:
“This morning Landsbanki stopped accepting deposits for its IceSave accounts, as the Icelandic regulator FME, determined it was becoming too big for the Icelandic government to cover its 20K minimum deposit guarantee.”
Wouldn’t that point have been before the Icesave accounts were started? The Icelandic government didn’t have the funds to cover the Icesave guarantee
and it must have known that from the very beginning.
Instead of discreetly telling them not to start the venture, the government actively promoted it.
Jim wrote :
> it was inevitable.. [ Darling ] would have to step in and transfer the deposit accounts to other banks.
Traditional bank risk come from the risk of mismatch between demand deposits and the loans made by the bank with that money.
As far as we know Landsbanki got this aspect wrong. But also ECB did not help.
This sounds more like a justification of what Darling / HM Treasury and UK FSA did in freezing Landsbanki London branch assets, etc than actual reality.
And why oh why did Darling and Brown do it for Kautphing Singer and Friedlander. Kaupthing had almost no mismatch between their demand deposits and loans because most people taking Kaupthing Edge had much longer notice period than for Landsbanki’s IceSave.
IceSave was being advertised for longer notice period accounts from early 2008 onwards with interest rate on short term notice accounts lowered a fair bit.
I do wish that FME would release detailed balance sheet analysis that was prepared for them of Landbanki operation as a whole snapshop of October 2008. It would make such discussions as this more meaningful.
>Not transferring such accounts would only exacerbate a systemic crash.
Calling in loans like the European Central bank did also will accelerate the mismatch problem. ( see above+ )
Darling also did refuse the same liquiding scheme member ship for Kaupthing Singer and Friedlander that it offered to all other banks with subsidiaries in UK at the time.
What was justification for that other than ” Die Kaupthing, die die die.” ?
+https://www.icenews.is/index.php/2009/07/29/more-members-of-parliament-against-the-icesave-deal/comment-page-4/#comment-91028 )
“clearly this is a bad idea, due to the risk of complete collapse it creates”
I disagree. Once it became clear that the Icelandic regulators had failed to control bank deposit taking, it was inevitable that a government (whether British, Dutch or Icelandic) would have to step in and transfer the deposit accounts to other banks. Not transferring such accounts would only exacerbate a systemic crash.
To Bromley86:
>>>>So can you provide links to the relevant EU laws that prevented the Icelandic state from controlling its banking sector?
Of course the Icelandic state has the ability and responsibility to control its banking sector, but it has to do so withing the confines of the existing laws, both domestic and in this case EU/EEA. Indeed, there were several steps they could have taken to alleviate the risks, listed here above in the response to Jim.
The question you pose, is whether it was possible legally for the Icelandic government to force Landsbanki to stop accepting foreign currency deposits in its IceSave accounts. I am not aware of any laws EU or otherwise that would have allowed them to do so, short of shutting the bank down.
And if you think about it, this action, even if legally possible, would probably have led to the collapse of Landsbanki, which is clearly not what anyone would have wanted. Just imagine, what the response to a news release, worded something like this, would have been:
“This morning Landsbanki stopped accepting deposits for its IceSave accounts, as the Icelandic regulator FME, determined it was becoming too big for the Icelandic government to cover its 20K minimum deposit guarantee.”
To Jim:
>>>>Regulators and/or central banks (depending which country talking about) have an obligation to control systemic risks. Taking excessive deposits (eg Icesave) can cause systemic risk, so why would specific additional laws be required.
Correct, they do have the obligation to control systemic risks and in the Icelandic case they clearly didn’t. There are several steps, the Icelandic central bank/government could have taken that would have alleviated this risk, for example:
a) Increase capital requirements. This is one of the most effective tools central bank can use to “slow down” banks.
b) Allow the banks to do their accounting in other currency, e.g. Euros. Since most of their operations were in foreign countries, this would have made a lot of sense and allowed the banks to minimize their risks without massive hedging against the Icelandic krona. But the central bank was dead set against this and turned them down.
c) Actively participated in the negotiations between Landsbanki and the UK government about moving IceSave into a subsidiary, so it would be placed under FSCS protection. The discussions had started regarding this move early in the year, but was being held up by demands of the UK government for transfer of large amount of funds bank to UK, which was not possible due to existing loan covenants of the Landsbanki (Just before the crash in October there were offers from the UK government had lowered those demands, but by then it was too late, details are a bit schetcy on the exact details of this offer). This move clearly would have lowered the risk for everyone involved, since outright crash of IceSave could then probably have been avoided.
d) They could have pressured the Icelandic banks to move their headquarters and main operations to some other European country (most likely UK, Netherlands, or Luxembourg). Kaupthing had already designed a plan for doing this, and according to recent interviews with their manager, was actually intending to do this later in 2008, but the crash beat them to it.
e) They could have done what Peter – London is suggesting, shutting the banks down or threatening to shut them down. This is indeed what they did with Glitnir and the UK government did with Kaupthing. But clearly this is a bad idea, due to the risk of complete collapse it creates, which is exactly what ended up happening in the Icelandic case.
At the risk of stepping in, that’s really the whole point. Sure, the EU framework ensured that the opportunities were there, but it is the job of sovereign governments to ensure that there are laws in place to protect their interests.
So can you provide links to the relevant EU laws that prevented the Icelandic state from controlling its banking sector?
(Bearing in mind that I know if anyone can, you can :) ).
Bjarni said:
“When you say Iceland, you probably mean instead the Icelandic bank managers. One of the problems with the EU regulations, that the IceSave debacle helped expose, was that the regulations allowed any bank to open branches in other European countries using the “passport” scheme, basically without any serious ability of the relevant authorities to limit it or otherwise stop it.”
Not true.
The Passport system allowed Icelandic banks to operate in other countries without being regulated by those countries regularly authorities. Icesave was regulated by Iceland. Confirmation of this is the fact that it was covered by the Icelandic depositors protection scheme. This was all over the website and confirmed by the Icelandic government in UK publications.
Icesave was regulated by the Icelandic authorities
“The Icelandic regulators really had no effective legal means available to them to stop Landsbanki from signing up more depositors, at least according to the relevant EU regulations. ”
Are you claiming that nobody was regulating the Icelandic banks? You may have a point.
As regulators of its own banking and legal system system can write any laws it writes to control its banks. Icelanders regulator could have shut down or threatened to shut down any Icelandic bank it wanted. Iceland was totally responsible for controlling its own domestic banks, EU law doesn’t
give banks any rights that the regulator cannot control.
Bjarni,
Thanks for explaining the reason for the delay.
“any specific laws that give regulators the power to stop a bank from signing up depositors”
Regulators and/or central banks (depending which country talking about) have an obligation to control systemic risks. Taking excessive deposits (eg Icesave) can cause systemic risk, so why would specific additional laws be required… If there’s already a law covering murder, then you don’t need a specific law for intentionally driving a knitting needle into someone’s eye socket!
Peter London did say :
>The Icelandic regulators/Icesave promised Holland that it would not >exceed a certain amount of deposits in that country and that those >deposits would be protected with a guarantee fund. Of course, they >ignored that promise and the Icelandic regulator must have been fully aware of it.
And Bjarni point out :
>The Icelandic regulators really had no effective legal means available to >them to stop Landsbanki from signing up more depositors, at least >according to the relevant EU regulations.
>
>But, as far as the management of Landsbanki is concerned, you could say >they actively exploited the fact that they couldn’t easily be stopped or >limited in their expansion by the regulators of any country.
>
>If you are aware of any specific laws that give regulators the power to stop >a bank from signing up depositors, please provide the link to the laws in >question with quotes of the relevant clauses.
I would also like to add that the actions of the European Central Bank do also have some reason for the reason that IceSave branch in Netherlands did go over it agreed soft limit :
https://www.icenews.is/index.php/2009/02/13/former-icelandic-pm-haarde-on-hardtalk/#comment-64707 – discussed here.
And original thread ignored by many including what I would say are most knowledgeable posters here :
https://www.icenews.is/index.php/2009/02/06/the-banking-crisis-in-iceland-in-2008/
“For several years, the Central Bank of Iceland’s rules on liquidity
facilities have been largely modelled on those of the ECB. I say
largely because for quite a while the Icelandic rules were rather more
stringent than those in Europe – that is, the Central Bank of Iceland set
stricter requirements concerning eligibility of collateral. Facilities in
the Central Bank of Iceland resembled those in the ECB’s jurisdiction;
the collateral accepted was similar, and so on. This applied, among
other things, to bonds issued by banks. Last year, steps were taken to
align the Icelandic rules more closely with those in Europe in order to
increase access to liquidity.
In 2008, the European Central Bank responded sharply to what it
considered excessive borrowing from the ECB by Icelandic banks
through subsidiaries in EMU countries. The loans concerned had been
taken in compliance with the ECB’s rules on liquidity facilities for
financial undertakings in EMU countries, but the ECB demanded that
the Icelandic banks repay, quite quickly, a large share of the facilities
of which they had availed themselves in good faith. Those repayments were funded at least partially with deposit accumulation in foreign branches.
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.”
As to other allegation of ad hominem — regarding British politician you will notice I never do ad hominem against for example those most responsible for current situation after our own Glitnir and IceSave banker whos acts did cause us so much harm.. yes that is Mr Alistair Darling and Mr Gordon Brown.
I have called the * actions * of Brown and Darling horrible — I critize their actions and bad faith only and I have callled their taking of Kautphing Singer and Friedlander as done in a mindless panic, that action of Darling Brown in KSF taking stinks to the heavens, and refer to the bad action of Brown Darling over Landsbanki terrorist listing.
But I have never called them ad hominem names.
I got upset at Niels when he did start to mis quote me about what I post about EU burecrats and their responsibilities :
https://www.icenews.is/index.php/2009/06/16/former-iceland-pm-defends-bank-privatisation/#comment-81871
I said :
“I do specifically blame EU burecrats for IceSave being such a big failing that it was in the end and for falling short term on the heads of Icelandic taxpayer, and first on the UK and Netherlands taxpayer”
My reasons being those EU commission burecrats did make:
– freedom of establishment through branches inside EU/EEA apply to banks and so do STOP member state ( as so called host country ) from regulating banks operating and taking money in they jurisdiction,
– give them banks using branches freedom to operate as they like as long as they follow these same EU regulations and so FORCE good enforcement of these EU burecrat made bad regulations on regulator such as UK FSA and Holland regulator AFM
AND THEN ..
– have people in home country AND host country then be on the hook to pay for it all when it goes wrong ( Directive 94/19/EC ).
And then trying to give Peter – London some guiding about his contuining inaccurate postings pointed him several time to to those three verses from our epic poem Hávamál which I introduced in describing of Halldór :
https://www.icenews.is/index.php/2009/06/16/former-iceland-pm-defends-bank-privatisation/#comment-81696
He did not get message so I have now called him directly a nitwit. It’s the first time. And if he stops, the last time.
It was surprising but not unexpected to see the very calm and reasonable Bjarni even losing his patience with Peter – London at least twice in earlier above in this thread because of Peter’s plain nonsense :
https://www.icenews.is/index.php/2009/07/29/more-members-of-parliament-against-the-icesave-deal/comment-page-4/#comment-87373
https://www.icenews.is/index.php/2009/07/29/more-members-of-parliament-against-the-icesave-deal/comment-page-4/#comment-87182
That is because when Peter – London stays in thread ( long one like this ) and post his nonsense again and again even if you point out his falsehoods he just keeps on again and again with them. And for intellectualy honest discussion trying to bring out actual facts it get tedious to have him keep on doing it.
That is why I am making sin of calling him a nitwit directly this time. Maybe it will focus his mind.
I am not exactly known for giving those that deserve none an easy time. The ones here that get most of my contempt are our own politicians here in Iceland.
Only one I describe as a crazy is our Minister of Finance in Iceland, Steingrímur J because of his crazy Left-Green ideas. But of course that was before he got into power in this government.
Now he show he has few if any principle at all.
I call our ex-Prime Minister Halldór Ásgrímsson a nitwit ( his actions and words meet that description ):
https://www.icenews.is/index.php/2009/06/16/former-iceland-pm-defends-bank-privatisation/#comment-81564
To Peter – London:
>>>>My I remind you that Iceland didn’t just comply meekly with EU law, but actively exploited it.
When you say Iceland, you probably mean instead the Icelandic bank managers. One of the problems with the EU regulations, that the IceSave debacle helped expose, was that the regulations allowed any bank to open brances in other European countries using the “passport” scheme, basically without any serious ability of the relevant authorities to limit it or otherwise stop it.
>>>>The Icelandic regulators/Icesave promised Holland that it would not exceed a certain amount of deposits in that country and that those deposits would be protected with a guarantee fund. Of course, they ignored that promise and the Icelandic regulator must have been fully aware of it.
The Icelandic regulators really had no effective legal means available to them to stop Landsbanki from signing up more depositors, at least according to the relevant EU regulations.
But, as far as the management of Landsbanki is concerned, you could say they actively exploited the fact that they couldn’t easily be stopped or limited in their expansion by the regulators of any country.
If you are aware of any specific laws that give regulators the power to stop a bank from signing up depositors, please provide the link to the laws in question with quotes of the relevant clauses.
According to the Icelandic news this morning, the IceSave agreement might finally be going to a vote tomorrow:
http://www.visir.is/article/20090827/FRETTIR01/423482042
Based on previous experience, this could of course easily be postponed again. :-)
The main reason for the delay in the past few days, was on the question how to ensure the amendments proposed by the finance committee would definitely come into effect with the granting of the guarantee by the parliament. There was a possibility that UK and Netherlands would use their courts to just take the original guarantee, and somehow bypass the amendments.
The bill the parliament will now be voting on, will have a clause stating that the guarantee only comes into effect if UK/Netherlands accept the amendments. Whether they do, will of course remain the question.
“Just as RBS and NR are ultimately the fault of the UK government and not the Germans, Dutch, French, etc”
Ah, I prefer to blame the Germans for everything ;-)
Fisy
My I remind you that Iceland didn’t just comply meekly with EU law, but actively exploited it.
The Icelandic regulators/Icesave promised Holland that it would not exceed a certain amount of deposits in that country and that those deposits would be protected with a guarantee fund. Of course, they ignored that promise and the Icelandic regulator must have been fully aware of it.
Thats not the actions of an innocent.
Fisy, considering you’re the only person I’ve seen here complaining about Ad hominem, you’re certainly a big fan of calling people silly, nitwit, crazy, etc.
Whatever you think of Peter’s previous comments, nothing he wrote in that post was incorrect.
If the FME failed, then that’s the fault of the Icelandic government. If the banks were too big to save, then likewise.
Just as RBS and NR are ultimately the fault of the UK government and not the Germans, Dutch, French, etc.
Peter – London writes again his sillyness
>Icesave came about because of the actions of Icelandic banks operating under Icelandic laws in Iceland supervised by the Icelandic regulators.
>The EU sets the law but it is up to member states to apply the. The Iceland isn’t even in the EU, so how can EU laws be responsible for the actions of Iceland’s banks when Icelandic authorities alone were capable of restraining them?
Really Peter stop posting like nitwit and you know that under EEA agreement directive 94/19/EC was implemented into our laws in 1998 and that we have followd running it to letter and intend of it.
It is even * in this thread * above us mentioned :
https://www.icenews.is/index.php/2009/07/29/more-members-of-parliament-against-the-icesave-deal/#comment-87720
I have been critial of Iceland FME for not seeing systemic risks of the banks, but that FME failed in they supervisory duties based on the EU regulations but they are not alone in Europe.
UK FSA did same possibly even more horrible job with RBS Royal Bank of Scotland and Bradford and Bingleys. And also Northern Rock the granddad of problem banks. Where was the UK FSA when these were on they way up?
You read this already but read it again Peter : —
https://www.icenews.is/index.php/2009/06/16/former-iceland-pm-defends-bank-privatisation/#comment-81705
I wont even comment on you other false hoods other than to link to this for example from Davið Oddsson interview in 2007 about attitude of Icelandic Central Bank
:
https://www.icenews.is/index.php/2009/07/01/iceland-icesave-deal-“there-is-no-plan-b”/#comment-84576
” On Aug 17, 2009, Terry said:
Hello Fisy
I said – ‘but I have set out my reasoning previously.’
Fisy said – > Please then post the link direct to the comment where you do this.
It’s all within this thread – and to link. and repeat would be pointless. I’m sorry you didn’t comprehend the meaning of my comment. ”
In this thread Terry did decide to respond to my question which was for him to explaine what he thinks
” harsh but tolerable settlement terms ” for Iceland in IceSave of deposit guarantee is, i. e. what he thinks would be ” harsh but tolerable settlement terms ” in terms of monies over what time, interest rate, and caps etc :
https://www.icenews.is/index.php/2009/08/14/iceland-pm-defends-parliament’s-icesave-misgivings/#comment-89784
His answer is :
“Well, my answer to that is – I don’t know if the present proposal is ‘tolerable.’
Which was not what I was asking him.
But I do appreciate that he did respond. Although here would have been better for many reader of this thread and conversation.
Axel said:
“Freedom and democracy, the states obligations to its citizens and the country are more important than debts collected by a handful of bankers because of a badly designed EU regulation work created by people who want trust bankers to regulate themselves,”
Icesave came about because of the actions of Icelandic banks operating under Icelandic laws in Iceland supervised by the Icelandic regulators.
The EU sets the law but it is up to member states to apply the. The Iceland isn’t even in the EU, so how can EU laws be responsible for the actions of Iceland’s banks when Icelandic authorities alone were capable of restraining them?
And Iceland didn’t stop Icesave, it told the British public to put their saving in it because it was guaranteed by the Icelandic government.
So, please stop trying to blame the EU for the actions of your government.
“if we are the first to demand ability-to-pay terms it was about time someone did”
Ah, now I understand the delusion a little better: Icelanders think they are the first to “demand” ability-to-pay terms on sovereign debt! It’s amazing that no other country has thought of demanding that in over 80 years. If only other countries had the priorities of freedom and democracy like Iceland does. LOL…
“It is, our way of thinking makes it different, our priority’s are different, Freedom and democracy, the states obligations to its citizens and the country are more important than debts collected by a handful of bankers”
Axel, you are like a brother to me. Spoken like a true lover of Freedom. A true Patriot. A handful of bankers cannot take and spend a fortune and decide that it is up to the people to pay it back…and that it’s up to the people to live their lives as debt slaves because of some papers that those filthy bankers pushed around.
The bankers designed this system to elevate themselves and their heirs into an elite class of rulers. It will only work if the people are stupid enough to be their serfs. In America, the propaganda devices repeated to the citizens again and again that our children and children’s children will be paying back this “debt”. Like we’re supposed to nod our heads, mumbling “yes..yes..pay it back.” You know what? I won’t! And MY children won’t!
Some Americans have already stated, however, that they would gladly pay it back…in hot lead. It is my hope that the crooks will reconsider their ways so that the people are not driven to desperation.
Jim said
“There’s some kind of strange delusion where Icelanders think their sovereign debt is somehow different to every other country’s sovereign debt.”
It is, our way of thinking makes it different,
our priority’s are different,
Freedom and democracy, the states obligations to its citizens and the country are more important than debts collected by a handful of bankers because of a badly designed EU regulation work created by people who want trust bankers to regulate themselves,
if we are the first to demand ability-to-pay terms
it was about time someone did,
the right thing to do now is to reject the icesave deal and refuse to pay,
this is not just about Iceland and UK/NL
its about fighting a unfair system,
we will change it, or destroy it.
A GDP cap might be acceptable, but I suspect that the ability to write off (rather than just roll over) any excess above that cap will not be.
I really can’t see any benefit to the UK/NL in accepting this counter-offer. If they do, there are massive limits on what will be repaid AND it goes to court, with the chance that the whole loan is subsequently written off. If they don’t, it goes to court and, assuming they win, then there are no limits.
“I find it most likely that this counter offer will be rejected”, the current colation government will collapse, the IP will be elected back into power as lead in a new coalition government, and then Icesave private negotiations will resume again.
Jim, I find it most likely that this counter offer will be rejected and it will go to court here and then up to EFTA Court quite quickly.
I do not think that the ending clause of write off by 2024 is something reasonable myself.
However the cap on GDP and other clauses I have read in public so far are.
>> And that’s just one of the reasons why Britain isn’t going to
>> write-off part of its loans to Iceland
>
> You will notice that this is not something majority of people
> in Iceland has any interest in asking for.
