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By News Wires | 13 September 2010
Iceland's former premier Geir Haarde
AFP— Iceland's former prime minister Geir Haarde and three ministers should be tried for negligence that led to the country's 2008 banking and financial meltdown, a parliamentary commission said Saturday. The ad hoc Special Investigation Commission (SIC) blamed extreme negligence of the former conservative government for the fall of three Icelandic banks in October 2008 that led the country's unprecedented financial crisis. Its findings confirmed the preliminary findings of its "Truth Report" released in April.
In a 274-page report published Saturday, the SIC said Haarde, former finance minister Arni M. Mathiessen, ex-commerce minister Bjoergvin G. Sigurdsson and former foreign minister Solrun Gisladottir should face trial. The commission was set up by lawmakers at the end of 2008, shortly after Iceland's three major banks went bust, dragging down its once-booming financial sector and sending the Icelandic krona plunging. The commission's report said the former ministers "showed themselves to be negligent" and said they should be "tried and punished by the Landsdomur" court.
The recommendation to try the former ministers was supported by a narrow majority of five out of the nine lawmakers sitting on the commission. The Icelandic parliament should meet Monday to debate the report and decide whether to appoint a prosecutor and judges for the Landsdomur for the first time since the special court for trying government officials was set up in 1905. "This is a serious accusation against our political system, our politicians, the parliament, and stock market. It is a problem we must confront," said Social Democrat Prime Minister Johanna Sigurdardottir.
It was unfortunate the commission wasn't able to reach a unanimous decision, which would given its recommendations more force, she added.
Truth Report On The Icelandic Banking Collapse
By GLG Expert Contributor | 13 April 2010
Yesterday, 12 April 2010, the Special Investigation Commission (SIC) selected by the Icelandic parliament issued an extensive report on the Icelandic Banking Collapse. The focus of the investigation is primarily on the three main banks, Glitnir, Kaupthing and Landsbanki. The report reflects that the legal and regulatory system in Iceland was not strong enough to cope with the growing financial industry. Deposits raised at foreign subsidiaries or branches are discussed in Chapter 18.
The roughly 2000 page report on the Icelandic Banking Collapse looks at several aspects that led to the collapse of the Icelandic financial system. The Commission was set up in December 2008 to analyze and investigate the collapse of the Icelandic banking system. The focus of the investigation is primarily on the three main banks, Glitnir, Kaupthing and Landsbanki.
It is evident that the legal and regulatory system in Iceland was not prepared to deal with the fast growth of the financial system in the years leading to the 2008 collapse. The FME, the Financial Supervisory Authority in Iceland, had insufficient financing and was unable to grow it´s expertise to handle the increasingly complex financial market. Furthermore, despite statements of otherwise, the Central Bank was unable to back up the banks when difficulties arose in 2008.
Interestingly, although there was a serious sign of weakness in early 2006 it seems that no one was willing to take control and responsibility for correcting the situation. Neither the Central Bank nor the Government took a leading role to strengthen the regulation of the banks. Although it needs to be mentioned that several people within the government and the Central bank did publish statements of warning, there was no significant action taken.
The report states that the Icelandic Government, Central Bank and the Financial Supervisory Authority showed great negligence when signs of difficulties appeared. Furthermore, the report illustrates how the majority owners of the banks received extensive loans— in some cases without sufficient collateral. It is thus clear, whether you look at the regulatory system or the banks themselves, that there were insufficient controls in Iceland during the financial boom.
Iceland Has Its Truth Report Into The Financial Crisis— Now What About One For The Rest Of Us?
By Rowena Mason | 12 April 2010
Protestors gather outside the residence of the Icelandic President earlier this year
This afternoon, 45 men and women will begin the long task of reciting an astonishing saga of manipulation, deception and the betrayal of thousands of people at a theatre in central Reykjavik. The unusual story— a 2,000 page political report— will take them four to five days to intone, taking in the events leading up to Iceland's far-reaching financial collapse that saw three banks go down in three days and its currency crippled. Some people have mocked the earnestness of this gesture, but 18 months after the collapse, it seems the Icelanders are taking the consequences of their crisis seriously and putting some effort into finding out what happened.
