Iceland Facts

ianmr65

From Lex in the FT Just Published:

So long, and thanks for all the fish? Anyone questioning how the tiny nation of Iceland could support the heady expansion of leverage and risk-taking by its banks now has their answer. Landsbanki will be effectively nationalised, to be hammered together with Glitnir. Kaupthing, the de facto national champion, stays intact for the time being, with a small line of liquidity secured against FIH, the Danish bank it owns.
Having frightened everybody by warning of national bankruptcy, prime minister Geir Haarde has given himself a mandate to take some unpalatable actions. He should start by slashing interest rates. The current 16.5 per cent rate has already delivered a mild recession and will probably drive the economy deeper into the mire, thanks to rising bad debts and weakening capital inflows. Luring foreign investment through high rates worked, as long as international markets saw those rates as credible. The plunging swap and forex markets show that the opposite is now true. Iceland needs to sell itself as a cradle of enterprise and civilisation – not a yield play.
Any clawback of capital on the back of that rate cut could be offset if the government sacrifices its own balance sheet, providing cash to the indebted private sector so it can rein back activities without savagely reducing capital expenditure.

Doling out money to undeserving causes, of course, risks a Japan-style bridge to nowhere. And external help always comes with strings, especially in a crisis. To Mr Haarde’s evident dismay, Iceland’s notional Nordic support group is twiddling its thumbs. Instead, relief is coming from Russia, in the form of a €4bn loan. The irony is not lost on anyone, given how hard Iceland has tried to fight the impression it is kept afloat by the Kremlin. It is perhaps significant that Iceland used to serve as a strategic outpost for Nato, until a large military base was dismantled two years ago. For Mr Haarde, throwing his lot in with the Russians could be the least worst outcome.

ianmr65

From The landsbanki Website:

Landsbanki's Operations Continued Under Unchanged Management


Landsbanki Íslands announces that the Icelandic Financial Services Authority, the Fj!rm!laeftirlitið (FME) has decided to take over the powers invested in Landsbanki's shareholders meeting and Landsbanki's Board of Directors. The FME has appointed a receivership committee which has assumed the role of the Board of Directors with immediate effect.
Members of the receivership committee are Ársæll Hafsteinsson, Einar J!nsson, L!rents!nus Kristj!nsson, L!rus Finnbogason and Sigurj!n Geirsson.
The receivership committee have stated the following:

• The objective of the committee is to ensure the continued operations of the commercial banking operations of Landsbanki Íslands hf. in Iceland.
• A public notice to debtors will not be issued.
• Provisions of Icelandic insolvency laws do not apply to the operations of Landsbanki while the receivership committee is responsible for the matters of the bank. Ceasure of assets can not be made against Landsbanki during the same period.

By law, the action of appointing a receivership committee, can not have the effect of creating a default under any loan documents.
The receivership committee have asked Halld!r J. Kristj!nsson and Sigurj!n Þ. Árnason to continue their work as CEOs of Landsbanki Íslands hf. and be responsible for daily operations.
Landsbanki would like to stress that the bank has not been put into liquidation but is in receivership which gives it a temporary protection from payment of debts and obligations as they fall due. Work has already begun on the restructuring of the operations of Landsbanki. The receivership committee and Landsbanki's CEOs share the view that operations over the next days will be performed in a manner as close to business as usual with a view to protecting Landsbanki's assets in Iceland and abroad.

ianmr65

From the Icelandic Financial Supervisory Authority Website

Based on New Legislation, the Icelandic Financial Supervisory Authority (IFSA) Proceeds to take Control of Landsbanki to ensure Continued Commercial Bank Operations in Iceland

��

Domestic deposits are fully guaranteed, as declared by the Government

��

Landsbanki´s domestic branches, call centres, cash machines (ATMs) and internet operations will be open for business as usual

��

The objective of the IFSA´s action is to guarantee a functioning domestic banking system

Reykjav!k 07 October 2008 - The Icelandic Financial Supervisory Authority (IFSA) has under powers granted by the Icelandic Parliament

proceeded to take control of Landsbanki.
As declared by the Government, all domestic deposits are fully guaranteed. Landsbanki´s domestic branches, call centres, cash machines
(ATMs) and internet operations will be open for business as usual.
The action taken by the IFSA is a necessary first step in achieving the objectives of the Icelandic Government and Parliament to ensure the
continued orderly operation of domestic banking and the safety of domestic deposits.