>
> Instead they are interested is about something that is sustainable.
That is a fallacious argument. If Iceland doesn’t achieve the GDP growth rates specified in the amendments, then it won’t repay the loan. Such ability-to-pay terms haven’t been used for any sovereign debt anywhere in the world for at least 80 years. I think Icelanders don’t understand that key feature about sovereign debt! There’s some kind of strange delusion where Icelanders think their sovereign debt is somehow different to every other country’s sovereign debt.
I wrote about the above posts+ :
>Really I would like others to post on this than us. [i.e me and Brumley86].
It disappointes me that only Alexander E did bother.
+from about here — https://www.icenews.is/index.php/2009/07/29/more-members-of-parliament-against-the-icesave-deal/comment-page-4/#comment-89320
Jim wrote :
>And that’s just one of the reasons why Britain isn’t going to write-off part of its loans to Iceland
You will notice that this is not something majority of people in Iceland has any interest in asking for.
Instead they are interested is about something that is sustainable. And then for EU commission to leave us the hell alone with they horrible regulations.
EU member ship is a fantasy of current Social Democrats, not a will of people of Iceland and certainly not the tax payer of Iceland since EU commission actions and of they member state over IceSave.
“At 56.8 per cent of total British gross domestic product, it is higher than the burden in 1976, when Britain sought an emergency loan from the International Monetary Fund”
Indeed. And that’s just one of the reasons why Britain isn’t going to write-off part of its loans to Iceland…
Alexander E. said:
“But the scale of national debt, which exceeded £800billion for the first time ever in July, is becoming deeply worrying, said analyst Russell Jones of RBC.”
Yes, but Iceland should be bailed out by the UK, because Icelanders are nice, there isn’t many of them and hell why should Iceland suffer becuase of the actions of its politicians, government, banks and political system.
“Britain is forecast to accumulate the biggest budget shortfall of any member of the 30-strong Organisation for Economic Cooperation and Development next year. ”
“But the scale of national debt, which exceeded £800billion for the first time ever in July, is becoming deeply worrying, said analyst Russell Jones of RBC.
At 56.8 per cent of total British gross domestic product, it is higher than the burden in 1976, when Britain sought an emergency loan from the International Monetary Fund. “
Fisy, I’m not a banker (thanks god) but I have long time “practice” with them as well as politicians (of larger scale than “bosses” of the 300,000 citizens) and world scale corporations. And their lawyers of course. And from this experience I believe that Brown&Co. were least concerned about “saving private money of Johnson and McLoud”. By acting so irrational and illegal they want to divert attention (and responsibility) of their own incompetence. As it was their ideas about “free financial flow” and it was their responsibility to inform UK people about real Icesave status (it was not a bank in fact). They wanted to distance themselves as far as possible from the disaster. Cause what happened in Iceland is just a beginning of the world financial disaster – not a “mismanagement” of few crooks.
Dutch guys just had to react to UK move to save their faces (and as**) as they also failed to inform public. Of course they would talk about “confidential nature” and “bank secrecy” and bla-bla-bla. But this is what government are supposed to do – to protect public in the first place and banks only after. But well we know this is not what happens :-(
So all your remarks and info are correct – but these are details. The reasons behinds only matter. And the reason – Icelandic “meltdown” is not an accident nor local misfortune. It’s just an example of how the current world financial (and political) system is f**** up.
End of the day Fisy, I could link you to a definition of guarantee or promise, but you still wouldn’t accept the point.
Without in any way intentionally trying to insult you, perhaps it’s a linguistic difference. I can only say that in British English (and assuming no ususual legal meaning of words like “support”), neither the letters nor the transcript show that the Icelandic government was guaranteeing anything. Therefore the Icelandic government had no intention of honouring their obligations. Rather they intended to try, which is no guarantee.
Surely you don’t want me to repeat myself :) .
You know this how? Note that I’m not saying that such transfers were going on.
Were the Kaupthing Edge deposits in the UK a small part of KSF’s funding? I’ve not seen its accounts so I can’t be sure. Could it have survived a full run? I doubt it, but freely admit that that is a guess.
You have to understand that Darling’s comments and the freezing order, whilst no doubt not in any way helping the situation, were not the problem as far as British depositors were concerned.
The problem was the sudden, shocking knowledge of just how deep in the **** Icelandic banking was when its most well known bank was closed to UK depositors. And it became apparent that this was the second Icelandic bank to collapse, leaving just one.
It didn’t help that many people started to realise just how small the population of Iceland was. For example, in so far as I’d ever considered Iceland, I’d always assumed it was like Ireland or Scotland – perhaps a little smaller.
The short of it is, FSCS or no, only a total moron, someone who hadn’t seen the news or someone with a term deposit would have not been transferring their money out of KSF during the week of the 6th. AFAIK, there’s no direct evidence to support this assertion, so you’ll have to either believe it or not.
I see you’re happy to quote from him when it supports you. Perhaps you’d like to summarise his views on the likelyhood of Kaupthing surviving?
That aside, he’s perfectly entitled to draw those conclusions, but I don’t think that makes him correct. He certainly does use some pretty emotive language, as well as a degree of insinuation, so no doubt he feels strongly about it.
And just for readers to be clear why we talking about Kauthping and Kaupting Singer and Frieldander when main converation is about unrelated entity Landsbanki IceSave it is this.
Likely that with its largest banks ( and largest company in Iceland ) Kauthping still operating that there would have been deal to put Landsbanki under it with Kaupthing taking over it IceSave liability :
https://www.icenews.is/index.php/2008/10/05/kaupthing-to-buy-landsbanki/
With Kauthping Singer and Friedlander, Kaupthing’s main subsidiary taken by UK — as it was for no good reason — that avenue of rescue for Landsbanki and IceSave was closed by UK government.
So that is bearing it has on Landsbanki branch IceSave in UK and Holland and the guarantee of IceSave by Iceland that we are talking about.
Kuupthing Singer and Friedlander was a subdsidiary fully regulated and licensed in the UK by UK FSA and Treasury. And as such there is no state guarantee owed by Iceland+ as it was not a branch.
+Or rather Icelandic The Depositors’ and Investors’ Guarantee Fund which is a private foundation. http://www.tryggingarsjodur.is/AboutUs/
>Would the Icelandic government have stuck to a guarantee that they had not
>formally announced they were giving or would they, as they are trying to do
>now with the amendments, want it to go to court?
I have no doubt they would have wanted to deal in constructive spirit with UK and Holland before a law suit.
But then if collapse of Kaupthing did happen * without * actions of Brown and Darling fact that Iceland government does not have several billions lying around situation probably would need to go to impartial third party but would be in form of gentlemenly agreement of such by both UK and Holland and Iceland.
But.. all indications are that Kautphing and Kauthping Singer and Frieldnader would survive with short term loan from Icelandic Central bank of EUR 500 millions for 4 days that * was * sent to bridge its short term gap in financing:
https://www.icenews.is/index.php/2009/06/22/haarde-in-dublin-ireland-worse-than-iceland/#comment-82891
Bjarni gives nice analogy above us in this thread here about so called arbitration attempt of EU and why Icelandic government withdrew :
https://www.icenews.is/index.php/2009/07/29/more-members-of-parliament-against-the-icesave-deal/comment-page-3/#comment-87229
> I never said that we should take everything literally, just that, in the absence
>of any other information, if someone says “may” then that means that they
>may, not that they will.
But Darling had plenty of other information didnt he.
Not only did he know the previous letters and also the specific situation of bank accounts at Landsbanki branch in London plus at Heritible and that wires not being sent out of those back to Iceland or any where else.
So, even not given that extra information he clearly had, why should we make an exception for the Darling Árni conversation that you do not apply elsewere even to words of person in same government position and talking on similiar subject , i.e. Brown ?
I think it is because you know you position is weak and are stretching and being selective to try and back you weak position up.
But course I could be crazy.
+ and here is link I missed in the above about HM Treasury and KSF for quote :
“The FSA has determined that Kaupthing Singer & Friedlander no longer meets its threshold conditions, and is likely to be unable to continue to meet its obligations to depositors.”
http://www.hm-treasury.gov.uk/press_102_08.htm
Really I would like others to post on this than us.
>then although strong, the statement is factually correct.
Do you not agree it mispresesents the situation ? Someone hearing it said or reading it in article expects something else than what the situation was.
To expect that a clear statement of intent of * not * backing up the branch of Landsbanki was made in the conversation.
That was * not * what was said by Árni. And * not * what the letters said.
Like Brown statements I am sure that it was factaully correct according to your way of talking about this in the same way as ” likely ” means in this press release from HM Treasury in October 2008 :
“The FSA has determined that Kaupthing Singer & Friedlander no longer meets its threshold conditions, and is likely to be unable to continue to meet its obligations to depositors.”
The comments that Darling made about his conversation with Árni will no doubt show a pattern of behavior that I do not think judges in UK high court that is to do the review of taking down of Kaupthing SInger Frieldander will take very kindly in Darling’s direction.
The reason I want others to give reality check to this conversation is that it possible that I and Willem Buiter and many others simply are losing our minds. And I would like some verification of that.
“In addition, outrageous bullying behaviour by the UK authorities (who invoked the 2001 Anti-Terrorism, Crime and Security Act, passed after the September 11, 2001 terrorist attacks in the USA, to justify the freezing of the UK assets of the of Landsbanki and Kaupthing) probably precipitated the collapse of Kaupthing – the last Icelandic bank still standing at the time. The official excuse of the British government for its thuggish behaviour was that the Icelandic authorities had informed it that they would not honour Iceland’s deposit guarantees for the UK subsidiaries of its banks.
Transcripts of the key conversation on the issue between British and Icelandic authorities suggest that, if the story of Pinocchio is anything to go by, a lot of people in HM Treasury today have noses that are rather longer than they used to be.”
— Willem Buiter end of October 2008 on Darling actions.
http://www.voxeu.org/index.php?q=node/2498
And there I will concede you may have a point. Note “may”. I don’t know how EU case law (or any other law, for that matter) affects this. It is entirely possible that “assist”, “may” & “support” have an absolute legal nature that is different to their literal nature. I doubt it, but it is possible.
I know you want comment from others, but if you keep restating your position I’ll just keep restating mine :) .
a) Assuming ,as I have to in the absence of any evidence to the contrary, that the literal meaning applies to the letters of support,
b) given Arni’s direct statement “I cannot . . . guarantee”, and
c) given that state backing of the guarantee was required (and here there is a lot of room for argument),
then although strong, the statement is factually correct.
As I’ve said to you before, your position is that the Icelandic government intended to back the guarantee but the asset freezing and move against KSF changed the situation. Fair enough. But what if the freezing order didn’t happen and the FSA didn’t move against KSF, but KSF still folded (a situation that I know you don’t believe would have occurred, but bear with me)? Would the Icelandic government have stuck to a guarantee that they had not formally announced they were giving or would they, as they are trying to do now with the amendments, want it to go to court? If you say anything other than the latter then I’ll call you a liar :) .
If you examine what he says, you’ll see that it in no way conforms to reality. I never said that we should take everything literally, just that, in the absence of any other information, if someone says “may” then that means that they may, not that they will.
So you can either believe in some conspiracy that makes no sense (as we all know that KSF was in fact regulated by the UK), or you can believe that Brown got confused and started waffling.
Where are you going with this? Is it that he said “companies” when it was actually “company”? The rest is all perfectly true – even you can’t argue that the FME did a correct job.
Regarding Jim’s point, that’d be this one:
“Fisy – Mathiesen could have simply said one sentence instead of all that waffle”
“Darling’s taking situation and truth and bends it but by the time Brown starts speaking the truth of what is going on, what little truth comes comes out his mouth becoems like light entering a black hole — it bends incredibly far seemingly against the laws of everyday physics and them disappears”
To extend the analogy: Icesave accounts could be the event horizon into which nothing can return, David Oddsson’s ongoing ramblings bear a striking similarity to Hawking radiation, and the agreement disclaimers are undoubtedly singularities where all notions of time and space break down. ;-)
Hello Fisy
I said – ‘but I have set out my reasoning previously.’
Fisy said – > Please then post the link direct to the comment where you do this.
It’s all within this thread – and to link. and repeat would be pointless. I’m sorry you didn’t comprehend the meaning of my comment.
I am aware that Bjarni has invited Peter–London, to provide substantive reference to claims he is making relative to legal assertions. The point I made, was not of a legal nature, but from a personal moral perspective.
>Ad hominem would be calling you Wolfie or a ” Little Englander “.
Ah! Sorry Fisy, yes, I recall making the ‘Wolfie’ reference. Following a post – you gathered supportive comment from two acolytes, relative to your argument. But, I had not realised that Gummi was being (as you later pointed out) amusingly somewhat disingenuous. So I am happy to withdraw the reference, as Wolfie did have more than one supporter! (that’s a joke Fisy).
>But as we know this would only come up in case related to IceSave guarantees as background, that look very likely to be about to come up now Parliament is wisely amending the IceSave agreement to sensibleness looking at the reports.
Well, this is the interesting next chapter in this saga.
Brumley wrote:
>By all means dismiss Jim’s point
What point? You need to be explicit in stating what.
>At the end of the day Fisy, I’m the one putting forward the literal meaning of the transcript and letter texts and you’re the one that’s having to justify why the literal meaning is not the same as what you think the real meaning is.
As is very clear Darling was never expecting the transcript and letters to be published. Either this or he did not care because situation in UK was so desperate on that week for reasons that have nothing to do with Icelandic banks that he had nothing to lose by lying and every thing to gain by lying.
You point is basically, EU/EEA case law and protocols of diplomacy have no bearing on this.
It is obvious that wording assisting the Fund in raising the necessary fund, and supporting the fund are about the government using its money or credit rating to get money for the fund to capitalize it for the obligations.
But OK taking devils advocate position, even if we take a weaker interpretation from what was literally said in the letters and in the conversation ( which is not correct given context of EEA case law ) there is certainly nothing to justify the strong statement of Darling that :
“The Icelandic Government, believe it or not, have told me yesterday they have no intention of honouring their obligations here.”
If we analyse according to your standard then Darling’s statement doesn’t fir with the conversation and the letters does it ?
Reading it literally you expect a very different conversation and set of letters from what was then released.
Please would some other than me and Brumely ( and Peter – London ) make comment on this.
>Does that make me correct? Not necessarily, but the balance of probabilities is in my favour.
Going forward a short time if we apply the same standard of yours to Brown’s speech in the UK parliament commons about Kaupthing Singer and Fridlander on on 6th May 2009 :
https://www.icenews.is/index.php/2009/07/01/iceland-icesave-deal-“there-is-no-plan-b”/#comment-84073 :
“The fact is we are not the regulatory authority [ of Kaupthing Singer and Friedlander ].”
And to his statements to the world on Oct 10th 2008 :
http://news.bbc.co.uk/2/hi/uk_news/politics/7662027.stm for example this diamond of a lie :
“We are freezing the assets of Icelandic companies in the United Kingdom where we can. We will take further action against the Icelandic authorities wherever that is necessary to recover money.
This is fundamentally a problem with the Icelandic-registered financial services authority – they have failed not only the people of Iceland, they have failed people in Britain.”
As well as what Darling said do you not see a slight pattern here.
( To other poster reading FYI those links have links to Brown so you can watch him saying it and see I am not taking it out of context. )
Starting with Darling’s taking situation and truth and bends it but by the time Brown starts speaking the truth of what is going on, what little truth comes comes out his mouth becoems like light entering a black hole — it bends incredibly far seemingly against the laws of everyday physics and them disappears.
I wrote :
>”A judge looking at all of this letters and that conversation and background of EU directives etc will conclude that intend was for the government to support the fund.”
Terry wrote :
>“will conclude” – Well, I’m sure the Judge will accept your decision Fisy!
If it would ever go in front of impartial judge and particularly one that knows the EU/EEA case law then yes, that is what the interpretation would be.
Change of it in front of judge would be a fine thing.
But as we know this would only come up in case related to IceSave guarantees as background, that look very likely to be about to come up now Parliament is wisely amending the IceSave agreement to sensibleness looking at the reports.
I have no doubt that there would be no damanges given but certainly the actions of Brown and Darling would come up as background history to the case.
But have no doubt that in the court of public opinion in UK and around the world Brown and Darling will receive a very hefty reputation kicking after Kauththing Singer Frieldander Judicial Review is completed.
Thanks Oystein. Both of those statements fall foul of the “support” problem. In that if one chooses to read them naively then they look good, but if they’re instead read as a legal document would be then there’s no state guarantee given.
>Bromley86. “Show me once where Arni, Geir or David said that the guarantee would be honoured.”
In october 08, when nobody seems to have control over the situation – these statements were posted.
http://www.tryggingarsjodur.is/Frett/7806/
http://www.tryggingarsjodur.is/Frett/7821/
At the end of the day Fisy, I’m the one putting forward the literal meaning of the transcript and letter texts and you’re the one that’s having to justify why the literal meaning is not the same as what you think the real meaning is.
Does that make me correct? Not necessarily, but the balance of probabilities is in my favour.
By all means dismiss Jim’s point, just as you’ve failed to point to a single instance where the guarantee has been unequivocally affirmed. Just don’t expect to change any opinions.
>If Darling was lying, why then did Geir or Arni not come out and say that of
>course Iceland was standing by its guarantees and that the statement was
>ridiculous.
>
>Could it be, perhaps, because they weren’t guaranteeing?
No could it perhaps be because by then Darling and Brown had with incredible speed already knocked us over the head by calling us ” dishonourable “, put us on the financial regimes sanction list ( AKA terrorist governments list), seized Kaupthing Singer and Friedlander and gifted Kaupthing Edge to ING?
As I have said before and you understand full well , attitude of government is different before this actions of Brown and Darling, and after, when all these things have been done.
It is very simple. Then IMF puts pressure and we sign acceptance of backing of the guarantee fund completely in November .
If Kaupthing Singer and Friedlander was not taken and horrible actions of Darling and Brown situation would have played out differently. For example Landsbanki being sold to Kapthing, with some split of liability combined by borrowing of money by Icelandic government on behalf of the insurance fund.
Whole point is by actions, Darling and Brown close off actions possible before they did it. And of course there was no actual reason to take Kautping Singer and Friedlander as UK high court review will demonstrate.
( And why now there is suddenly this flury of ” independent ” interest in Kaupthing case by UK Serious Fraud Office to muddy situtation in UK public minds ready for that high court review of Darling FSA decision. )
+http://www.indefence.is/News/News/~/NewsId/13
Brumley writes:
>Nice dance Fisy. I love the way that people who take the literal meaning of what Mathiesen says are dishonest.
I mean as you know and understand full well that Darling knows better because he is or should be steeped in the minuteae of the deposit agreements and what this letters from Icelandic government mean. He even said when challenged that he did take the whole conversation for his justification.
If you take one thing out of context it means one thing. But you have to put it into full context of the full conversation and also background of knowledge which Darling had.
So taking what you say here and applying it to different conversation, we must take what Brown says here in UK Parliament “The fact is we are not the regulatory authority [ of Kaupthing Singer and Friedlander ]” as the entire basis of Browns actions against Kautphing Singer and Friedlander ?
https://www.icenews.is/index.php/2009/07/01/iceland-icesave-deal-“there-is-no-plan-b”/#comment-84073
( I invite others to comment on your conclusions vs mine re: the Darling Árni conversation, although no doubt Peter – London will post with yet more factually inaccurate jumbling up of separate issues post in reply.
To be clear I am inviting analysis from others who make coherent analysis, not you Peter – London. )
“You notice in transcript if you read the full one that Darling keeps on interrupting”
That’s just your opinion. Unless you’ve heard a recording, how do you know that Mathiesen didn’t simply fail to finish some of his sentences and merely left them trailing? For example, do you know the length of the pauses that Darling allowed in each case before he responded?
Anyway, given what we all now know about Landsbanki’s criminal activities (including taking British and Dutch deposits and then “loaning” them to the businesses of friends and family members), do you really think that Landsbanki’s assets shouldn’t have been frozen?! I’m really surprised that Iceland’s investigators still haven’t frozen the assets of the suspected criminals, but it seems that’s the way Iceland works…
Terry wrote:
>but I have set out my reasoning previously.
Please then post the link direct to the comment where you do this.
Fisy wrote :
>I think you are then in a minority of 2. Peter and you. Although your styles are very similiar.