There are signs that this parliamentary investigation report— also known as the Truth Report or the Black Report— will not be a whitewash. Pall Hreinsson, the supreme court judge in charge of the report, has repeatedly delayed its publication, but warned several months ago: "No committee has ever had to bring to its nation such bad news". There are already formal criminal investigations into suspected market manipulation, fraud, excessive loans to related parties and tax evasion connected to the banks, Kaupthing, Glitnir and Landsbanki.
But we should care about this political report because it ought to provide some explanation of how billions and billions of pounds in British money was lost in the Icelandic banks and where it went to. UK councils, charities, universities and hospitals had deposited more than £1bn and are still waiting to be fully compensated. The Treasury is also owed around £3bn for the compensation it paid to customers of Icesave and Kaupthing Edge.
Then there are the lessons we can learn about the chronic failure of oversight in the UK that allowed these banks to operate in a regulatory black hole on our soil. The banks did not just lure British savers to deposit money. There were extensive and tangled corporate links between Reykjavik and London, where the Icelandic banks did two-thirds of their business financing high-profile property and retail ventures like Woolworths, House of Fraser, Debenhams, Oasis, Karen Millen and Iceland Foods.
And finally, the report should lift the lid on failures of corporate governance among shareholders, and examine the relationship between the banks and the billionaire Icelandic families behind them. These men— now vilified back home but steadfastly denying any wrongdoing in connection with the collapse— have since all set up home in London and seem to be blithely carrying on their business affairs from here many miles from the financial decimation of their native country. Jon Asgeir Johannesson, for example, the major shareholder of Glitnir Bank, is still chairman of Iceland Foods and a director of House of Fraser.
He lives is London and is reportedly considering setting up a chain of supermarkets over here. Back home in Iceland, he has been disqualified as a director over charges of false accounting, faces a tax evasion case and is being sued by the winding-up committee of Glitnir Bank over alleged misuse of his influence to gain personal loans. Bjorgolfur Thor Bjorgolfsson and Bjorgolfur Gudmundsson, the father-and-son team who were the largest owners of Landsbanki and Icesave, also have offices on Park Lane in London. Bjorgolfur Thor, until recently still estimated to be a billionaire by the Forbes rich list, lives in a house in Holland Park, worth an estimated £7m.
He has denied all responsibility for the Landsbanki's failure, insisting in a recent documentary: "I have nothing to say to [those who blame me for the crash]. I am not a criminal and never have been." The collapse of Landsbanki— sparking a bitter diplomatic row between Britain, Iceland and the Netherlands over E5bn of its debts— will nevertheless form a cornerstone of today's report.
And finally there's the Gudmundsson brothers, Agust and Lydur, who reportedly live in West London and have been battling to keep control of the Bakkavor food empire that employs 5,000 people in the UK. They were the major shareholders of Kaupthing— which has been under the closest scrutiny by Iceland's special investigator so far. The brothers borrowed billions in loans to their companies, and Lydur was vice-chairman of the bank.
Icelanders want to know who was responsible for the failure of oversight at their publicly-listed banks. They have already realised that some of the biggest shareholders and business associates were borrowing huge sums of money to finance their own investments. So will this report tell them anything new? Iris Erlingsdottir, at the Huffington Post, believes it's an important refusal to sweep unpleasant truths under the carpet.
An inquisition is not a painless way of recovering from a colossal economic collapse, and the usually stoical people of Iceland are understandably fatigued with the miserable details of the "kreppa". But in both Britain and Iceland, understanding how the damage was done in the first place is the only likely way to prevent this uniquely reckless situation from arising all over again. Like my colleague, Lawrie Holmes, I'm dismayed at the contrasting complacency in Britain— how everything appears to have gone back to normal. It's time to lay bare old City [[UK and Europe's version of Wall Street: normxxx]] practices.
Maybe the UK would need a similar wholesale collapse, rather than a near-catastrophe, for the City to engage in any similar introspection and hand-wringing. But I'd still like to see independent report, or series of reports, snooping into those darkest corners of the British banking system that are undeniably still in the shade and poorly understood by those politicians and taxpayers that stumped up the cash to bail them out. Iceland may have failed in many ways, but at the moment, its efforts at catharsis are an example to us all.
M O R E. . .
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