ianmr65

From the icesave website

We are not currently processing any deposits or any withdrawal requests through our Icesave internet accounts. We apologise for any inconvenience this may cause our customers. We hope to provide you with more information shortly.

ianmr65

From the Landsbanki Guernsey website

Last night the Directors of Landsbanki Guernsey Limited made an application to the Royal Court for the Court to appoint an administrator under Guernsey’s company law. The Court has appointed Mr Rick Garrard of Deloitte and Touche LLP with a view to achieving the survival of the bank, and the whole or any part of its undertaking, as a going concern. The administration is on a temporary basis until 6 January 2009 or earlier order of the Court.

The application by the bank’s Directors follows the deepening problems of the Icelandic economy and, in particular, of the Icelandic banking system. Pending clarification of the uncertainty around liquidity and the ultimate recoverability of certain assets, the Directors have sought to ensure that all depositors of Landsbanki Guernsey Limited are treated equally and fairly. It is anticipated that the administration will help to ensure that all depositors in the bank, including those with deposits which can be withdrawn immediately and those who are locked in to fixed term deposits, have an opportunity of the return of their funds on the same basis.

The decision by the Directors was made after close consultation with the Guernsey Financial Services Commission, which supported the appointment of the administrator as being in the best interests of depositors.

Customers should contact the bank’s Customer Service Department on the routine number for further details.
Landsbanki Guernsey Limited
Q & As
1. Why did the Company go into Administration?
Landsbanki Guernsey Limited is a subsidiary of an Icelandic Bank. Due to the deepening problems of the Icelandic economy and in particular the banking system, the Board of Directors took the decision that it was in the best interests of depositors to put the Company into administration. Pending clarification of uncertainty around liquidity and the ultimate recoverability of certain assets, the Directors have sought to ensure that all depositors of Landsbanki Guernsey Limited are treated equally and fairly.
2. I have heard that the company has been put into Administration. What does this mean?
Control of the Company has been passed to the Administrator, Mr Rick Garrard of Deloitte and Touche LLP who will now make all decisions going forward. An Administrator is an independent third party appointed by the Court.
3. Why is Administration the best option for depositors?
The appointment of the Administrator will help ensure that there will be an orderly repayment to depositors seeking repayment and other creditors.
4. Will I receive back all my money and when?
At this stage we cannot say how much or when, but the Administrator will be working towards an orderly repayment to depositors seeking repayment, at the earliest opportunity.
5. I have funds in Euro (or US Dollars). Will my funds be treated any differently?
No all depositors will be treated equally regardless of the currency of the deposit.
6. Will I continue to receive interest on my money?
The Company will continue to calculate interest but the Administrator will decide whether and how much interest is paid out to depositors in due course.
7. Is my deposit covered by a Deposit Protection Scheme in Guernsey?
No, there is no such scheme in place at present.
8. Are my deposits covered by the Icelandic or UK Deposit Protection Schemes?
No, these schemes do not cover deposits of Landsbanki Guernsey Limited.
9. What will happen now? Will I be provided with more information?
The Administrator will determine the course of action and we anticipate that he will write to all depositors. The Administrator will also provide appropriate updates on the bank’s website.
10. My bond is due to mature shortly. What will happen – will it be repaid?
At maturity, the funds will be treated as if they were on an Easy Access Account. Please also refer to answers to Q4 and Q6 above.

The company is in administration and the affairs, business and property of the Company are being managed by the Administrator, Mr Rick Garrard of Deloitte and Touche LLP.
7 October 2008

ianmr65

From the Icelandic Prime Minister

Icelandic Prime Minister Geir Haarde addressed the nation as the country faced its worst economic crisis in modern times and introduced emergency legislation.
Following are excerpts from a text of the speech released by the Icelandic government.
Fellow Icelanders...
The entire world is experiencing a major economic crisis, which can be likened in its effects on the world’s banking systems, to an economic natural disaster...