Terry replied :
>Fisy – you readily complain of Ad Hominem. Personal sniping at those with differing opinion is not constructive.
Ad hominem would be calling you Wolfie or a ” Little Englander “.
I think instead I was merely making a matter of fact observation. But if you are offended I apologise.
Axel wrote :
>i read the conditions the government intends to add to the state guarantee
>last night when they where leaked on the internet, in my opinion they are
>weak and far from being acceptable,
If they vote for main terms then people will not accept it. I mean in the future they may simple not pay they taxes any more. Watch to Bolivia and what happened there.
But it is clear that people will be out on the streets again. We already saw this with the Indefense protest of Friday where 3.000 or so turned up to protect the current IceSave deal.
It should be very clear that Steingrímur support is now gone completely and back to levels before 2003 or so. He has lost his voters. They will not be fooled by him again, So yes, there will be no support for Social Democrat in next election that will be demanded as result of collapse of government coalition.
As Bjarni say:
“If we do not accept those loan guarantees exactly as specified in the agreement, then UK and/or Netherlands have the option, according to the agreement itself, to terminate the agreements.”
Too weak and the amendments may be accepted by UK and Dutch, resulting in sovereign default of Iceland 2016 onwards.
Reasonable amendments that try to cap the amount to % of exports or GDP, or lower the interest rate or make it over longer term will not mean the nice profitable deal for UK and Holland have so they will reject it.
I think the understanding is as Bjarni says earlier that aim should be to show ” international community ” that we agree to pay in principle but want reasonable amendment to terms that are sustainable for tax payer of Iceland to avoid destitution and sovereign default.
>the bottom line is that Iceland is ready to pay the minimum compensation
>the argument is about the deal itself and the terms it contains, which are not
>acceptable,
Yes, that is the current situation. But the deal itself and terms comes from this not gone in front of impartial third party and poor negotiing position taken by Red-Green government.
Jóhanna “There is no Plan B” , “Icelanders.. will make sacrifices” Sigurðardóttir shows with her FT.com article she is entirely disconnected from reality — both reality of what this IceSave ” deal ” means and underlying attitudes of Icelandic people as whole. The misjudged FT.com article just is the icing on cake showing the contempt she hold for tax payer and every one other than her own EU at any cost supporters .
Jim:
“Fisy – Mathiesen could have simply said one sentence instead of all that waffle”
You notice in transcript if you read the full one that Darling keeps on interrupting. Hes not really listening and not letting Árni finish what hes trying to say once he understands that Iceland is not to guarantee 100% in UK branches.
This is a poor conversation but regardless of that, given that the letter are specifically mentioend by Árni twice Darling is clearly lying next day when he makes his infamouse statements when cornered on BBC — that then are repeated throughout the world later in the day.
Axel:
The whole point is that the basis of Darling and Browns actions is alleged to be this phone call where Iceland is meant to have said to Daring ” screw you we’re not backing the branches “.
That was the impression every one got form what Darling said and as confirmed by Brown later with his even more factually inacurrate damanging statements.
But Árni did not say that he said the exact opposite.
What Darling clearly want said is for Árni to say they are backing all 100% deposits in branches not just the minimum EU 94/19 insurances.
This single conversation is the justification given by Darling and Brown for invoking Anti-terrorism, Crime and Security Act of 2001 against Landsbanki and government of Iceland, and somehow this conversation is also used as justification for the taking of Kautphing Singer and Friedlander by the FSA as decided by Darling.
That is why it matters and why Brumley spends so much effort on trying to make out that Darling was justified in acting as he did. And I react to Brumely’s posts.
If Darling was lying ( which he was ) he and Brown had no justification doing what they did with Anti-terrorism, Crime and Security Act.
Darling and Brown had a problem at home in UK because regardless once they heard from Árni that there was no 100% of UK branches then knew that then they would have to guarantee UK branch above the EU minimum.
This way they get to do what UK has to do anyway, in a way that make it look like they were forced by ” dishonerable ” Icelander to do it. Which disguises problems with own banks at home like RBS which other wise is getting vicious press in UK.
I find what happened with Lehmans taking money out before and this as a way by Darling and Brown to ” make example ” to stop others from doing same again, difficult to swallow. Because Landsbanki and other bank were not removing money.
Robert Tchenguiz * was * wiring some huge money out at this time but he is not sending it to Iceland and his money is in British FSA registered and regulated bank Kaupthing Singer and Fridlander.
Darling and Brown having no justificaton make them look very very nasty at best . So supporters of Darling and Brown must try and rewrite the history to make they actions look justified.
Axel – Why are you so sure that the amended deal would eventually result in a change of government? If the current government has manages to persuade both Iceland’s parliament and the UK and Netherlands to agree an amended deal, then surely the current government has achieved something positive?
I dont understand why you guys argue for months if Mathiesen or Darling lied, im sure they both did, politicians tend to do that,
the bottom line is that Iceland is ready to pay the minimum compensation
the argument is about the deal itself and the terms it contains, which are not acceptable,
i read the conditions the government intends to add to the state guarantee last night when they where leaked on the internet, in my opinion they are weak and far from being acceptable,
if the deal goes before parliament looking like that the socialist/Lg gov will be finished before the end of the year,
that would mean Progressive/Independence gov.
Nice dance Fisy. I love the way that people who take the literal meaning of what Mathiesen says are dishonest.
No, it really isn’t obvious. Not in the context of a guarantee, rather than an intention to help out if it’s not too much bother.
Yes, he does. What a shame he spoilt it when questioned further by saying that actually he couldn’t guarantee it but, “gosh, we’ll try like heck to do our best.” I know you’ll never accept it, but that actually just further underlines what the Icelandic government meant by “support”.
To say that you’ll support the fund and then, in the very next breath, say that you can’t guarantee the minimum amount means that you’re not sure that you’ll be willing or able to support the fund.
If Darling was lying, why then did Geir or Arni not come out and say that of course Iceland was standing by its guarantees and that the statement was ridiculous.
Could it be, perhaps, because they weren’t guaranteeing?
Hello Fisy,
>You keep on talking this whooly way. What exactly do you mean by ” tolerable settlement terms ” and do you actually truly believe that the current IceSave deal unamended fits that?
Well, my answer to that is – I don’t know if the present proposal is ‘tolerable.’ – but I have set out my reasoning previously.
>I think you are then in a minority of 2. Peter and you. Although your styles are very similiar.
Fisy – you readily complain of Ad Hominem. Personal sniping at those with differing opinion is not constructive.
>”A judge looking at all of this letters and that conversation and background of EU directives etc will conclude that intend was for the government to support the fund.”
“will conclude” – Well, I’m sure the Judge will accept your decision Fisy!
Fisy – Mathiesen could have simply said one sentence instead of all that waffle (eg “Yes, we will honour our obligations under EEA law in respect of the minimum guarantee for deposits, but we do not have sufficient cash liquidity to do so now”) and then everyone could have still played happy families. Or are you saying that, because of the Icelandic law on state guarantees, Mathiesen wasn’t authorised to make such a statement and Althingi would have to first vote on it?!
P .S. Dont forget that when Árni is explaining about prioriztization of depositors this is signifcant as well because Landsbanki as whole has lots of assets and these we know is going to pay off the minimum amounts.
I do wonder of course if Darlings perception is coloured by fact that he is at this time dealing with the horrble situation of Royal Bank Scotland where suddenly it balance sheet is billions in the hole.
This is another aspect that makes Darling look bad — that Landbanki had considerable assets including in it London branch which he as UK Treausry would know easily being as all monies flowed under control in his banking system he and FSA have power to view detail and overview of.
“would do everything that any responsible government would do in such a situation”
“including assisting the Fund in raising the necessary funds”
“In such a case [a bank run on a solvent bank], the Central Bank of Iceland as a lender of last resort may provide liquidity assistance”
“If needed the Icelandic Government will support the Depositors’ and Investors’ Guarantee Fund in raising the necessary funds”
The problem is the plain language of the letters sets back ground and still in hte conversation Árni is clearly stating that “We have the insurance fund according to the Directive and how that works is explained in this letter [October 5th] and the pledge of support from the government to the fund.”
“Darling: So the entitlements the people have, which I think is about sixteen thousand pounds, they will be paid that?
Mathiesen: Well, I hope that will be the case. I cannot visibly state that or guarantee that now, but we are certainly working to solve this issue. This is something we really don’t want to have hanging over us.”
He is talking about that week. If you are responsible finance minister / chancellor you are being careful but the whole pattern of what has been said since months in the letters has not been deviated from.
“We have.. the pledge of support from the government to the fund”
His use of “cannot visibly state that or guarantee that now, but we are certainly working to solve this issue” clearly cannot be interpreted in the context of the conversation as whole or the letters to mean suddenly we are not going to honor our committments.
Only a dishonest person who is minister / chancellor would make that interpreation.
Iceland state coffers are not empty at this point and money to save Kautphing is on its way to KSF at this time.
And at this state Iceland soverign credit rating is still very good as is its connection to world banking system.
You are stretching very hard with this words. A judge looking at all of this letters and that conversation and background of EU directives etc will conclude that intend was for the government to support the fund, i.e.
It is obvious that wording assisting the Fund in raising the necessary fund, and supporting the fund are about the government using its money or credit rating to get money for the fund to capitalize it for the obligations.
That the fund has little money in it is obvious because that is what the directive for it stipulates.
Árni repeats in the conversation that they have pledge of support from the government to the fund.
Everything here makes clear the opposite of what Darling says next day. How you can argue otherwise still amaze me.
He was bending the truth more than a bit. The word for what he did is called lying, Brumley.
http://www.icelandreview.com/icelandreview/search/news/Default.asp?ew_0_a_id=314205
“Darling: Thank you for taking the call. As you know, we have a huge problem with Landsbanki, we have a branch here, which has got four billion pounds worth of deposits and it has now been shut and I need to know exactly what you are doing in relation to it. Could you explain that to me?
Mathiesen: Yes, this was explained in a letter we sent the night before last from the Trade Ministry. Since then, we have set out a new legislation where we are prioritizing the deposits and where we are giving the FME, the Icelandic FSA authorities, the authority to go into banks, similar legislation to what you have in England, and the Landsbanki is now under the control of the FME, and they are in the process of working out how to do these things, but I think this legislation will help in solving this problem.
Darling: What about the depositors you have got who have got deposits in London branches?
Mathiesen: We have the insurance fund according to the Directive and how that works is explained in this letter [October 5th] and the pledge of support from the government to the fund.
Darling: So the entitlements the people have, which I think is about sixteen thousand pounds, they will be paid that?
Mathiesen: Well, I hope that will be the case. I cannot visibly state that or guarantee that now, but we are certainly working to solve this issue. This is something we really don’t want to have hanging over us.
Mathiesen: … and just this week, since we can’t cure the domestic situation we can’t really do anything about things that are abroad. So we must first deal with the domestic situation, and then we will certainly try to do what we possibly can, and I am personally optimistic that the legislation that we passed last night will strengthen this part of it. And we, of course, realize what could happen and don’t want to be in …
Mathiesen: Yes, we are in a terrible position here and the legislation we were passing through last night is an emergency legislation and, as I say, we are just trying to ensure the domestic situation so that we can then secure other situations.
Mathiesen: Yes, we do understand that. We will try our utmost to avoid that. We need to secure the domestic situation, before I can give you any guarantees for anything else.
Darling: Sure … We would have to explain to people here what has happened. It will, of course, no doubt, have repercussions for others. It really is a very, very difficult situation where people thought they were covered and then they discover the insurance fund has got no money in it.
Mathiesen: Yes, as we said in the letter [October 5th] …
Darling: OK, I will appreciate whatever help you can give.
Mathiesen: Yes, we will need for the FSA and FME to be in touch on the …”
Brumley wrote:
>I think you missed my point about Steingrimur, Fisy. But that’s alright :) .
Why dont you state it then. Subltey was too deep for me to detect what you trying to say.
>How you could interpret this as a hostile comment? It is recognition of the
>need to allow Iceland harsh but tolerable settlement terms.
You keep on talking this whooly way. What exactly do you mean by ” tolerable settlement terms ” and do you actually truly believe that the current IceSave deal unamended fits that ?
>Fisy, I enjoy and appreciate Peter’s comment
I think you are then in a minority of 2. Peter and you. Although your styles are very similiar.
I think you missed my point about Steingrimur, Fisy. But that’s alright :) .
Likewise the letters. You didn’t respond to my observations about the actual wording all those months ago (they are lot less solid than you appear to believe they are). On top of that, your position was one of “written communications are good as gold” and that they outweigh subsequent direct verbal communication between finance ministers. But that argument falls foul of Iceland’s failure to honour the MoU with the Netherlands. No doubt that is different?
Anyway, let me repost direct quotes from the letters (emphasis added). I wouldn’t buy a house with clauses like this in the contract:
And, for clarity, I entirely dispute your assertion that I know Darling was lying. He was not, as subsequent events have proved, not least that transcript.
Again, you say:
“The Icelandic Government, believe it or not, have told me yesterday they have no intention of honouring their obligations here.”
And again I say:
AD: So the entitlements the people have which I think is about 16 thousand pounds, they will be paid that?
AM: Well, I hope that will be the case. I can not visibly state that or guarantee that now but we are certainly working to solve this issue.
Remember what a guarantee is. It most certainly is not an intention to try. Show me once where Arni, Geir or David said that the guarantee would be honoured.
Fisy – you have a habit of ‘plucking’ select parts of posts, and then placing your own interpretation upon them.
>You quote me, “ its getting exciting”.
The full quote – which echoed Jims comment about matters becoming exciting was –
‘It is the political intrigue you touch upon that I have waited for – now emerging – perhaps in the form of a well choreographed ‘fight scene’ where a number of punches are forcefully thrown and eloquently ‘ducked’ until ‘satisfaction with honour’ has been attained by all parties. As Jim said in a recent post – It’s getting exciting’
Surely, all of us interested in these matters look forward to the exposition of the truths, of which you forcefully hypothesise your predictive view. That is what I meant by ‘exciting’.
>So you must be getting some amusement out of this — your postings be some attempt at humour that goes over my head.
Well, that is from your head – but not from what was said.
>Because you cannot possbly be trying to actually make serious point given facts of this matter.
I said:
‘Fisy – maybe you also have the expression ‘there is no good in flogging a dead horse.’ Iceland is not dead – nor would I wish it so. Dead horses can’t pay debts. My comment was largely sympathetic of the need to allow Iceland to meet its commitment – but within tight margins.’
How you could interpret this as a hostile comment? It is recognition of the need to allow Iceland harsh but tolerable settlement terms.
Again, in your head – not what I said.
>You are starting to sound like Peter – London.
Fisy, I enjoy and appreciate Peter’s comment – as I do yours.
I said
“I have no doubt that there was intent to back IceSave before the actions of Brown Darling in October from all the letters from us to UK.”
Brumley says:
“Those letters do not say that the government of Iceland will support the guarantee fund. Mathiesen did not say that Iceland would support the guarantee fund. And that was before either the asset freezing or the FSA action against KSF.”
You continue to stretch and reach on this topic as you have been doing ever since October and despite the evidence showing that Darling lied came out.
You know full well now that you have read into EEA guarantee directive and into the background of communications between the ministrys of Iceland and UK that Darling simply was lying about the justification for his actions .
When are you going to admit that Brown and Darling were using lies to justify what they did with the Anti-terrorism, Crime and Security Act of 2001 based and that Darling lied on the BBC saying that :
“The Icelandic Government, believe it or not, have told me yesterday they have no intention of honouring their obligations here.”
When that is the opposite of what was said, and what had been made clear to him in official diplomatic letters that you are aware of as listed here, both for months before and on the weekend they talked :
https://www.icenews.is/index.php/2009/02/16/kaupthing-sweden-sold-to-finns/#comment-67865
>I’ve actually been quite impressed with Steingrimur.
That is because you are tax payer that benefits from his support if IceSave. But as to his actual tax payers here, and his supporters there is differnt opinion.
>Okay, there are some *big* problems with the agreements,
That is what is known in English as gross understatement.
>but from what you’d been saying about him Fisy, I didn’t expect him to be able to accept reality.
He hasnt accepted reality. Reality being that the IceSave agreement as currently made is not just bad for Iceland it is horrendous unsustainable and as close to traitorism of the interests of his fellow tax payer as I can imagine.
Let alone hjs own supporters, and those who voted for him new in the last election.
He was only trusted by those because he was expected to keep to his principalps about no to EU and to oppose IceSave agreement .
He was known to be crazy and principled. Now he has simply shown he is crazy and unprincipled.
You quote ” its getting exciting “.
You say:
>”Clearly – it is no ones interest to see Iceland placed in an impossible situation, relative to its obligations.”
And then you make all these strange vague assertions about
>”My essential needs are fulfilled Fisy, and basic they are – but, what are Iceland’s essential needs? ” etc.
The IceSave deal as set is unsustainable unless it is capped against our exports. It’s simple math.
We live on a rock. We need to import a lot of items to keep living like the civilized people –and I mean stuff like textiles car and bus parts, engine parts for our ships. And also food stuffs.
Icelandic tax payer and state must get this EUR and GBP to pay IceSave from somewhere and that somewhere is going to be from selling our stuff abroad for EUR and GBP or other currency and then buying EUR and GBP.
Bjarni illustrates in links i give above that based on income of GBP 2 billions from exports for country and budgets ( which are already being cut down a lot and wages of government employees cut too ) we are looking at between 15-26% of country’s yearly exports for paying this 5.5% — 7 year interest only first — IceSave ” deal ”
With his estimate being that with recovery coming of Landsbanki assets over time it would likely be 20% or above of exports for each year.
That is on top of already loans and interest we must pay back.
How in gods name do you think that is possible when we have to buy this foreign currency some how ? Position must be taken that oil and gas will not be found for at least 3 years.
It must be taken that this agreement is based on our resources and ability to pay based on what we have now.
And if that obvious mathematical certainly result will not be beggar thy neighbour I dont know what could be a better example.
So you must be getting some amusement out of this — your postings be some attempt at humour that goes over my head.
Because you cannot possbly be trying to actually make serious point given facts of this matter
>”My comment was largely sympathetic of the need to allow Iceland to meet
>its commitment – but within tight margins.”
Just what in gods name do you mean ? You are starting to sound like Peter – London.
Fisy
>I’m not sure what you are trying to say, except that ” beggar thy neigbour ” as government policy is fine.
No – that is not what I said.
>If you get some amusement out of this I find that difficult to comprehend.
No – where in my comment would you find that I expressed, or derived a sense of amusement?
>Retailer depositor in IceSave have exactly zero to complain about because they made no financial loss at all.
No -Iceland reneged on guarantee – but gratitude to Brown and Darling who returned my money at the expense of UK taxpayer.
>You do understand that uncapped IceSave 5.5% ” deal ” would not just be usury given circumstance…
Fisy – maybe you also have the expression ‘there is no good in flogging a dead horse.’ Iceland is not dead – nor would I wish it so. Dead horses can’t pay debts.
My comment was largely sympathetic of the need to allow Iceland to meet its commitment – but within tight margins.
So, your interpretation of ‘beggar thy neighbour’ is unwarranted.
Those letters do not say that the government of Iceland will support the guarantee fund. Mathiesen did not say that Iceland would support the guarantee fund. And that was before either the asset freezing or the FSA action against KSF.
I’ve actually been quite impressed with Steingrimur. Okay, there are some *big* problems with the agreements, but from what you’d been saying about him Fisy, I didn’t expect him to be able to accept reality.
I doubt that the responsibility for the poor agreements rests entirely with the current government – they didn’t appoint Svavar Gests. Just look at this idea for a bond, pre-dating the current government, and the response to it:
http://www.island.is/media/frettir/60.pdf
http://www.island.is/media/frettir/64.pdf
And anyway, the terms of the current agreement are better in all respects than the MoU between the Icelandic and Dutch governments that the IP-led fovernment negotiated (which Iceland subsequently reneged on, leading to the rather vocal Dutch intervention in the IMF loan). So again, it can’t all be blamed on the lying Left-Greens and the SD idiots.
Something to think about. How much of the dirty laundry hidden in Landsbanki is Left-Green, and how much is IP?
*Back ground from Bjarni about 83% recovery ( other figures put around by Jóhanna and others are just wishfullness ) :
https://www.icenews.is/index.php/2009/06/21/protests-in-iceland/#comment-82768
>The British and Dutch negotiators did their job by pushing to maximise the benefits in their favour.
Yes but the facts are pretty clear despite expected 83% recovery of Landbanki assets, its not difficult to compute effect on Icelandic economy from 5.5% interest.
British tax payer would I am sure find acceptable to pay back this loan closer to IMF monies rate or certainly something more closer to actual cost of money such as 3.5%.
Since when is government negotatior in loan shark business aiming to maximize return ?
Unless aim * is * to beggar thy neigbour for future purposes.
The British and Dutch negotiators did their job by pushing to maximise the benefits in their favour. Yet the result was a bad agreement because the Icelandic negotiators were directed by an ignorant government. If only the Icelandic negotiators had better information and clearer direction, then the result could have been a fairer agreement that would have been ratified. As it is, the whole process is now descending into farce with Icelandic MPs being asked to vote on terms and conditions that haven’t even been negotiated yet! I’m genuinely surprised that MPs still have confidence in the government.
Terry, I’m not sure what you are trying to say, except that ” beggar thy neigbour ” as government policy is fine.
If you get some amusement out of this I find that difficult to comprehend.
Retailer depositor in IceSave have exactly zero to complain about because they made no financial loss at all.
You do understand that uncapped IceSave 5.5% ” deal ” would not just be usury given circumstance… Despite what lying Left-Green and Social Democrat idiots ( and Left-Green central banker from Norway ) but they signature on the projections about it, it will result in sovereign default and complete collapse of country ability to function by year 8 of agreement ( i.e. in or soon after 2016 ):
https://www.icenews.is/index.php/2009/07/01/iceland-icesave-deal-“there-is-no-plan-b”/#comment-83787
https://www.icenews.is/index.php/2009/06/21/protests-in-iceland/#comment-82896
How is that possibly in best interest of UK tax payer?
Unless aim * is * to beggar thy neighbour.
>As been perfectly clear from various earlier discussions, I have held the same
>belief myself. But, after the Icelandic government accepted the guarantee for
>IceSave in November last year, this particular question was settled, and it
>does not do any good in the current situation to constantly revisit it.
Yes, although Davið’s interview did give insight into the reality behind the legal aspect which gave depth to how poor our Left-Green friend have been in negotiations — this is all stuff any one would * expect * our negotiatiors to have used and this detail is important for world to know of, both in EU and elswhere.
But this is result that comes from a rudderless EU at any cost govenrment held up by a now we discover — late in the day — principleless Steingrímur.
I have no doubt that there was intent to back IceSave before the actions of Brown Darling in October from all the letters from us to UK.
Then after that Geir and his colleagues did take the strict legal liability approach demanding review by impartial third party after Brown Darling did knock us on the head ( in particular the taking of Kauthping Singer Friedlander which was most unjustifiable of things they did — even terrorist listing is less worse than that as that was at least temporary — Kautphing was destroyed ) .
Of course after all this we were ” forced ” not to take that demand for justice — impartial 3rd party review approach — by EU commission as otherwise memberstate UK and Holland would continue to block IMF loan ( and actions of Ireland and other member state would have had to be reviewed too — something not wanted. )
But still, having accepted state liability to back the fund ( after this EU kangeroo court ) the negotiations have been horribly handled and I dont know which I hold more in contempt — Steingrímur J and colleagues or the politicians in UK and Holland trying to extract as much profit as possible.
Bjarni said:
“It is important to realize thoguh, that the key audience in this upcoming debate is not them, but rather the other European countries. Iceland did not enter these negotiations, because of pressure from UK/Netherlands, but rather because of lack of support from rest of Europe for its position. If we can show that UK/Netherlands took advantage of the situation and demanded more than what was fair, then we have a shot at this.”
Do not expect any sympathy from the EU about this. Germany was particularity harsh about the repayment (probably becuase Iceland has stiffed its citizens and banks).
UK, NL and Germany are the three biggest contributors to the EU coffers so they will pretty much call the shots on this.
Sorry Fisy – it was Grimsson’s speech relating to Vikings etc. Bjarni describes David as a ‘colourful’ politicician, and as such, he is still in our minds – like our own Peter Mandelson. Now ther’s a ‘comeback kid’ – so who knows with Oddsson?
Hello Fisy
>What does offend me a lot is people who made bad investment decision playing the ” honour card “.. Yes, Icelanders pay our debts.
Oh Fisy! – you know the difference between ‘investment’ and ‘deposit’. My money in IceSave was a deposit (within the limit), guaranteed – not honoured (but kindly refunded by our government)..
Clearly – it is no ones interest to see Iceland placed in an impossible situation, relative to its obligations.
However, perhaps the question is – what is an ‘impossible situation’. Iceland has in the good times enjoyed the ‘fruits’ of your entrepreneurs (I will not quote from David’s golf club speech about Viking invasion etc, etc).
I have also read in this forum, about concerns of Icelanders being subjected to poverty if they are forced to pay their debt.
Fisy – poverty is a relative term. I am bemused that the USA ploughs so much of its national wealth into foreign objectives – while many of its own citizens do not have access to healthcare needs.
My essential needs are fulfilled Fisy, and basic they are – but, what are Iceland’s essential needs? Perhaps an Iceland having lived on the excesses of ‘ill gotten’ gains will find the adjustment to reality a painful transition.
So, no – we must not kill the goose that lays the eggs preventing the repaying of its obligations – however your nest should be less comfortable than that occupied by those ‘dishonoured’ by Iceland.
To Jim:
>>>>It may be a mistake to appeal to EU sympathy over Iceland’s recession when Icelanders are still better off than most Europeans! Countries don’t, for example, write-off loans to Spain out of sympathy because it has 20% unemployment, 30%+ property price crash, etc.
I think its fair to say, Iceland has not been getting much sympathy from the EU in the past year, and its not really what it is asking for. What it is asking for is fairness, and the acceptance of the fact, that there is just a limit how much a country with only 320000 inhabitants, can pay out to others each year in foreign currency.
Without trying in any way to belittle Spain’s economic problems, which I am sure are severe enough, it is still a much larger country (40 million), does probably not depend on importing almost everything it uses, and did not have a complete collapse of its banking system and its currency last year.
Come to think of it, some sympathy should actually be considered for the Icelandic people, that are now being asked to pay for IceSave through their taxes, after loosing their jobs, savings, and houses, while seeing their loans double in value. They were certainly not involved at all in running the banks.
The Icelandic banks were owned and run by a relatively small group of people (estimated to be around 40-50), that as we are now learning bit-by-bit every day, gained billions by issuing unsecured loans and other bad business practices. Most of them have now already left the country and the damage behind.
To Fisy:
>>>>I’m not sure that you are reading Davið interview correctly on that. His criticism was about the way that the negotiations were conducted in detail coming from a wrong negotiating position…
I agree that Davið was not too impressed with how the negotiations were conducted by Svavar Gests and his committee (very few people do in Iceland by now). But he also said in the Skjar1 interview that the Icelandic government should never have accepted responsibility to provide the IceSave guarantee.
http://skjarinn.is/einn/veftivi/malefnid/965/?autostart=True
http://www.mbl.is/mm/frettir/innlent/2009/07/14/gerdi_ekki_krofu_um_greidslu/
As been perfectly clear from various earlier discussions, I have held the same belief myself. But, after the Icelandic government accepted the guarantee for IceSave in November last year, this particular question was settled, and it does not do any good in the current situation to constantly revisit it. In any case, its always tricky to try to debate opinions of other people, especially colorful former politicians such as Davið.
The most important issues at the moment are exactly what amendments will finally be passed by the Icelandic parliament and even more important how does the Icelandic government handle the aftermath.
P.S. Thanks for all the nice references to my earlier comments. You seem to keep even better track of them than I do. :-)
The UK and Netherlands will initially observe that the agreement has been terminated due to Iceland’s failure to complete the preconditions. However, if Iceland’s negotiation strategy changes from private negotiation for later ratification to publicly stating unnegotiable demands, then the UK and Netherlands may have no choice but to refer the dispute for a court judgement. And that process could take years to conclude, with no IMF or Nordic loans in the meantime.
It may be a mistake to appeal to EU sympathy over Iceland’s recession when Icelanders are still better off than most Europeans! Countries don’t, for example, write-off loans to Spain out of sympathy because it has 20% unemployment, 30%+ property price crash, etc.
To Jim:
>>>>The ball will then be back with the UK and Netherlands whether to agree those amendments. Iceland will make the nation’s position public, thereby raising the ante and probably strengthening its negotiating position. Clever, if it works.
Correct, but this is also where I get worried. Both former and current government have shown time and again that they are not very good at getting our position known and understood well in Europe.
There is no doubt that both UK and the Dutch will be VERY unhappy about any amendments made to the agreements, since they got almost everything they wanted. To them the deal is done, signed, and cannot be changed. And they are going to raise hell about any amendments.
It is important to realize thoguh, that the key audience in this upcoming debate is not them, but rather the other European countries. Iceland did not enter these negotiations, because of pressure from UK/Netherlands, but rather because of lack of support from rest of Europe for its position. If we can show that UK/Netherlands took advantage of the situation and demanded more than what was fair, then we have a shot at this.
Immediately after the loan guarantee with all the amendments have been passed by the Icelandic parliament, we need to make the following points clear publicly to all of Europe:
1. Iceland is still willing to pay the 21K Euro deposit guarantee, according to the EU directive. The original agreement required Iceland to pay MORE than the 21K Euros.
2. By requirement of the UK/Dutch negotiators the agreements were done in secret. This was a mistake, since it meant that the Icelandic parliament and the country could not see the agreement until after they had been signed. It was only after the agreements had been made public and been analysed by experts that the flaws were uncovered.
3. The UK/Dutch negotiations committees used their strong advantage to negotiate terms that were fundamentally unfair to Iceland. Then we need to list all the unfair terms for the Europeans to evaluate themselves. (I am not repeating them here, since we have already discussed most of them here above in the icenews.is comments)
4. It is important that the terms of the agreement are not so severe that they can result in the sovereign default of Iceland. (We need to suggest here what terms would likely to be more manageble, in terms of either GDP or export revenue, considering the severe recession thats now gripping the country and will be for years to come)
5. The Icelandic parliament, as the democratically elected representatives of the Icelandic people, is the ultimate decision maker on the behalf of them, including what terms Iceland can take on regarding the IceSave deposit guarantees.
If we just pass the agreement with amendments, without immediately explaining fully to the Europeans why we did so, the battle will already be lost before it started.
Easy – The amendments are unlikely to be minor notes on the contract, but substantive changes to the terms and conditions of the agreement. The ball will then be back with the UK and Netherlands whether to agree those amendments. Iceland will make the nation’s position public, thereby raising the ante and probably strengthening its negotiating position. Clever, if it works.
Easy wrote:
>You can not be more wrong.
>
>You can put as many notes as you want arrownd the contract but the core of the contract is that Iceland is acceptring that debt, an as long as they sign it they are accepting the debt as simple as tha
Easy, read the text of the actual IceSave contacts.
If it is amended by parliament it is voided.
That is why Bjarni writes what he writes:
“It is a known fact, that accepting the agreement with amendments, is legally the same thing as rejecting it.
But politically, it would send the positive message, that Iceland is not walking away from the IceSave issue.”
And then this goes to court or at least an ” impartial 3rd party “.
But do not trust the morons in Social Democrats and Left-Greens to not try and make out it has been passed or to pass it completely unamended.
“There is no Plan B” – Jóhanna Sigurðardóttir, June 2009.
https://www.icenews.is/index.php/2009/07/01/iceland-icesave-deal-“there-is-no-plan-b”/
Mike (UK Nordic analyst):
>Fisy, Nice to know I’m remembered.
Mike, of course. When you write things that show you do have good knowledge of course you will be remembered and gain the respect that is deserved for calling things correctly.
The uncapped level of debt due from IceSeave contract as currently is not sustainable despite what you wrote about UK and US war loans ( and were rebutted by Bjarni as to the figures of that).
But I do wish you good luck in finding a negotiated way to keep bond holders happyier. No doubt a way will be found.
Bjarni wrote:
>I think its important to remember, that the main purpose of the emergency laws
>125/2008 was NOT to stiff the foreigners, but keep the Icelandic banking system up >and running during a major financial crisis.
Exactly.
>Granted, there are some people in Iceland that think we should (David and others),
> but those are not in power anymore. Most people here in Iceland are basically decent and honest.
I’m not sure that you are reading Davið interview correctly on that. His criticism was about the way that the negotiations were conducted in detail coming from a wrong negotiating position, as started when Ingibjörg Sólrún was foreign minister talking to the EU and basically ignoring the legal basis for the liability which would have meant much earlier the negotated position of UK and Holland would be back to earth as it must now come instead of still being in the straospehere as it is that the damn agreement was signed.
Still, of all people involved in mess of the IceSave negotiations it amazes me most that Steingrímur has gone along with this and lust for power so much that he votes with the Social Democrat for something he is against!!
He is a traitor to his supporters particulary the new ones that went to him for last election. But also his existing one too.
No matter what current government/parliament are going to do – they are doomed. IMHO.
>The Icelandic government changed the law retrospectively, so in an icelandic
>court your rights have been changed. IE they have been taken away and you
>have none to protect.
If you property rights have been voilated by this law in changing priority you have a case (even Left Green crazies would not be against such things as property right in this context ), but I am not sure you can claim you rights have been retrospectively changed.
It would be so if the law came after bankrupty was declared, but it wasn’t. The banks still operating companys and not yet insolvent when the law was passed.
>In addition you cannot sue the Icelandic state directly because of Sovereign >Immunity.
When I say this I mean to sue the resolution committe or the FME ( these are the government for pruposes of this kind of case ).
For example, the Association of Dutch Savings Owners are intended to make lawsuit complaint about discrimination based on nationality for full backing of domestic bank accounts vs foreign brances.
They are unlikely to prevail ( this kind of backing giving more to domestic accounts was done in Ireland first when the crisis hit and has not been challenge by EU commission as they dont want to touch the issue ) but it can go up to the EFTA court for ruling if it is based on breaches of EEA.
The same applies to your class of claims. EEA agreement and EFTA Court ultimately can be appealed to in matters that relate to rights and oblgiatins as set out in EEA. First sue in local court.
The emergency laws passed because the situation was so bad after Lehamans fell was intended to save domestic banking and economy first so that there would be an economy and working people and companies left to pay debts later.
It was not an intention to stiff foreigners nor are the capital control.
What does offend me a lot is people who made bad investment decision playing the ” honour card “.. Yes, Icelanders pay our debts.
But we are not going to do so blindly so that current or future generations are made into indentured slaves. That is simply not reasonable.
Dont think for a second weak minded EU at any cost idiots currently sitting in the government seats represent the people of Iceland ideas. We are not a pushover and not to be singing ourselfs into slavery ever again as we did and were for so long under Norwegian King and Danish Kings.
Icelanders as a body of taxpayer are not going to just roll over and accept any thing that you debtors ask of us. We will do what impartial court finds reasonable.
To Easy:
>>>>The amandmets on the contract should be accepted by the other party befor signing the contract, otherwise YOU ARE SIGNING THE CONTRACT,…
All the agreements themselves have already been signed by all the relevant parties. The only issue left is for the Icelandic parliament, to decide if the Icelandic government accepts, as a sovereign country, the loan guarantees, as specified in the agreement. This is a necessary step, as specified in the Icelandic constitution.
If we do not accept those loan guarantees exactly as specified in the agreement, then UK and/or Netherlands have the option, according to the agreement itself, to terminate the agreements.
@Bjarni: You said.
“It is a known fact, that accepting the agreement with amendments, is legally the same thing as rejecting it. But politically, it would send the positive message, that Iceland is not walking away from the IceSave issue.”
You can not be more wrong.
You can put as many notes as you want arrownd the contract but the core of the contract is that Iceland is acceptring that debt, an as long as they sign it they are accepting the debt as simple as that, go to the bank and put some notes arround the contracts of your loans, lets see if your responsability on paying your loans desapears. The amandmets on the contract should be accepted by the other party befor signing the contract, otherwise YOU ARE SIGNING THE CONTRACT, this is just a show from the MP´s not to look so bad when they sign the stupid contract, so they can say, “we sign it, but we put some notes arrownd it” Loosers!!!
To Jim:
>>>>It no longer really matters how many MPs are for or against the original Icesave deal. The MPs will instead soon be debating and voting on amendments proposed by parliamentary committees!
Correct, in fact according to the news in the last few days, there is an effort now to get unanimous support for the amendmends among all the political parties, or as close to that as possible.
It is a known fact, that accepting the agreement with amendments, is legally the same thing as rejecting it. But politically, it would send the positive message, that Iceland is not walking away from the IceSave issue.
Instead, we are just saying that the agreement in its current form, the agreement goes well beyond what the obligations of Iceland should be according to the directive (21K Euros per depositor) and its ability to pay.
To Mike (UK Nordic analyst):
>>>>Nice to know I’m remembered.
Of course we remember you and your knowledgeable comments…
>>>>Law 125/2008 remains in place (Icelandic assets remain in the hands of the new banks) but the value of those assets is vested with the overseas creditors; result – Law 125/2008 is by-passed.
I think its important to remember, that the main purpose of the emergency laws 125/2008 was NOT to stiff the foreigners, but keep the Icelandic banking system up and running during a major financial crisis. Granted, there are some people in Iceland that think we should (David and others), but those are not in power anymore. Most people here in Iceland are basically decent and honest.
>>>>I’ll have to crawl back under my stone and stay quiet a bit more. I’ll be watching and reading blogs such as this. All the best guys!
We will keep the lights our for you! :-)
It no longer really matters how many MPs are for or against the original Icesave deal. The MPs will instead soon be debating and voting on amendments proposed by parliamentary committees!
http://www.icelandreview.com/icelandreview/daily_news/?cat_id=16539&ew_0_a_id=337496
Fisy –
Nice to know I’m remembered.
I’ve been working in-country over the summer on some negotiations so I can’t pass comment on anything – but as you see I keep a watch.
But yes, the effect of the Hawkpoint/IMF deal over the Law 125/2008 and new/old bank split is to hand over the beneficial ownership of Icelandic loans to the foreign creditors, and in the case of any default by Icelandic entities the pledged (Icelandic) assets will fall into the ownership of the new banks … which are owned by the foreigners. Thus the income streams from Icelandic mortgages, car loans, fishing rights, electricity sales etc are now being diverted through the new banks to the foreign creditors. Law 125/2008 remains in place (Icelandic assets remain in the hands of the new banks) but the value of those assets is vested with the overseas creditors; result – Law 125/2008 is by-passed.
Anyway, thanks for the rememberence Fisy. I’ll have to crawl back under my stone and stay quiet a bit more. I’ll be watching and reading blogs such as this. All the best guys!
Peter – London wrote:
>The fact is the EU has decide Iceland is liable and Iceland has gone as far as
>negotiate a repayment schedule.
Yes that is so nice of them in EU to do when they do not have legal presendent or actual legal authority to decide it.
Problem is that our idiot Social Democrat ( and even more shockinly Steingrímur of Left-Green ) government minister have decided Iclandic state — we taxpayer — are liable for politiical not legal reason:
https://www.icenews.is/index.php/2009/07/13/the-icelandic-government-is-not-responsible-for-icesave/#comment-85803
Yes thanks to them in Social Democrats starting negotating with EU on this issue — with Ingibjörg Sólrún first stating this idea of political not legal reasons for saying yet to liability –we have this horrible deal now in front of parlimanet instread of more reasonable conditions.
>There is nothing, anywhere, to suggest that Iceland will not pay the debt – they are not trying any legal means in any court.
The Icelandic parliament is the body acting as a judge on the agreement. If the MPs do not pass it, it will lapse as per the agreement ( signed by civil servants on behalf of idiot Red-Green coalition ministers which has condition it is ratified by parliament ).
Signing it without caps related to value of exports or interest rate means basically sovereign default and country bancrupcy by year 8 of agreement ( i.e. in or soon after 2016 ):
https://www.icenews.is/index.php/2009/07/01/iceland-icesave-deal-“there-is-no-plan-b”/#comment-83787
https://www.icenews.is/index.php/2009/06/21/protests-in-iceland/#comment-82896
Would you sign ?
>If it is inequitible sue the Icelandic government ( >as has been done on other issues) , you will get a >fair hearing.
>When there is a collapse on the scale that we >witness post September 15 2008 the cleanup can take >years. And interested parties can expect to litigate >to protect they rights.
Clearly a basic lack of understanding of how the law works. The Icelandic government changed the law retrospectively, so in an icelandic court your rights have been changed. IE they have been taken away and you have none to protect. In addition you cannot sue the Icelandic state directly because of Sovereign Immunity.
Magol wrote:
>There is limited historical precedent for this pre 2008 and this disrespect for
>law, honour and fairness will have long term consequences.
As to law, honour and fairness yes, I understand what you are saying as Icelanders and our state have been under denied these exact things by actions of EU with this kangeroo court and of course actions of Brown and Darling back in October 2008.
So I encourage you as some one who rights may have been breached to takes it to court in Iceland where an impartial judge looks at matter, and then it gets appealed up to EFTA court, the impact of the emergency situation and the legislation will get all phases of a fair review.
That is the reasonable thing given circumstances. Although there is circumstances that are far from usual pre-2008 crisis, that does not necessarily mean that actions taken were equitable longer term. So get it settled impartially in court.
>Wholesale lenders and credit investors and high net worth retail may be
>expected to do more credit work, but are they supposed to factor in
>retrospective changes in law to subordinate their claims on the assets and in
>some cases make them almost worthless?
If it is inequitible sue the Icelandic government ( as has been done on other issues) , you will get a fair hearing.
When there is a collapse on the scale that we witness post September 15 2008 the cleanup can take years. And interested parties can expect to litigate to protect they rights.
>In fact the subordination was practically doubled by the structural reorganisation in banks.
It looks like this is going to be quietly ignored / ignored judging by the recent announcement about foreign owners of New Kaupthing.
( And as predicted by now departed Mike UK Nordic Analyst ).
How are those reeling from Lehmans Bankcrupty handling situation ? Or Washington Mutual ?
BTW this thread is excellent example again of what quality posting and good moderation can bring
( may shape up to be best thread here even more than this one https://www.icenews.is/index.php/2009/06/21/protests-in-iceland/#comment-82569 ) — but always any thread are enhanced by Bjarni postings with new fact brought to light. And thank you to Gunnar also for this posts here.
>When I visited, I learned that the early Icelnaders had trees – but cut them all down.
If you look into matter you find that while there was cutting down for fuel and use for building, climate change back at era of medieval warm period ending was what caused trees to go.
Back at first time of settlement trees end of 900s were growing all the way down to the sea but by 1400 when little ice age begins to be felt that growth of trees where nowhere to be seen.
( Bear in mind that in general with glaciers and internal frost being what it is about 21% of land can sustain vegetation without human technology .)
>More recently there was fish – which was all but fished out.
Until quota system made it sustainable in 1980s there was same overfishing as happens without quota, but no way as bad as EU member state have made they waters.
EU common fisheries policy has been disaster right from 1975 onwards.
As independent nation we implemented quota in 1980s and since then overfishing in Icelandic waters is thing of past.
Bromley86:
“1. That the maximum payment for each savings account will not exceed EUR 20,887”
Thats not right is it? Icelandic depositors were protected 100% so why shouldn’t non-domestic depositors be likewise protected?
Fishy:
“What is it you assert I am claiming?”
The fact is the EU has decide Iceland is liable and Iceland has gone as far as negotiate a repayment schedule.
There is nothing, anywhere, to suggest that Iceland will not pay the debt – they are not trying any legal means in any court.
The only debate is whether Iceland should or should not sign the deal as it stands, all the discussion on the legality, fairness, etc is irrelevant.
Wholesale lenders and credit investors and high net worth retail may be expected to do more credit work, but are they supposed to factor in retrospective changes in law to subordinate their claims on the assets and in some cases make them almost worthless? In fact the subordination was practically doubled by the structural reorganisation in banks. There is limited historical precedent for this pre 2008 and this disrespect for law, honour and fairness will have long term consequences. The actions of the Icelandic state can only be described as self interested grand larceny.
Welcome Magol.
>..wholesale lenders and the many retail customers who bought international bonds by making their claims on the assets subordinated to icelander and international depositor claims.
This is interesting post. Bottom line is that wholesale lenders are expected to know better.
( UKs own Brown and Darling have been far harsher on non individual depositors in they own handling of this through UK FSCS for UK charities and hospitals. )
Whole sale lenders have they analysts and pay they expensive firms for risk analysis — they above all others should be responsible for own actions and not expect to be bailed out.
As I post before I think deposit guarantee scheme should not be there as it create moral hazard as best and worst they encourage things like IceSave to get so big.
But any way whole basis of deposit schemese is to be in favour of retail depositor over others. Of all people whole sale lenders are on they own and compated to them should * expect * to be discriminated against compared to retail depositers.
In this whole mess since Lehmans fell Sept 15 2008 it is Wall Street, Euro and UK whole sale lender bleating for an getting bail outs ” To Big To Fail Too Big Too Fail” that is most likely to get my punch in face if I meet them.
This is to my mind one of best article on this subject of what just happened in banking since end of dot com boom and why bail out into gurgling drain of balance sheet of banks like Darling and Brown and Paulson in US did is so wrong :
It’s Finished by
John Lanchester
http://www.lrb.co.uk/v31/n10/lanc01_.html
Not really fair Peter, as we have not really seen anything that confirms (a) that a binding judgement was given and (b) that it is legal as Iceland withdrew. We’d need more than the newfrettir article and the opinion that’s been linked to.
Meanwhile, over on IR, there’s been some movement on Icesave:
http://icelandreview.com/icelandreview/daily_news/?cat_id=16539&ew_0_a_id=337496
So they want to put 2 conditions into it.
1. That the maximum payment for each savings account will not exceed EUR 20,887
Was there ever a suggestion that it might? Surely they’re not talking about Landsbanki not repaying depositors more than 20,887 euros in the extremely unlikely event that they’re in a position to?
2. That Iceland will not repay the Icesave loans any longer than until 2024
Another wierd one. Are they saying that they want the loans written off if 15 years from now they’ve not been repaid?
Peter – London I simply did not understand which of my post you were replying to.. So what do you mean.. “your government isn’t doing what you claim it can do, is it? why not?”
What is it you assert I am claiming?
My post is about the EU kangeroo court ” arbitration process ” and why EFTA officials wanted nothing to do with it beyond signing the opinion letter
:
https://www.icenews.is/index.php/2009/07/29/more-members-of-parliament-against-the-icesave-deal/comment-page-2/#comment-87719
Fisy said:
Iceland are paying the debt back, the EU court made the judgement because Iceland entered it and accepted its binding nature. It was too late to withdraw.
For all your noise, the fact is your government isn’t doing what you claim it can do, is it? why not?
Edit:
-Changing the law to retrospectively make depositor claims senior to senior unsecured on the eve of default has effectively stolen vast sums of money from wholesale lenders and the many retail customers who bought international bonds by making their claims on the assets subordinated to icelander and international depositor claims.
[changed wholesale depositors to wholesale lenders]
The Great Theft of Iceland has little to do with the discussion above and everything to do with:
-Changing the law to retrospectively make depositor claims senior to senior unsecured on the eve of default has effectively stolen vast sums of money from wholesale depositors and the many retail customers who bought international bonds by making their claims on the assets subordinated to icelander and international depositor claims.
-The new bank/old bank structure has given domestic depositors structurally senior status over all other deposits and claims.
Both of these are enormous inexcusable thefts by the Icelandic people from the other European countries, which your political leaders instigated and for which you must take the blame.
Desperatation of EU burecracy not to have this in front of any impartial court is only equalled by the gloss over langauge and sliding slippery conclusions of this opinion.
You notice that they talk about obligation to pay but ignore completely who is meant to pay when the Directive says nothing about the government backing it, but just that the deposit-guarantee schemes for credit institutions are introduced and officially recognised. Of course they want to ignore it.
Then they have this lovely paragraph :
” 5. The 24th recital of the preamble to the Directive does not exonerate Iceland from the consequences of any failure to implement the Directive properly. The Directive does not make an exception for times of financial distress. ”
This is very funny because it is clear that Iceland did implement it properly. That is why it had the 2% or so of monies in it.
If had not implemented it propery before now there would have been sanction form EFTA Court before then like there was for Liechtenstein in 2000 :
http://www.eftasurv.int/information/pressreleases/2000pr/dbaFile1699.html
Perhaps it now becomes more clear why EFTA officials want nothing to do with it either.
Peter – London you should really stop your flapping jaw as it does your ” cause ” no good to keep on posting some new falsehood or factual inaccuracy and same old poor rhetoric devoid of facts again and again.
Peter – London who you work for again? I have a strong feeling given power of your reasoning that you are unemployed taking UK government handout judging from you reasoning power.
As we discuss already this matter
https://www.icenews.is/index.php/2009/07/13/the-icelandic-government-is-not-responsible-for-icesave/#comment-86075
I have no doubt this Kangeroo court arbitration process refered to has it result in this letter of 17 November 2008 signed by Tim Middleton, Patrick Hetsch, Katja Würtz and Per Andreas.
It is common to call any aternative dispute resolution arbitration, as opposed to case taken in a particular court , etc.
http://www.island.is/media/frettir/31.pdf
Point as I have said is that if party withdraws from this as it was done, they are not bound by result.
If there was actual piece of paper signed by all parties including Árni Mathiesen agreeing to binding arbitration etc that would be different matter. But there isnt.
He formally withdrew country from it when it was clear it wasn’t following usual ideas of arbitration process. Therefore any result of it is void.
You must have concent of both parties to arbitration accepting process for it to be enforceable. If one party withdraw before result is given this decision has no force.
You notice also that despite intention of original arbitration process it is stated that “The European Free Trade Association did not participate in the preparation of this opinion”.
Of course not beacause they want nothing to do with kangeroo court either. Some one should write to the Secretary General of EFTA and President of EFTA Suirveillance Authority exactly what
( FYI it is common for the result of mediation or arbitration like a legal review to be called an “opinion”. )
And what must happen if one party withdraw from actual binding arbitration ? Well in most cases then one or other party must sue other in a court.
Notice EU has not done it despite Iceland obviously withdrawing. If there was signed arbitration agreement it would be in court as it would be enforceable there. EU of course want to avoid court, which has ” impartial process” and ” impartial judges ” like the plague.
“This will be so great if there are no loans from IMF, EU, Russia, etc. One loan from Norway only will be quite enough. And Iceland independent again (not sold out for new loans). Simple.”
I agree with you..
Todd DiRoberto
http://www.campaignmoney.com/political/contributions/todd-diroberto.asp?cycle=08
@Adam: You said
“Is such a government not a collective expression of the will of the people?”
“ordinary citizens (most working at many jobs) used that money to buy houses, cars, and imports.”
“When I visited, I learned that the early Icelnaders had trees – but cut them all down. More recently there was fish – which was all but fished out. I’ve seen reports on the environmental damage by the aluminum smelters which use up most of your electricity supply.”
SPOT-on specially the first 2 cuotes.
Gunnar Tómasson
Well, what else does it say and why did Iceland try to withdraw from it?
Peter – London said:
This is the original, in Icelandic
http://mbl.is/mm/frettir/innlent/2009/07/01/arni_atti_i_vok_ad_verjast/
I can’t find anything else about it, but it does seem clear.
Comment.
“Arbitration” is “gerðardómur” in Icelandic.
There is no mention of “gerðardómur” in the report by Iceland’s ambassador in Brussels which is cited as source for the above news item.
@Knowless –
Hmm, when i say ‘You’ I meant the Icelandic people and the Icelandic Banks approved and authorised by Icelandic authorities, as confirmed in office by a democratically elected Icelandic Government – yes, the banks, authorities and/or government may have been corrupt – but how could a depositor in such a bank know this? Is such a government not a collective expression of the will of the people?
Is such a collective ‘you’ really unfair?
Maybe so – but not only (if mainly) did the oligarchs of Iceland benefit from foreign deposits; ordinary citizens (most working at many jobs) used that money to buy houses, cars, and imports. I have no axe to grind, lost no money myself – and I’d like to see Iceland prosper, not fail.
When I visited, I learned that the early Icelnaders had trees – but cut them all down. More recently there was fish – which was all but fished out. I’ve seen reports on the environmental damage by the aluminum smelters which use up most of your electricity supply.
Such ‘frontier’ attitudes have hurt Iceland in the past. Going for default is also a ‘frontier’ attitude. I accept that it is impossible for Iceland to really pay all of its debts, with the interest originally due; what I would counsel is acceptance of the imperative need to try to pay what you can, to reach agreement when you can, for otherwise you really are condemning future generations of Icelanders to a much lower standard of living, once again.
If not in the cold light of day, then in the cold dark of winter, your politicians will see this is true. The goodwill of the international community towards Iceland is more important than any money hoarded away; your need for imports far outweighs anything Iceland can export or earn abroad. Whatever pride may be salvaged or respect earned from a stubborn refusal to continue to be part of a global financial system now the bailiffs have called is not worth the suffering it would bring.
On Aug 3, 2009, Adam said:
“You did take in foreign currency bank deposits and the total cost to your neighbours will be large in any case – our local council lost £2.5 million, and charities have also been affected here – no government compansation for these losses.”
When you say “You”, you do realise who composes the vast bulk of the “you” you refer to.
Bromley86 said:
“The only real mention I can remember seeing of the arbitration was on newsfrettir”
This is the original, in Icelandic
http://mbl.is/mm/frettir/innlent/2009/07/01/arni_atti_i_vok_ad_verjast/
I can’t find anything else about it, but it does seem clear.
Gunnar Tómasson said:
“There has been NO arbitration with respect to any outstanding legal issues in the Icesave case.
Hence NO arbitration result ignored by Iceland.”
Well, there has in November 2008 and obviously Iceland did ignore it – evidence; it refused to take any further part in the arbitration (it went ahead anyway) and as a result it was forced into the Icesave agreement.
Peter – London said:
Yes, as it says, its an opinion. Not the actual result of the arbitration which has been ignored by Iceland.
Comment.
There has been NO arbitration with respect to any outstanding legal issues in the Icesave case.
Hence NO arbitration result ignored by Iceland.
The only real mention I can remember seeing of the arbitration was on newsfrettir:
http://newsfrettir.com/politics/general/1025-arni-was-on-the-defence-
This letter that Gunnar is quoting from seems to involve the same representatives mentioned in the newsfrettir article, allowing for translation errors.
So I think this letter is the exact result of the arbitration that Iceland subsequently withdrew from. Whether that affected its binding nature or not I couldn’t say.
Is this the source Gunnar?
http://www.island.is/media/frettir/31.pdf
Yes.
Bromley86 said:
“Is this the source Gunnar?
http://www.island.is/media/frettir/31.pdf”
Yes, as it says, its an opinion. Not the actual result of the arbitration which has been ignored by Iceland.
Is this the source Gunnar?
http://www.island.is/media/frettir/31.pdf
Peter – London said:
I like to see the decision of the meeting and its final ruling.
Comment.
The only substantive point addressed was the one noted earlier:
“This opinion is limited to addressing this specific question [i.e. “the obligations of Iceland under the Deposit Guarantee Directive 94/19/EC”]. It is given in the personal capacity of the nominees and does not commit their respective appointing authorities.”
The personal opinion of the group members was
(a) that the Deposit Guarantee Directive 94/19/EC applied to Iceland by virtue of its membership in the EEA, and
(b) that Iceland cannot claim “an exception” from the Directive’s provisions “for times of financial distress”.
I am sympathetic to the plight of Icelanders, as a visitor in 2008, and would simply note that as a matter of fact Iceland needs to reach some agreements with creditors as it clearly needs credit. Refusing to agree won’t change anything – but yes, be cautious. You did take in foreign currency bank deposits and the total cost to your neighbours will be large in any case – our local council lost £2.5 million, and charities have also been affected here – no government compansation for these losses. At the same time Iceland has limited resources and has a real need for imports; seek some guarantees for credit for essential imports. I don’t think the UK or Dutch governments really seek to punish Iceland so much as to recover what they can.
Your currency restrictions may be necessary but it is troubling to see that new inspectors are probably the only new jobs being created. I wonder what the black market rate must be like.
Clearly you will have to settle your internal differences sensibly, and reach some consensus on how to adjust. Whether for good or ill, joining the EU does seem a sensible step from an outside point of view.
Even if the debts were written off or liquidated through a form of bankruptcy, or simply defaulted upon, the credit of Iceland would take a long time to rebuild. Analogies to credit systems for individuals is always a difficult comparison, but surely accepting in principle that debts must be repaid, and making regular if small payments, is likely to be better received, before arguing for a reduction in principal or interest rates – and it seems this agreement has already given you something like 1/3 off the value of the total bank deposits.
In any case your Parliament remains sovereign, though subject to international law. If continued negotiation fails to reach a position which you can sustain, you can explicitly declare a sovereign default; though no doubt this agreement will be framed as a treaty and you would be subject to sanctions – much as you will be anyway, should you default now – and failure to agree could well result in (further) default.
The UK is borrowing £175 billion this fiscal year – while the amount which has been incurred here by the kreppa is only a small part of this, it is nonetheless quite real. Size is relative – it is on the order of 20% of government spending, rather than the 50% you are experiencing – and at official exchange rates I think your government is spending more per head than here (though this is probably arguable).
Gunnar Tómasson:
Yes, thats Iceland’s response. However, that argument was rejected and the decision was made. I like to see the decision of the meeting and its final ruling.
Peter – London said:
I haven’t seen it. But as you have you have already realised, if this opinon was the ‘result’ then Iceland would not have refused to participate in the process after it started.
Iceland tried to withdraw from the process precisely becuase it was ‘Legally Binding and Final’
Comment.
The facts of the matter are as follows.
1. Here is the “withdrawal” letter from the Icelandic Minister of Finance to H.E. Christine Lagarde, Minister of Finance, President of the ECOFIN Council, dated 7 November:
Dear Colleague
Reference is made to the ECOFIN EFTA informal ministerial meeting on 4th of November 2008, where the issue of Iceland’s banking crisis was discussed.
I highly appreciate your genuine efforts during the meeting to find a way for Iceland and our partners in the EU to set up a process that could address in a meaningful way some of the legal issues that have been discussed between Iceland and the Member States concerned recently.
At the meeting it was agreed, under very unusual circumstances, that a particular legal issue would be examined by a group consisting of five members appointed by the Council Legal Service, The Commission Legal Service, EFTA, the EFTA Surveillance Authority and the President of the European Central Bank.
The context surrounding this decision is that there is considerable doubt as to the exact scope of a State’s obligations under Directive 94/19 in a situation where there is a complete meltdown of the financial system of that State. As a matter of principle, Iceland considers that legal issues should be resolved in accordance with the procedures created to that effect and which provide the guarantee that the principle of rule of law imposes.
The decision was, to our understanding, a decision of principle. There has subsequently been considerable uncertainty as to a host of matters regarding the Group, including the question whether the Group should deliver a proper legal opinion, whether such an opinion should be binding, as well as on the exact scope of the mandate of the Group and the rules and principles that should inspire its work. It has been furthermore our concern that the expeditious manner in which the deliberations are to be conducted could be to the detriment of a proper legal consideration of the matter.
As you are aware, this is an issue of paramount importance to my Country. It can have serious economic consequences and political implications as the amount involved could be of up to 60% of Iceland’s GDP.
Thus, it is highly important that the process envisaged is sound and fair and that the Group is afforded the proper conditions for the accomplishment of its difficult task.
Bearing this in mind it is of concern that consultation prior to the start of the Group’s work did not take place and a clear mandate of the Group or the rules and principles to guide its work have not been defined beforehand in writing. Iceland did not receive communications of the mandate of the Group, so as the EU sees it, until after the Group had started its works.
Against this background, I trust that you will understand my unease about the current process that does not appear to offer the guarantees that a State governed by the rule of law must demand for the resolution of a difficult legal issue which, in addition, has huge repercussions for the citizens of that State.
In light of this and bearing in mind the enormous interests involved I regret to inform you that Iceland is not in a position to continue participation in this process. Iceland continues to be committed to its international legal obligations, including the principle of non-discrimination, and will continue constructive contacts with all parties concerned and stands ready to solve outstanding legal issues through appropriate means. Guidance of the French presidency would be highly appreciated in such a context. I look forward to continue our collaboration on this issue.
Yours truly,
Árni M. Mathiesen
2. On November 14 2008, one week after the date of this letter, representatives of Iceland, Britain and Holland adopted “agreed guidelines” for the resolution of the Icesave matter.
The guidelines included
(a) Iceland’s acceptance of the applicability of Directive 94/19/EC to Iceland as EEA Member State and
(b) agreement by the parties to work towards prompt resolution of the Icesave issue, taking into account “the difficult and unprecedented circumstances which Iceland is faced with, and the urgent necessity to decide on measures which would enable Iceland to reconstruct its financial and economic system.” (My translation from the Icelandic text.)
Alexander E. said:
“How much sympathy would you expect from me for people who gave their money to “internet bank” and now want ME to pay for their stupidity and greed?”
As you now know, those accounts were guaranteed by you, so who’s the idiot?
Describing it as an ‘Internet Bank’ is disingenuous – as you also now know its identical to a domestic Icelandic bank. It was verbally and legally guaranteed by your government.
Bjarni said:
“Well, since you clearly seem to have seen this “result of the Arbitration Committee”, how about giving us a reference to it, so we can read it ourselves. We wouldn’t want to think you just made it up, would we?”
I haven’t seen it. But as you have you have already realised, if this opinon was the ‘result’ then Iceland would not have refused to participate in the process after it started.
Iceland tried to withdraw from the process precisely becuase it was ‘Legally Binding and Final’
To Jim:
>>>>The UK spent 60 years repaying its $5bn loan ($50bn in today’s money) from the US after WW2.
Iceland has 200 times smaller population than UK, and most likely will have to pay around 3-4 Billion USD during the 8 years (2016-2024), according to the current loan terms. The UK interest was 2% while Icelands interest is 5.5% and UK had the ability to defer payments if needed, which they did 6 times. The loan terms offered to the UK would probably be very acceptable to Iceland.
>>>>Assuming a new pair of shoes every 2 years, that’s 30 pairs! ;-)
Good one! :-)
One of the biggest news in Iceland at the moment is the leaking of the slide presentation with lending information for the biggest borrowers of Kaupthing.
Before going into it, let me say that I am a bit torn about these leaks from the banks (mainly coming from Kaupthing so far). Banking secrecy is there for a reason and its strict according to the Icelandic laws. You cannot run banks in any civilized society if all the financial information about people and companies is automatically released publicly.
But, on the other hand, this banking crash had devestating concequences for Iceland and will affect the financial status of the Icelandic people for decades to come (irrespective of the outcome of the IceSave dispute). The people in Iceland (and in fact many people elsewhere) demand to know what exactly happened and why.
In my view, it would be best if the Icelandic parliament now passed new laws, that would allow publication of any loans that were given to the owners and the management of the banks, and any loans that were over certain amount and were not paid back.
Typically the “bad” loans, were only backed up by a stocks in banking/viking/foreign/holding companies that are now either bankrupt or otherwise worthless. Passing this law would allow for better analysis of the cause and result of the crash, while still protecting normal people and companies that were not involved in the crash at all.
Having said all that, here is link to the site that contains the actual leaked document:
http://www.wikileaks.org/wiki/Financial_collapse:_Confidential_exposure_analysis_of_205_companies_each_owing_above_EUR45M_to_Icelandic_bank_Kaupthing%2C_26_Sep_2008
I have not had much time to go through all 210 slides myself, but the following blog site contains collected information of the main borrowers:
http://matti.wordpress.com/2009/08/01/yfirlit-yfir-lykiltolur-ur-gl%C3%A6rupakka-kaup%C3%BEings-sannleikann-upp-a-bor%C3%B0i%C3%B0/
Translating the final overview from the blog, the main borrowers of Kaupthing were (in EUR):
Bakkavor-brothers companies: 1840M (the biggest shareholders of Kaupthing through Exista)
Jon Asgeir companies: 1803M (main owner of Baugur, that bought many UK retail companies)
Tchenquiz-brothers companies: 1583M (well known investors in UK, now in big trouble financially)
Skuli Thorvaldsson companies: 790M (Involved with Hotel Holt)
Olafur Olafsson companies: 784M (large owner of Kaupthing and on the board)
Kevin Stanford companies: 570M (retail entreprenaur in UK, works with Baugur)
Antonios Yerolemou: 365M (works with Bakkavor-brothers)
Bjorgolfs-(father and son) companies: 126M (largest owners of Landsbanki, the father is now bankrupt)
Thorsteinn M Jonsson companies: 73M (works with Jon Asgeir)
For reference the Euro exchange rate is now around 180ISK.
Further details of all the loans can be found in the slide presentation.
“For an interesting thought process, try to put yourself in our shoes”
The UK spent 60 years repaying its $5bn loan ($50bn in today’s money) from the US after WW2. Assuming a new pair of shoes every 2 years, that’s 30 pairs! ;-)
To Jim:
>>>>Do you think that, after the current agreement is inevitably rejected by parliament, there will be no choice but for that point to be resolved (despite it being politically painful)? Now that would be an interesting court case (EU vs Iceland)…
I wholeheartedly agree it would be a very interesting court case and it SHOULD happen.
To Peter – London:
>>>>That document is an OPINION. However, it is NOT the result of the Arbitration Committee, which was legally binding and final.
Well, since you clearly seem to have seen this “result of the Arbitration Committee”, how about giving us a reference to it, so we can read it ourselves. We wouldn’t want to think you just made it up, would we?
Peter.
How much sympathy would you expect from me for people who gave their money to “internet bank” and now want ME to pay for their stupidity and greed?
“The interpretation of the EEA directive 94/19/EC on this particular point has not been fully resolved legally, by an independent international court and probably will not be for political reasons”
Do you think that, after the current agreement is inevitably rejected by parliament, there will be no choice but for that point to be resolved (despite it being politically painful)? Now that would be an interesting court case (EU vs Iceland)…
To Peter – London:
>>>>.. Your country systematically ramps up massive borrowing -against every external advice over several years – with the connivance of your government. The government uses every trick it has to maximise its borrowing. Warnings are ignored with an arrogant contempt, born of the naive belief that when the SHTF, the EU will bail you out and if not there isn’t any way to repay the debts so F*** the debtors its their problem.
I think you are once again mixing things up. It was not the country that was borrowing, but mainly the banks themselves. There was never any belief that EU would bail out the banks or anyone else. The debtors had their risk analysis departments and should have known what risk they were taking by lending out so much money.
We’ve covered this territory before Alexander. Read the final paragraph of that link you supplied and try to understand that, however clever you think your point is, it’s one that no one who’s read the legislation would recognise as valid.
Going to elaborate on the drawing rights point, or was that another quip?
Bjarni said:
“Thanks for this, it will be interesting to see if Peter – London still somehow considers this a “legally binding and final legal process”.”
Aha, more selective release of documents by Icelandic authorities.
That document is an OPINION. However, it is NOT the result of the Arbitration Committee, which was legally binding and final.
Its the right answer to the wrong question…
Bjarni said(missing text added):
“For an interesting thought process, try to put yourself in our shoes. Lets say..”
.. Your country systematically ramps up massive borrowing -against every external advice over several years – with the connivance of your government. The government uses every trick it has to maximise its borrowing. Warnings are ignored with an arrogant contempt, born of the naive belief that when the SHTF, the EU will bail you out and if not there isn’t any way to repay the debts so F*** the debtors its their problem. Then –
” something bad happens financially in London, and in the span of one week ALL the British banks (HSBC, Lloyds, Barclay, etc.) go bankrupt and the pound tanks.”
How much sympathy would you expect to get?
Sweet FA.
1. Opening an Icesave Account
1a. You should check the current interest rates applicable before submitting your application.
Bromley86 said:
>>How many Icelandic residents had an account with Icesave?
>At a guess, somewhere between 30% and 50%. You’ll get the hang of this branch thing eventually.
Bromley, what would you say about this terms?
—————————–
1b. The Account Holder(s) will be the person(s) (a maximum of two) named in the application.
1c. We will accept applications from private individuals who are resident in the United Kingdom, each aged 18 years or over.
1d. The accounts are not available to corporate bodies, trustees, clubs, charities or other organisations.
———————————
http://web.archive.org/web/20070122124650/www.icesave.co.uk/termsandconditions.html
To Gunnar Tómasson:
>>>>”This opinion is limited to addressing this specific question [i.e. “the obligations of Iceland under the Deposit Guarantee Directive 94/19/EC”]. It is given in the personal capacity of the nominees and does not commit their respective appointing authorities.”
Thanks for this, it will be interesting to see if Peter – London still somehow considers this a “legally binding and final legal process”.
To Jim:
>>>>”Thats the thing, legally there was no Icelandic government guarantee at the time, only the TIF guarantee”
>>>>What about all EU member states unanimously confirming several months ago that they don’t agree with that… You are effectively saying that all EU member states incorrectly interpreted EEA law and only Iceland is interpreting it correctly. You may be right on this point, but the odds do seem very heavily against it.
The laws I was referring to were the Icelandic laws 98/1999 to establish TIF. As has been mentioned before, only laws by the Icelandic parliament, can authorise a guarantee by the Icelandic government. The interpretation of the EEA directive 94/19/EC on this particular point has not been fully resolved legally, by an independent international court and probably will not be for political reasons.
To Alexander E.:
>>>>How many Icelandic residents had an account with Icesave?
Probably close to zero. IceSave was only intended for foreign customers of Landsbanki. Landsbanki had of course many Icelandic customers but they had other local bank accounts.
Good post Gunnar.
I don’t follow the logic of point 11 though. Surely, in the absence of any other information, the UK FSCS payment to Icesave depositors in return for their 20,887 euro claims just means that the TIF owes the FSCS?
Certainly, the UK government has never said that it was taking responsibility for the 20,887 euros. Merely that they were stepping in the cover the fact that, intentionally or otherwise, Iceland was not going to pay on time (which, from your post, was by around January 7th).
Fair enough, again with just the information in your post, it can be argued that any costs incurred by the FSCS in arranging that payment are not the TIF’s responsibility, as it hadn’t authorised the payment. But that’s very different to saying that the liability is not transferable.
At a guess, somewhere between 30% and 50%. You’ll get the hang of this branch thing eventually.
To Peter – London:
>>>>It doesn’t matter, Iceland entered and it cannot reject the outcome because it doesn’t like it. It entered an ‘legally binding and final legal process’. There really doesn’t seem to be such a concept in the Icelandic mind does there?
Well, we DID reject it, BEFORE the arbitration was convened. It does not matter if you or anyone else think we couldn’t, no matter how often you repeat it. If you are so unhappy about this, you can just sue us in a court somewhere, and see if you can enforce it that way.
>>>>The judgement has been made and the only discussions going on is the payment terms. If the Althingi rejects the agreement there is nothing to say that even harsher terms won’t be demanded.
They can demand all they want, but any subsequent agreement would still have to be ratified by the Icelandic parliament.
>>>>Have you seen any indication of a legal challenge against the EU? I haven’t, and there isn’t going to be one. The Icelandic government know this, but people like you seem to be holding onto a fantasy that there is some magic get out of jail card.
We do NOT have to make any legal challenge from Iceland. It is UK and Netherlands that want to get paid, so it is up to them to make the legal challenge, if they choose to do so, to enforce their claim.
It is important to remember, the reason Iceland is even considering taking on the IceSave guarantee, is political, not legal. Most Icelanders do believe that we are not LEGALLY required to take on this obligation.
But many Icelanders, after a lot of soul searching over the past few months, do also believe that if we want to have reasonable relationship with the rest of Europe, at least some part of the IceSave guarantee will eventually have to be borne by us, so long as it is the fair share and we are able to. The current agreement is does not fulfill this and will therefore have to be changed before it is ratified by the parliament.
Bjarni said:
“The Icelandic government withdrew from the arbitration before it convened,”
Peter – London said:
It doesn’t matter, Iceland entered and it cannot reject the outcome because it doesn’t like it. It entered an ‘legally binding and final legal process’. There really doesn’t seem to be such a concept in the Icelandic mind does there?
Comment.
1. The “process” in question yielded an “Opinion” on November 7, 2008 which reads in part as follows:
“This opinion is limited to addressing this specific question [i.e. “the obligations of Iceland under the Deposit Guarantee Directive 94/19/EC”]. It is given in the personal capacity of the nominees and does not commit their respective appointing authorities.”
2. The personal opinion of the nominees does not commit either the respective appointing authorities nor those of Iceland.
Peter – London said:
The judgement has been made and the only discussions going on is the payment terms.
Comment.
3. Paragraph 5 of the Opinion reads as follows:
“The 24th recital of the preamble to the Directive does not exonerate Iceland from the consequences of any failure to implement the Directive properly. The Directive does not make an exception for times of financial distress.”
4. Paragraph 7 of the Opinion reads as follows:
“The Icelandic Financial Supervisor declared in early October 2008 that the Landsbanki, Kaupthing and Glitnir banks were unable to repay certain deposits. The scheme must be in a position to pay duly verified claims within three months, subject to any extension of time that may be granted. [This refers to a maximum of two additional periods of up to three months each.] If Iceland’s deposit-guarantee scheme is not in such a position, Iceland is in breach of its obligations under the Directive.”
5. Accordingly, the question of Iceland being “in breach of its obligations under the Directive [94/19/EC]” would arise if, within three months after “early October 2008”, Iceland’s deposit-guarantee scheme is not “in a position to pay duly verified claims”.
6. Moreover, Iceland cannot claim “an exception” from the Directive’s provisions “for times of financial distress”.
7. The same holds for the United Kingdom.
8. On October 8 2008 the UK Government announced a 100% guarantee 100% for all Icesave deposits in Landsbanki’s London Branch and proceeded to make good on the guarantee within a matter of weeks.
9. This action preempted Iceland’s exercise of its right under Directive 94/19/EC “to pay duly verified claims within three months [of early October], subject to any extension of time that may be granted.”
10. Directive 94/19/EC does not restrain the UK Government from instituting such ad hoc deposit guarantee arrangements as it deems necessary “to ensure the stability of the UK financial system” (HM Treasury communique 101/08, dated 8 October 2008) “in times of financial distress”.
11. However, the deposit guarantee arrangements instituted by the UK Government on October 8 2008 abrogated Directive 94/19/EC with respect to the Icesave deposits in Landsbanki’s London Branch.
Ok. Simple question.
How many Icelandic residents had an account with Icesave?
“Thats the thing, legally there was no Icelandic government guarantee at the time, only the TIF guarantee”
What about all EU member states unanimously confirming several months ago that they don’t agree with that… You are effectively saying that all EU member states incorrectly interpreted EEA law and only Iceland is interpreting it correctly. You may be right on this point, but the odds do seem very heavily against it.
To Jim:
>>>>Maybe only after the current agreement has inevitably been terminated (for one reason or another) will Icelanders realise the significance of the binding arbitration decision – so perhaps its significance will be presented in Iceland as a shock new discovery…
As I said before, we will have to see what happens after the parliament has finished its debate and what disclaimers/changes it comes up with before agreeing to the guarantee. I am sure we not going to like some of it.
For an interesting thought process, try to put yourself in our shoes. Lets say something bad happens financially in London, and in the span of one week ALL the British banks (HSBC, Lloyds, Barcleys, etc.) go bankrupt and the pound tanks. The rest of Europe and the World are screaming bloody murder and blame your government for everything.
Alistair Darling decides to go talk to the EU finance ministers and see what can be done. He is then surprised by demand for an arbitration where only demands of the Europeans will be considered. He tries to reach Gordon, but for some reason is unable to. He is a friendly guy, all for cooperation, not too smart though, so to he reluctantly agrees to this arbitration. (I know this is a stretch as a description for Darling, but bear with me :-))
When he finally reaches Gordon, Gordon hits the roof and says absolutely not! So UK withdraws from the arbitration, but they meet anyway and decide within a day of deliberations that UK has to pay One Trillion Euros for the European depositors.
Do you think UK should then just pay for it or do you think that the UK government and the parliament should have a say in the matter?
What should happen if UK doesn’t have one cool Trillion Euros lying around somewhere?
If later there was an agreement reached with the EU in secret, but when you finally were able to read the agreement, they want to be paid another Trillion, that was never supposed to be. Would you think your parliament would be correct in putting its foot down and saying the agreement will need to be changed?
This may seem far fetched story, but this is exactly what happened from our perspective.
To Jim,
>>>>Perhaps every time a Brit or Dutch opened an Icesave deposit account, the Icelandic parliament should have voted to ratify its corresponding 21K euros deposit guarantee. Each month in 2008, over 15000 new Icesave accounts were opened, meaning an additional 315m euros in sovereign financial guarantees each month. To put it another way, each month in 2008, every Icelandic citizen guaranteed an additional 1000 euros of Icesave deposits – all without parliament holding a single vote on it…
Thats the thing, legally there was no Icelandic government guarantee at the time, only the TIF guarantee. This is why the IceSave loan guarantee agreements are now being debated by the Icelandic parliament, to determine if we should take on this guarantee and if the agreement terms that were negotiated are acceptable to the Icelandic people (which will have to pay for it in the end).
“If the Althingi rejects the agreement there is nothing to say that even harsher terms won’t be demanded”
Actually, the UK gave no commitment to wait until Althingi rejects the agreement. Clause 3.2 says the UK can terminate the agreement if any of the preconditions (such as the Althingi ratification) have not been completed by the beginning of the Icelandic parliament’s summer recess. Maybe only after the current agreement has inevitably been terminated (for one reason or another) will Icelanders realise the significance of the binding arbitration decision – so perhaps its significance will be presented in Iceland as a shock new discovery…
This Icesave deal as it is may go trough parliament with limited state guarantee, zero chance of anything above that, i would turn it down flat,
Iceland is the priority now, every one and every thing else will have to accept that
like it or not,
there are more important things to deal with now in Iceland, like thieves and people guilty of treason,
our patience is over, we must see arrests soon or there will be a revolution and this time the gloves come off.
Perhaps every time a Brit or Dutch opened an Icesave deposit account, the Icelandic parliament should have voted to ratify its corresponding 21K euros deposit guarantee. Each month in 2008, over 15000 new Icesave accounts were opened, meaning an additional 315m euros in sovereign financial guarantees each month. To put it another way, each month in 2008, every Icelandic citizen guaranteed an additional 1000 euros of Icesave deposits – all without parliament holding a single vote on it…
Bjarni said:
“The Icelandic government withdrew from the arbitration before it convened,”
It doesn’t matter, Iceland entered and it cannot reject the outcome because it doesn’t like it. It entered an ‘legally binding and final legal process’. There really doesn’t seem to be such a concept in the Icelandic mind does there?
“Its just childish to think that the arbitration result is therefore a “legally binding, non-negotiable agreement”. In fact, it played almost no role in the negotiations, and has hardly been mentioned by anyone involved in the case since then.”
The judgement has been made and the only discussions going on is the payment terms. If the Althingi rejects the agreement there is nothing to say that even harsher terms won’t be demanded.
Have you seen any indication of a legal challenge against the EU? I haven’t, and there isn’t going to be one. The Icelandic government know this, but people like you seem to be holding onto a fantasy that there is some magic get out of jail card.
To Terry:
>>>>Bjarni – whilst I have been utterly fascinated and transfixed by the abilities of yourself and other contributors – delving into the ‘quantum mechanics’ of economics and EU agreements.
Thanks, I have definitely been fascinated by this whole issue myself. Its not often you get to debate the future of your whole country.
>>>>It is the political intrigue you touch upon that I have waited for – now emerging – perhaps in the form of a well choreographed ‘fight scene’ where a number of punches are forcefully thrown and eloquently ‘ducked’ until ‘satisfaction with honour’ has been attained by all parties.
There is possibly some posturing going on by different sides, but I have to say, the three Icelandic governments we have gone through, have not necessarily shown much cleverness yet (almost everything they have done or tried has failed, except maybe keeping the Icelandic bank operations going). But it must be said, they had a very limited hand to play with from the start.
If someone is somehow choreographing all this, with all the twists and turns the issue has taken, it would have to be one very clever individual.
But, I think everyone involved realises, in the end, this matter has to be resolved fully (with full honour for everyone :-)).
Care to flesh this out?
To Jim:
>>>>It is not the case that sovereign loans have to be subject to parliamentary vote – such loan agreements are made all the time between governments without recourse to parliamentary vote…
This is not an expertise subject for me, but it was pretty clear early on in Iceland that the IceSave agreement would have to be accepted by the parliament.
From what I understand, all agreements that involve a financial guarantee or place a financial obligations on the Icelandic government, have to be ratified by the parliament.
In any case, it would be a political suicide for any Icelandic government to agree to a guarantee of this size, without giving the parliament its say in the matter first.
>>>>They could have, for example, chose to also put in an Icelandic national referendum as yet another precondition – but that wouldn’t mean that only national referenda have the authority to enter into legally binding agreements on behalf of a sovereign country…
There was actually early on a discussion in Iceland whether this IceSave guarantee was so large committment that it would need a national referendum. But this demand quieted down pretty quickly.
As a background, we had a situation few years ago, on disputed new laws over who could control the news media (Fjolmidlamalid, David Oddson and Baugur played a major role there also). Olafur Ragnar Grimsson, the Icelandic President, old nemesis of David Oddson, refused to sign the laws, which meant it was supposed to go automatically to a national referendum.
The problem was that the then current laws were rather vague on the subject and it was for example not perfectly clear, what exactly would constitute a majority in the referendum (don’t ask!).
This may have been just a legal smokescreen by the current government, that did not want to loose, but in any case the new laws were withdrawn and we never got the referendum.
The national referendum laws have still not been clarified, so there is certain leeriness towards using them. This will have to be fixed soon, or at least in time for the EU referendum.
Note – my previous post. I think that should have been EEA agreements….see I’m learning!
What a loss, Peter, what a loss! ;-)
Loans are just temporary delay for the problem not a solution.
It’s like taking out your teeth slowly – for less pain. But you know – I prefer to do it fast.
As to IMF “loan” – this is not money, this is SDRs. So another from of “promise” Iceland will have to pay in real money.
As to Nordic countries – let’s see who are real friends ;-)
Russia and/or China are not the best friends but they might appear to be the only ones at the end.
Bjarni – whilst I have been utterly fascinated and transfixed by the abilities of yourself and other contributors – delving into the ‘quantum mechanics’ of economics and EU agreements.
It is the political intrigue you touch upon that I have waited for – now emerging – perhaps in the form of a well choreographed ‘fight scene’ where a number of punches are forcefully thrown and eloquently ‘ducked’ until ‘satisfaction with honour’ has been attained by all parties.
As Jim said in a recent post – It’s getting exciting
“the only institute that has the authority to enter into legally binding agreements on behalf of Iceland, a sovereign country, is the Icelandic parliament (Althingi). This is why the IceSave guarantee agreement HAS TO BE ratified by Althingi before it takes effect.”
The reason the Icesave agreements have to be ratified (and guarantee authorised, etc) by Althingi before they take effect is because that is one of several explicit preconditions in the agreement. It is not the case that sovereign loans have to be subject to parliamentary vote – such loan agreements are made all the time between governments without recourse to parliamentary vote… Perhaps it is more appropriate to say that the British and Icelandic governments chose to make Althingi ratification a precondition in the agreement. Just check out its wording in the agreement to see that the British government defined this precondition to increase the subsequent binding power of the agreement. They could have, for example, chose to also put in an Icelandic national referendum as yet another precondition – but that wouldn’t mean that only national referenda have the authority to enter into legally binding agreements on behalf of a sovereign country…
To Jim:
>>>>Okay, why hasn’t the MoU been released? And why hasn’t an Icelander demanded its publication under freedom of information? An analysis of the MoU wording will determine whether or not it’s a binding contract…
I agree, the MoU should be released publicly, but as far as I know, we do not have any official freedom of information act in Iceland (we surely need one!).
The MoU is referred to in several places (including the Icelandic Weather Report, Bromley86 mentioned), and clearly lot of people have read it, but for some reason I have not been able to lay my hands on the actual document anywhere.
If anyone knows where the MoU is published, or has a copy and can provide link to it, I would be very grateful.
To Mike Smith:
>>>>In negotiations, it is better to see if you can get the Icelander to think that he/she has thought of the proposal, and even pretend to oppose it a little, so that they think they have beaten you when they have really agreed to what you wanted.
You might be on to something here. I have been thinking about why on earth the Icelandic negotiation committee ended up accepting the IceSave loan guarantee agreement as it was written, since it clearly has some major problems, some that are even pretty obvious.
Without knowing all the facts, but reading between the lines of various reports, here is my current theory of how it happened:
The British and the Dutch clearly had some very experienced professional negotiators, while Iceland picked its Ambassador from Denmark and a former politician, Svavar Gestsson, to head the committee. (In Iceland, its unfortunately a common practice to give former politicians, nice cushy positions, before their retirement, David Oddsson’s CBI chairmanship being one extreme example.)
My theory is that the British/Dutch negotiators now applied a well-known but very effective negotiation trick. First, come in full force and demand a quick payment back of the full amount with high interest rate, knowing that the Icelandic negotiators could never accepts this. Let the Icelanders then stew on this stalemate for a while.
Then suddenly they give in to the Icelandic demands for a longer loan term and a lower interest rate, even the ability to renegotiate later (what Steingrimur J. the finance minister would report as the “breakthrough”).
In turn, they wanted just in “fairness” only few extra things: “equal” treatment for their guarantee funds, strict termination clauses with the ability to recall the full loan, complete secrecy, and complete waiving of Iceland’s sovereign rights.
My thinking is that this was their goal all along and the Icelandic negotiation commmitee, with its combined inexperience, plain incompetence, and pure impatience, just didn’t realize this. It was only after the agreements had been signed and then slowly published and analysed by others, that all the problems we have been discussing finally surfaced, but by then it was too late.
To Peter – London:
>>>>Bjarni said: “At this time, there is strong debate whether the Icelandic Government should take on the obligation for guaranteeing 100’s of billions of kronas..”
Actually, if you read just one line up, you will see it is prefaced with the text “Ragnar Hall writes:” so these words are actually not mine, but rather translation of an article that Ragnar wrote. This should have been very clear to anyone that read the comment, but you were maybe not paying full attention (as usual).
That being said, I do not think there is any doubt that currently there is a very strong debate in Iceland on the subject of IceSave guarantee.
>>>>All very academic. The Icelandic government has entered a legally binding, non-negotiable agreement when it lost the arbitration case.
The Icelandic government withdrew from the arbitration before it convened, as it was already very clear, that Iceland would not be allowed to make its case and it was clearly biased to towards the EU. The arbitration met anyway and issued its ruling within a day, without hearing any arguments, that Iceland had the obligation to pay.
Its just childish to think that the arbitration result is therefore a “legally binding, non-negotiable agreement”. In fact, it played almost no role in the negotiations, and has hardly been mentioned by anyone involved in the case since then.
As been stated numerous times here before, the only institute that has the authority to enter into legally binding agreements on behalf of Iceland, a sovereign country, is the Icelandic parliament (Althingi). This is why the IceSave guarantee agreement HAS TO BE ratified by Althingi before it takes effect.
>>>>The decision is down to between to sticking to the agreement or leaving the EFTA and losing the Nordic and IMF loans.
It remains to be seen what the UK/Netherlands/EU/IMF/Nordics will do, when the Icelandic parliament will accept the IceSave loan guarantee with specific disclaimers and/or changes, which now looks almost certain.
It is clear, that the IMF loans (and probalby the Nordic loans also) will not be finalized until an IceSave agreement has been reached that will be ratified by everyone involved, including Iceland.
Bjarni said:
“At this time, there is strong debate whether the Icelandic Government should take on the obligation for guaranteeing 100’s of billions of kronas..”
All very academic. The Icelandic government has entered a legally binding, non-negotiable agreement when it lost the arbitration case.
The decision is down to between to sticking to the agreement or leaving the EFTA and losing the Nordic and IMF loans.
To Bromley86:
>>>>Funnily enough, I couldn’t find a similar clause in the UK Agreement. Not saying that it’s not there though – I was getting a little glazed by the end :) .
The reason you cannot find it, is it isn’t there… Instead the corresponding clause (4.2) is in the Settlement Agreement that was kept “secret” until last Tuesday when GT found it on the web and leaked it on http://www.vald.org.
There are few things that I find amazing in all this (and appalling):
First, the Icelandic government knew what they were agreeing to, since they explain it in the Icelandic law that is now being debated at Althingi (see the quoted paragraph referred to by Ragnar Hall in his article).
Second, the agreements even assume that Landsbanki bankruptcy will likely pay more to TIF due to its preferential status, and in this case they “fix” the problem by having TIF make EXTRA payments to FSCS and DNB to bring them into line.
Third, the lack of knowledge by the negotiation committee of the basics of Icelandic bankruptcy laws. Here I am referring to the last sentence in the quoted paragraph by Ragnar Hall: “they receive payments in equal proportions, as this is in accordance with the interpretation of bankruptcy laws, that most commonly has been applied.”, which he shows is exactly the opposite.
Four, how anyone involved in negotiations of these agreements (Icelandic, British, Dutch), could think it would be a good idea to try to keep all this secret.
There was an interesting email correspondance that was later published by Lara Hanna, one of the main prolific bloggers in Iceland on IceSave. She actually went in June to visit Steingrimur J., the Finance Minister, and Indridi H., member of the negotiation committe (not that difficult in Iceland) and received copies of emails between Indridi and the UK/Dutch negotiators. In those emails it is clear that they really prefer to the keep the agreements secret, or at least kept in a room with limited access. Here is a reference to her blog entry that shows copies of those emails:
http://larahanna.blog.is/blog/larahanna/entry/900581/
I can understand why the British and Dutch possibly liked the idea to keep the agreements secret, but the Icelandic government should never have agreed to it in the first place.
By the way, for those that understand Icelandic, reading/listening and viewing Lara Hanna’s many blog entries is a lot of fun. She comes across a bit angry at times, but no one can doubt her commitment to keeping everyone involved (politicians, goverment, business people) on the narrow straight line. She also keeps marvelous records of all kind of relevant documents and media (that I often use).
Okay, why hasn’t the MoU been released? And why hasn’t an Icelander demanded its publication under freedom of information? An analysis of the MoU wording will determine whether or not it’s a binding contract…
Very kind of you Bjarni. I’ve just been reading the Agreement and, in the Dutch one, the relevant section is 3.1.2. Long story short, Ragnar Hall is correct.
http://www.island.is/media/frettir/02.pdf
DNB Dutch Central Bank
TIF Icelandic Guarantee Fund
Simplifying what 3.1.2 says:
(a) DNB assigns to TIF the rights to the first 20,887 euros per person.
So far, so good
(b) (i) That amount shall to the fullest extent permitted by applicable law rank the same as the excess above 20,887 euros retained by the DNB.
Okay, a little worrying, but not a huge problem as long as the applicable law is Icelandic, as that prioritises the TIF above all others (assuming that the Emergency Law didn’t screw that up. Even if it did, it can just be amended).
(b) (ii) If (for any reason, including TIF preferential status) either the TIF or the DNB experience a greater pro rata level of recovery, then a payment is made to bring them into line.
Holy ****! That’s appalling and basically means that the TIF suffers if recovery is less than 100% of the TIF+DNB covered amounts. Whether it’s material (i.e. significant) is a different matter, but this is just plain, flat-out, wrong.
Funnily enough, I couldn’t find a similar clause in the UK Agreement. Not saying that it’s not there though – I was getting a little glazed by the end :) .
To Jim:
>>>>If you have not seen that MoU, why do you think it is not a legal contract? MoUs are agreements that can be as binding as contracts; it all depends on the wording.
You are right, its difficult to evaluate the MoU without actually seeing the document. In fact it might matter very much for both sides if any of this matter ever goes to court.
FSCS used its own understanding of the MoU, “the parties have not handled claims as anticipated by the MOU”, to justify the unilateral actions it took.
On the other side, Gunnar in his analysis claims that the actions of FSCS were in violation of the MoU by not involving TIF directly and letting it provide the lead as specified. Basically, FSCS did not want to wait for several months, which TIF was legally entitled to work on the matter, and decided instead to make the deposit guarantee payments immediately by itself.
Does not sound that this “Memorandum of Understanding” provided much understanding after all… :-)
“I have not seen this MoU published anywere. I would be interested to read it, although it probably does not matter too much anymore what it actually contains, especially since its not a legal contract.”
If you have not seen that MoU, why do you think it is not a legal contract? MoUs are agreements that can be as binding as contracts; it all depends on the wording.
To Bromley86:
>>>>Thanks Bjarni. Looks like that Settlement Agreement refers to the 2006 MoU that Alda (IWR) blogged about recently (preamble (d) ). Have you seen that MoU?
I have not seen this MoU published anywere. I would be interested to read it, although it probably does not matter too much anymore what it actually contains, especially since its not a legal contract.
>>>>I can’t believe that Ragnar Hall is correct, but I assume that his argument stood up to your scrutiny. Clearly, any attempt to move the FSCS creditor in excess of the EEA guarantee into the same priority as the TIF is wrong.
I could not find any translations of Ragnar Hall’s article, even though there is a translation there of a response article from Magnús Halldórsson with an opposing view.
http://newsfrettir.com/banks/landsbanki/1050-a-mistake-in-the-icesave-agreement
Here nelow is my quick and dirty attempt at translating Ragnar Hall’s original July 10th article in Frettabladid:
http://visir.is/article/20090710/SKODANIR03/529558416
Please note that this translation may not be 100% accurate as I am in no way certified to translate anything, but the overall meaning should be close enough. The comments in brackets are mine to aid understanding.
————————————————-
Ragnar Hall writes:
At this time, there is strong debate whether the Icelandic Government should take on the obligation for guaranteeing 100’s of billions of kronas [billions of Euros] due to IceSave deposit accounts in UK and the Netherlands. Even though the debate is fierce and many have voiced their opinions to it, there seems to be missing from the debate explanation how the estimated obligated amount has been calculated. I have reason to believe that the calculations are wrong and the obligation of Iceland has been overestimated.
In the following article, I do not get into the debate that has mostly been discussed publicly, that is whether the Icelandic government should in fact be obligated to provide the depositor and inverstor guarantee fund [Tryggingasjodur Innistaedueigenda og Fjarfesta – TIF] enough funds so the fund can cover its obligations towards the foreign depositors. Instead, I make the assumption, as the Icelandic negotiation committee has done, that Iceland is obligated to provide these funds. The question that then remains is the following:
How should we calculate this?
As Landsbanki Islands hf. is bankrupt, we have to approach the issue from the regulations that cover bankruptcy proceedings – it does not matter in this context that the bank is now managed by administration committee [skilanefndar] and judgement has not yet been issued on the bankrupcy. Claims by IceSave depositors are priority claims during bankruptcy disbursion, along with salary claims, after the change that was done to priority order of claims with the so called emergency laws [neydarlogum] last October. These claimants also have the right that TIF pays them 20887 Euros for each such account that had this amount or more (of course the claim is lower if the account amount was lower). If the TIF does this, then what is the next step?
At the same time the TIF pays out, it takes over the claim by the depositor equal to the amount paid out. For example, if there is a claim for 100000 Euros, and the TIF pays out 20887 Euros of the claim, the the TIF takes over 20.887% of the claim, while the depositor keeps 79.113% of the claim.
Now, lets assume that the British guarantee fund [Financial Services Compensation Scheme – FSCS] is supposed to guarantee the depositors up to 50000 Euros of each account according to British regulations. This means that the FSCS pays out 29113 Euros to the depositor, which then retains 50% of the original claim. The British government then takes over this part of the claim also, more than it is obligated to as I see it, but it does not matter in this context.
Interpretation of bankruptcy laws
Now we have reach the core of the issue: How much share should each of these parties get towards their claim from the bankruptcy proceedings of Landsbanki? The owners of the deposit, that originally was 100000 Euros, are now three. Are they all equal during the disbursion, or does any of them have priority over the others? If they are all equal, then the original depositor would get paid towards his remaining claim, even if the recovery rate was less than 50% of priority claims – that obviosly would not work. Guarantee funds are supposed to guarantee certain minimum payments. Therefore, when they do so, then the payment must first go towards resolution of the claims that the guarantee funds have taken over. In the same manner, must first go towards the Icelandic TIF, before the British FSCS gets anything, since the claim of the British fund comes after the Icelandic fund. The British fund only pays the difference between 20887 Euros and the 50000 Euros, and pays nothing if the amount was lower than 20887 Euros.
Wrong deduction
In the current law that the Icelandic parliament [Althingi] is considering on authorisation for the minister of finance on behalf of the Icelandic goverment, to guarantee the loan to TIF to cover the IceSave obligations states among other things:
“Icelandic TIF takes over the forwarded claims of the British FSCS and the Dutch Central Bank towards Landsbanki. The foreign parties will then make a separate claim towards the excess amounts they have paid out. In the contract there is a special clause that states, that all the funds will receive equal treatment, when the payments from Landsbanki bankruptcy proceedings will be made, that is, they receive payments in equal proportions, as this is in accordance with the interpretation of bankruptcy laws, that most commonly has been applied (emphasis by author RHH)”.
In my opinion, this deduction is completely wrong and there is no way it can hold up. I have worked extensively with laws in connection with bankruptcies for a long time. I do not recognise that the interpretation of law as referred to here has been commonly applied. In fact, the application has been exactly the opposite. For example, we can refer to the many cases where the guarantee fund for salaries [Abyrgdarsjodur launa] has taken over partial claims for salaries towards bankrupt companies.
I do not have enough information, how much these calculation methods differ, but I suspects it can run into 100’s of billions of kronas [billions of Euros]. This is the likely reason why there is a special clause about this in the contract – there has simply been a terrible mistake made on our side – and it not difficult to understand why the Dutch say that under no circumstances should the negotations be opened up again.
The author is a supreme court lawyer.
Bjarni said:
“FSCS unilaterally decided to guarantee all IceSave UK deposits above 21K GBP, and the Landsbanki bankruptcy proceedings are under no obligation to cover those payments in excess of what the Icelandic bankruptcy laws require”
CORRECTION: The amount referred here 21K GBP should of course have been instead 17K GBP (21K Euros). These are also approximate numbers, the actual numbers are: 16827.99 GBP and 20887 Euros. The mistake was mine (fast fingers) and the point made by Ragnar Hall still is worth serious legal consideration.
Dont worry this is just a show, unfortunatelly they will accept it, mark my words!!!
Bjarni, thanks for posting a summary of the settlement agreement between FSCS and TIF.
This is obviously a very complicated issue. I agree with Gunnar Tómasson’s conclusion that this agreement weakens the British argument, but for different reasons than he does.
The FSCS-TIF Agreement was between the the British FSCS and the Icelandic TIF, a PRIVATE entity not owned or controlled by the Icelandic government. Therefore nothing in this agreement is binding upon the Icelandic government unless a separate, collateral agreement is explicitly mentioned and included, which it wasn’t. It is a basic principle of contract law that you cannot obligate third-parties, and third-parties if they agree to be bound, must known exactly what they are agreeing to. That was not the case here.
In addition, the Agreement includes, as terms of the Agreement, previous “contracts” that either were not contracts or had yet to be concluded. It refers to an MOU – an MOU is not generally a final contract unless the parties intend it to be, and usually if they do consider it final, they call it a contract, not an MOU. MOUs are pseudo-contracts drawn up by businessmen — statements of principles are not contracts. Similarly, the Agreement refers to a Loan Agreement between Iceland & UK – which had not yet been finished.
Actually, I would go so far as to say this Settlement Agreement has no validity to the Icelandic government, and that the government’s responsibility is defined only by EC Deposit Guaranree Directive {94-19c} and Icelandic Law 98/1999. If the UK government wants to sue Iceland for not funding TIF, it can do that, but the terms are those in the EU directive and Isl. Law 98/1999, not this Settlement Agreement (GT says this too).
As has been pointed out, the settlement Agreement generally attempts to put the responsibility back on TIF by reconstructing liability after the fact. Maybe TIF could agree to this, but not the Icelandic government, unless it explicitly agreed.
I disagree with GT’s conclusion that because FSCS made several “unilateral” decisions with the “knowledge” but NOT prior agreement by TIF, the FSCS is automatically responsible for the consequences of those decisions. Two parties can in fact agree to payment, even if one party is passive (for instance, if my dog bites you and you go to the doctor and pay his bill, I can agree to pay even if I didn’t agree beforehand). This is called a stipulation of fact. On the other hand, if TIF was mistaken about its liabilities, then this amount can be challenged. (For instance, if you go to the doctor and get complete plastic surgery when you only needed stitches for the dog-bite, then I can challenge the cost, even if I agreed to pay your doctor bill.)
GT is also brings up the language of 94/19/EC and 98/1999, which are both vague. Apparently it says the Iceland must only ensure the introduction of a compensation scheme, without saying how much compensation is due. As I said above, the TIF cannot unilaterally decide on behalf of the Icelandic government what that compensation should be.
I imagine few if any readers have any interest in the contract details. The larger point is that the details about what kind of compensation is due and by whom is very unclear, and that if the whole issue were to go before a neutral court you could have a very different result than the Icesave agreement. For instance, Iceland may conceivably only be liable for funding the TIF at 2% of the amount of Icelandic deposits – the introduction of a compensation scheme.
Here is a quick English translation of my comments referred to by Bjarni in point 5 – Unilateral decisions by FSCS. Follow-up analysis and comments (mainly in Icelandic) may be found at http://www.vald.org.
Comments on Icesave
SETTLEMENT AGREEMENT
The confidential document SETTLEMENT AGREEMENT between Financial Services Compensation Scheme (FSCS) and The Depositors’ and Investors’ Guarantee Fund (TIF), dated 5 June 2009, includes the following provisions which may explain the great emphasis which British (and Dutch) parties place on prompt approval of the Icesave agreement without any changes and/or significant qualifications.
1. TIF is a private foundation incorporated under the laws of Iceland, entrusted under such laws with the execution of the Icelandic Deposit Guarantee Scheme in accordance with the provisions of Icelandic Act No. 98/1999 on deposit guarantees and investor compensation schemes. (item b), p. 1)
It follows from this, among other things, that all obligations of TIF with respect to FSCS are only binding if they accord with the provisions of Act No. 98/1999.
2. On or about 31 October 2006, FSCS and TIF agreed a Memorandum of Understanding (the “MOU”) setting out, inter alia, certain principles for the handling of claims for compensation from depositors with UK branches of certain Icelandic banks. Under the terms of the MOU, TIF had lead responsibility to deal with and assess and pay such depositors’ claims. (item d), p. 1)
It follows from this that unilateral decisions by FSCS concerning the handling, evaluation and payment of depositor claims without approval of TIF are entirely the responsibility of FSCS alone.
3. On 6 October 2008, Landsbanki encountered severe liquidity and other financial difficulties which led it to default on its obligations to depositors and other creditors and which resulted in the “Icesave” website operated by the UK Branch ceasing to function. On 8 October 2008, the Financial Services Authority (the “FSA”) in the United Kingdom declared the UK Branch to be “in default” under the Scheme. On 27 October 2008, FME issued its opinion that Landsbanki was, on 6 October 2008, unable to make payment of the amount demanded by certain depositors and that, therefore, TIF was obligated to pay compensation in accordance with Article 9 of Icelandic Act No. 98/1999. In respect of the claims of depositors with the UK Branch, TIF became obligated to pay an amount of up to ?20,887 to each individual depositor. (item e), p. 1-2)
No provisions on the timing of payments by TIF are to be found in Article 9 of Act No. 98/1999, which begins as follows:
If, in the opinion of the Financial Supervisory Authority, a Member Company is unable to render payment of the amount of deposits, securities or cash upon a customer’s demand for refunding or return thereof in accordance with applicable terms, the Fund shall pay to the customer of the Member Company the amount of his deposit from the Deposit Department and the value of his securities and cash in connection with securities trading from the Securities Department. The obligation of the Fund to render payment also takes effect if the estate of a Member Company is subjected to bankruptcy proceedings in accordance with the Act on Commercial Banks and Savings Banks and the Act on Securities Trading. The Fund is authorised to reimburse the value of deposits from its Deposit Division and to remit such payments in accordance with the terms applying to the deposit or securities; for example, as regards tied periods, termination, and the like. It shall always be permissible to reimburse the value of deposits, securities, or cash in Icelandic krónur, even though the original transactions may have been in another currency. The Fund is authorised to set off the financial undertaking’s claims against a customer’s claim of disbursement.
The opinion of the Financial Supervisory Authority shall have been made available no later than three weeks after the Authority first obtains confirmation that the relevant Member Company has not rendered payment to its customer or accounted for his securities in accordance with its obligations.
The final provisioin of Article 9 reads as follows:
Further specifications regarding payments from the Fund shall be included in a Government Regulation
The SETTLEMENT AGREEMENT has no reference to any such regulation.
4. Following the declaration of default by the FSA and the issuance of the opinion by the FME, the parties have not handled claims as anticipated by the MOU. On 4 November 2008, FSCS made a determination under the rules of the Scheme, following which FSCS has, with the knowledge of TIF, proceeded to handle and pay claims of depositors in the “Icesave” product of the UK Branch. All “Icesave” depositors of the UK Branch have received or will receive from FSCS compensation for their deposits with the UK Branch including in respect of claims which TIF was obligated to pay to each such depositor. As part of the compensation process and as a precondition to payment of compensation by FSCS, depositors transfer and assign to FSCS their related rights (the “Assigned Rights”) to claims against Landsbanki, TIF and third parties. (item f), p. 2)
Here are many things to consider.
a. Without citation of the actual provisions of MOU it is not possible to judge whether the assertion by FSCS concerning alleged departures therefrom can be substantiated.
b. Nor is it possible to judge whether a unilateral ”determination” by FSCS “under the rules of the Scheme” may have been binding on TIF.
c. The wording “with the knowledge of TIF” indicates that FSCS acted without the approval of TIF and, therefore, entirely on its own responsibility.
d. Unilateral interpretation by FSCS of the “related rights” of depositors is not binding by law with respect to TIF/Landsbanki.
e. Absent such binding interpretation, FSCS’s interpretation cannot transform “related rights” into “Assigned Rights” with respect to TIF/Landsbanka.
5. The parties acknowledge that FSCS has already, with TIF’s knowledge, made payments in accordance with the Scheme rules to individual depositors of the UK Branch for claims in respect of which TIF has compensation obligations under Icelandic Act No. 98/1999. Furthermore, the parties acknowledge that FSCS may continue to make such payments until the date (the “Refinancing Date”) notified by FSCS to TIF as being the date on which FSCS will cease making such payments and commence making compensation payments (on behalf of TIF) using the proceeds of Disbursements under the Loan Agreement. The aggregate of all such amounts, whether paid before or on or after the date of this agreement but provided they are made before the Refinancing Date, is referred to as the “Refinancing Amount”. The Refinancing Date shall fall not more than thirty days after the date on which the conditions precedent to Disbursements under the Loan Agreement have been satisfied and FSCS shall notify TIF in writing of the Refinancing Date not less than two Business Days in advance of the Refinancing Date. (item 1.1, p. 2-3)
Again, here are many things to consider.
a. Again, here is reference to “TIF’s knowledge” – not approval – concerning actions by FSCS on its own responsibility in the affairs of depositors.
b. However, “Refinancing Amount” is defined to include payments by FSCS on its own responsibility (“paid before … the date of this agreement”).
c. By approving the Icesave agreement without any change, Althing would release FSCS from its responsibility under law for its unilateral decisions and actions.
Directive 94/19/EC
6. FSCS is the Scheme Manager of the Financial Services Compensation Scheme established under Part XV of the UK Financial Services and Markets Act 2000 (the “Scheme”). The Scheme is the deposit guarantee scheme established in the United Kingdom for the purposes of the EC Deposit Guarantee Directive (94/19/EC). (item a) p. 1)
It follows from this, among other things, that Directive 94/19/EC is ruling authority with respect to all actions by FSCS in the Icesave case.
As detailed further here below, on 4 November 2008 FSCS decided unilaterally to abandon the process indicated by Directive 94/19/EC with respect to the obligations of and settlement by deposit guarantee systems of host countries and home countries following the issuance of the opinion by FME on 27 October 2008 concerning the insolvency of Landsbanki.
7. Whereas this Directive may not result in the Member States’ or their competent authorities’ being made liable in respect of depositors if they have ensured that one or more schemes guaranteeing deposits or credit institutions themselves and ensuring the compensation or protection of depositors under the conditions prescribed in this Directive have been introduced and officially recognized;… (Introduction, Directive 94/19/EC)
It follows from this, among other things, that the United Kingdom may introduce ad hoc deposit guarantee schemes in addition to a scheme which may have been “established in the United Kingdom for the purposes of the EC Deposit Guarantee Directive (94/14/EC)”. (see item 6. above)
8. Article 10.1-2 of Directive 94/19/EC reads as follows:
1. Deposit-guarantee schemes shall be in a position to pay duly verified claims by depositors in respect of unavailable deposits within three months of the date on which the competent authorities make the determination described in Article 1 (3) (i) or the judicial authority makes the ruling described in Article 1 (3) (ii).
2. In wholly exceptional circumstances and in special cases a guarantee scheme may apply to the competent authorities for an extension of the time limit. No such extension shall exceed three months. The competent authority may, at the request of the guarantee scheme, grant no more than two further extensions, neither of which shall exceed three months.
The Articles of Directive 94/19/EC referred to here read as follows:
Article 1 (3) (i) og Article 1 (3) (ii):
3. ‘unavailable deposit’ shall mean a deposit that is due and payable but has not been paid by a credit institution under the legal and contractual conditions applicable thereto, where either
(i) the relevant competent authorities have determined that in their view the credit institution concerned appears to be unable for the time being, for reasons which are directly related to its financial circumstances, to repay the deposit and to have no current prospect of being able to do so.
The competent authorities shall make that determination as soon as possible and at the latest 21 days after first becoming satisfied that a credit institution has failed to repay deposits which are due and payable; or (ii) a judicial authority has made a ruling for reasons which are directly related to the credit institution’s financial circumstances which has the effect of suspending depositors’ ability to make claims against it, should that occur before the aforementioned determination has been made.
FSCS’s Decision
9. On 8 October 2008, the Financial Supervisory Authority (the “FSA”) in the United Kingdom declared the UK Branch to be “in default” under the Scheme. (SETTLEMENT AGREEMENT/SA p. 1-2)
10. On 27 October 2008, FME issued its opinion that Landsbanki was, on 6 October 2008, unable to make payment of the amount demanded by certain depositors and that, therefore, TIF was obligated to pay compensation in accordance with Article 9 of Icelandic Act No. 98/1999. In respect of the claims of depositors with the UK Branch, TIF became obligated to pay an amount of up to ?20,887 to each individual depositor. (SA, p. 2)
11. This action by FME on 27 Oktober 2008 accorded with Directive 94/19/EC, Article 1 (3) (i).
12. Article 9 of Act No. 98/1999 Í 9. gr. states in part: Further specifications regarding payments from the Fund shall be included in a Government Regulation.
13. This refers to Regulation No. 120/2000 on Deposit Guarantees and an Investors-Compensation Scheme. Article 4 thereof provides for payments from the Fund to be arranged as follows:
Customers of Member Companies shall submit their claims to the Fund in writing together with any documents regarded as necessary by the Fund. The Fund shall decide, in consultation with the Financial Supervisory Authority, on the extent of the time limit granted to customers of Member Companies to submit claims to the Fund. The time limits shall be at least five months in cases where customers of a Member Company have a claim on the Fund relating to securities transactions, and at most two months in the case of depositors having a claim on the Fund. Decisions on time limits shall be published in the Official Gazette and in newspapers.
14. Following the declaration of default by the FSA and the issuance of the opinion by the FME, the parties have not handled claims as anticipated by the MOU [Memorandum of Understanding, dated “on or about 31 October 2006”]. (SA, p. 2)
15. The SETTLEMENT AGREEMENT refers to the MOU in question as follows:
On or about 31 October 2006, FSCS and TIF agreed a Memorandum of Understanding (the “MOU”) setting out, inter alia, certain principles for the handling of claims for compensation from depositors with UK branches of certain Icelandic banks. Under the terms of the MOU, TIF had lead responsibility to deal with and assess and pay such depositors’ claims. (p. 1)
Thus, an agreement between FSCS and TIF was at hand “on or about 31 October 2006” providing that TIF should take the lead in calling for submission of claims and requisite documentation within a time period of at least five months in preparation for payments by the Fund in accordance with Article 4 of Regulation No. 120/2000.
Thus, an assertion that “the parties have not handled claims as anticipated by the MOU” does not hold insofar as TIF is concerned.
16. On 4 November 2008, FSCS made a determination under the rules of the Scheme, following which FSCS has, with the knowledge of TIF, proceeded to handle and pay claims of depositors in the “Icesave” product of the UK Branch. (SA, p. 2)
A decision taken by FSCS “under the rules of the Scheme” without TIF’s approval according to law does not accord with the MOU and is the equivalent of a decision by FSCS to shoulder responsibility with respect to owners of Icesave accounts which otherwise would have been processed by TIF according to the provisions of Act No. 98/1999 and Regulation No. 120/2000.
17. The decision was equivalent to the establishment of an ad hoc deposit guarantee scheme and saved (a) the owners of Icesave accounts from lengthy uncertainty concerning settlement by TIF and (b) the UK authorities from criticism for having delayed the transfer of deposits from the Landsbanki Branch to a British affiliate under the guarantee of FSCS.
***
“No Icesave-agreement, no EU..”
Damn, just when EU seem to be coming to their senses
http://www.nytimes.com/2008/11/13/world/europe/13food.html?_r=1
the politicians assigned to the EU funny shape fruit division have been reassigned
http://www.youtube.com/watch?v=9ZlBUglE6Hc&feature=channel
Thanks Bjarni. Looks like that Settlement Agreement refers to the 2006 MoU that Alda (IWR) blogged about recently (preamble (d) ). Have you seen that MoU?
I can’t believe that Ragnar Hall is correct, but I assume that his argument stood up to your scrutiny. Clearly, any attempt to move the FSCS creditor in excess of the EEA guarantee into the same priority as the TIF is wrong.
[…] Read more here: More Members of Parliament against the Icesave deal | IceNews … […]
Bjarni said:
“FSCS unilaterally decided to guarantee all IceSave UK deposits above 21K GBP, and the Landsbanki bankruptcy proceedings are under no obligation to cover those payments in excess of what the Icelandic bankruptcy laws require”
The Icesave repayments that Iceland is liable for only cover the 21k euro that the depositor protection scheme was to provide. The excess the the UK refunded to the depositors was paid from the UK government/finance industry.
“In fact, it might actually have the opposite effect (we don’t like being bullied).”
Very true. In negotiations, it is better to see if you can get the Icelander to think that he/she has thought of the proposal, and even pretend to oppose it a little, so that they think they have beaten you when they have really agreed to what you wanted.
The one thing you should not do is try to tell Icelanders what they have to do.
To C.A.K.
>>>>No Icesave-agreement, no EU..
Partially correct. At least the Dutch seem deadset against it, see for example:
http://www.dutchnews.nl/news/archives/2009/07/dutch_want_loan_paid_before_ic.php
But, most likely there will be some kind of IceSave agreement finalized and agreed by all parties sometime this year. The EU application process on the other hand will take several years.
It is unlikely that the threat of derailing the EU application, will sway any of the Icelandic MP’s that are against it to accept the IceSave agreement. In fact, it might actually have the opposite effect (we don’t like being bullied).
To Jim:
>>>>Bjarni – You seem deep in many details, but the real issue is the 5.5% interest rate. If it were a couple of percentage points lower, parliament would probably have ratified it by now.
I agree one of the big problem is the high interest rate (not generally, just the ability of Iceland to pay it). I just didn’t want to repeat the earlier discussions we had in June. See for example the subsequent comment covering this particular subject:
https://www.icenews.is/index.php/2009/06/21/protests-in-iceland/#comment-83121
Bjarni – You seem deep in many details, but the real issue is the 5.5% interest rate. If it were a couple of percentage points lower, parliament would probably have ratified it by now.
No Icesave-agreement, no EU..
This is not a surprising development, as more details on the loan guarantee agreement and its negotiations slowly become public. The different MP’s that oppose the agreement have over the last month pointed to several separate issues that they consider unacceptable:
1. Waiving of sovereign rights
This was one of the first points that was raised. Iceland as a sovereign country, has certain sovereign rights that the loan guarantee agreement mostly waives.
It is very unclear in the agreement exactly which Icelandic assets can be seized by the UK and Netherlands if Iceland is unable to make the loan payments.
2. Ability of Iceland to pay back the loan
This has been discussed in detail here in previous IceNews comments. See for example this comment and the following discussion:
https://www.icenews.is/index.php/2009/06/21/protests-in-iceland/#comment-82896
The Icelandic Central Bank recently published the following report on the ability of Iceland to pay back the IceSave loan:
http://www.sedlabanki.is/lisalib/getfile.aspx?itemid=7199
This report is in Icelandic only, but basically it says that based on certain economic assumptions Iceland will be able to pay.
These assumptions include among others: 75% recovery rate of Landsbanki assets, all assets recovered within the first 7 years, 6-7% yearly increase in GDP, positive trade balance of 150-200B ISK (about 1B Euros) per year due to additional aluminium smelters capacity from Straumsvik and Helguvik and further 36% reduction in imports (already down 45% from last year). Needless to say, not every MP believes this is actually a likely outcome.
Therefore, it is now very likely that the Icelandic parliament will only accept the loan guarantee with some kind of limit on the total payments by Iceland, either based on the GDP or the trade balance.
3. Weak renegotion clause
The loan agreement has a change in circumstances clause that states that if a “significant deterioration has occurred of the debt of Iceland, relative to the assessment of such sustainability by the IMF as of 19 November 2008”, then “The Lender agrees that if this paragraph 16 applies and Iceland so requests, it will meet with Iceland to discuss the situation and consider whether, and, if so, how, this Agreement should be amended to reflect the relevant change in circumstances.”.
This is considered very weak clause by many MP’s with some calling it an “just an invitation to a chat over coffee”.
4. Icelandic bankruptcy laws
Recent published analysis by the Ragnar Hall and few other lawyers (so far only in Icelandic press as far as I know), states that the loan agreement contains a major flaw that goes directly against the Icelandic bankruptcy laws. Basically, according to the current law, each deposit claim should be considered separately, irrespective of the deposit guarantee payments.
Therefore, if someone had 100K GBP in his IceSave account and the recovery rate is 75%, then his claim gets paid 75K GBP. Then the Icelandic Deposit Guarantee fund (TIF) has legal assigned claim for the full 16K GBP (21K Euros) and the FSCS can then claim the difference (75-16=59K) towards its payment of 84K (100-16). According to the current loan agreement the two claims would be considered equal with both getting 75% (12K TIF, 63K FSCS).
Ragnar Hall argues that FSCS unilaterally decided to guarantee all IceSave UK deposits above 21K GBP, and the Landsbanki bankruptcy proceedings are under no obligation to cover those payments in excess of what the Icelandic bankruptcy laws require. These published arguments clearly have had major impact on some of the government MP’s and their view of the agreement.
5. Unilateral decisions by FSCS
There is a separate settlement agreement between FSCS and TIF, that for some reason has not been published officially yet. Yesterday, it was leaked on the following web site:
http://www.vald.org/greinar/090728.html (click on link to settlement_agreement.pdf)
This is a very interesting agreement that explains various earlier mysteries. Gunnar Tómasson provides on the web site detailed analysis (in Icelandic) of this agreement.
In short, he argues that since FSCS made several “unilateral” decisions with the “knowledge” but NOT prior agreement by TIF, the FSCS is automatically responsible for the concequences of those decisions. The settlement agreement attempts to put the responsibility back on TIF.
It is not clear yet how many of the MP’s had previously seen this settlement agreement and the analysis or what impact it had, but it has been referred to in number of recent press resports and political arguments.
The Icelandic parliament is now on break until early next month, while various committees are analysing and debating the loan guarantee agreement. The IceSave guarantee will almost certainly be accepted in the end, but but is now pretty clear that the agreement will NOT be passed into law without at least making also some of the changes to it based on the above comments.
This leaves the question of what the likely response will be from UK/Netherlands/EU/Nordic/IMF. It seems that most likely the IMF loans will be delayed further, although they say they are only waiting for the Nordic countries to finalize their loans. The Nordic countries say they are waiting for the IMF to give the green light. It looks to me, this is just an easy excuse by everyone to delay the loans until IceSave matter will be cleared up.
This is getting exciting! Time for the Dutch and British to start dusting-off the Iceland invasion plans…
This will be so great if there are no loans from IMF, EU, Russia, etc. One loan from Norway only will be quite enough. And Iceland independent again (not sold out for new loans). Simple.