The Icelandic banks have not escaped this banking crisis any more than other international banks and their position is now very serious. In recent years the growth and profitability of the Icelandic banks has been like something akin to a fairytale. Major opportunities arose when the access to capital on foreign money markets reached its peak, and the banks together with other Icelandic companies, exploited these opportunities to launch into new markets.
Over this period the Icelandic banks have grown hugely and their liabilities are now equivalent to many times Iceland’s GNP. Under all normal circumstances larger banks would be more likely to survive temporary difficulties, but the disaster which is now engulfing the world is of a different nature, and the size of the banks in comparison with the Icelandic economy is today their main weakness.
When the international economic crisis began just over a year ago with the collapse of the real estate market in the U.S. and chain reactions due to the so-called sub-prime loans, the position of Icelandic banks was considered to be strong, as they had not taken any significant part in such business. But the effects of this chain of events, have turned out to be more serious and wide ranging than anyone had expected.
In recent weeks the world’s financial system has been subject to devastating shocks... The effects have been that large international banks have stopped financing other banks and complete lack of confidence has developed in business between banks. This has caused the position of Icelandic banks to deteriorate very rapidly in the last few days...
The Government of Iceland, the Central Bank and the Financial Supervisory Authority have over the past days and weeks worked ceaselessly to find a solution to the enormous difficulties which threaten Icelandic banks, in good cooperation with the banks. Various parties have been involved in this work, for example the pension funds and representatives of the labour market. The Government has, for its part, aimed for the sale by Icelandic banks of foreign assets and a reduced presence abroad, so that the Icelandic state, so small in comparison with the Icelandic banks, would have the capacity to support them. We should bear in mind in this connection that the huge measures introduced by the U.S. authorities to rescue their banking system represent just under 5 percent of GNP. The total economic weight of the Icelandic banks, however, is many times the GNP of Iceland...
There is a very real danger, fellow citizens, that the Icelandic economy, in the worst case, could be sucked with the banks into the whirlpool and the result could be national bankruptcy....
The position has today altered completely and for the worse. Major credit lines to the banks have been closed and it was decided this morning to suspend trading with the banks and with the savings funds in the Icelandic Stock Exchange.
We now need responsible and measured reactions...
By making these changes in legislation we will adapt the banking system to Icelandic circumstances and rebuild the trust of foreign operators in Icelandic banking and financial operations. If the bill is passed today it can be assumed that the measures will come immediately into force.
I would like to diffuse all doubt that deposits by Icelanders and private pensions savings in all Icelandic banks are secure and the exchequer will ensure that such deposits are reimbursed to savers in full....The authorities will also ensure that the country’s businesses have access to capital and banking services to the maximum extent possible...
If there was ever a time when the Icelandic nation needed to stand together and show fortitude in the face of adversity, then this is the moment. I urge you all to guard that which is most important in the life of everyone of us, protect those values which will survive the storm now beginning....
Despite this major setback the future of the nation is both sure and bright. What is most important is that the foundations of our society and the economy are solid, even though the superstructure has given way in the face of the present disaster. We have natural resources, both on sea and land, which will ensure us a good living whatever happens. Our level of education and the human resources which we have here are no less enviable in the eyes of other nations than our natural resources.
By the same token, we will have the opportunity to rebuild the financial system. We have learnt from those mistakes which were made during that period of massive growth and that experience will prove to be valuable when put to the test. With a common effort and with that optimism which characterises the Icelandic people, we will emerge from these difficulties and make a new and energetic come-back...
The task of the authorities over the coming days is clear: to make sure that chaos does not ensue if the Icelandic banks become to some extent non-operational. For this the authorities have many options and they will be used. Both in politics and elsewhere it will be important to sheathe our swords. It is very important that we display both calm and consideration during the difficult days ahead...

Griffboy

Just heard on the news - Icesave are expected to DEFAULT.

Sideways

From the Pot Noodle website-

Three new flavours have been spotted in the Pot Noodle range, and three have mysteriously gone missing. The Sizzling Bacon, Mexican Fajita, and the Posh Noodle brothers have not been seen since last year. While the exotic Chicken Satay, the homely Lamb Hot Pot, and the traditional British Tikka Masala seem to have taken their place. And wait, what's that I smell... it's the Beef & Tomato

ianmr65

And some speculation from me...

The economic situation in Iceland is very very dire. In fact the three main banks were arguably in a (relatively) stronger position than the country. I’ll reserve my comments to the two main banks Landsbanki, and Kaupthing.
Landsbanki,
Once the Icelandic central bank; and which was ironically the strongest bank, has been nationalised to ‘save the nation’; enable Islanders to continue to bank day to day, and additionally put into recivership/administration to prevent it’s creditors from causing it to collapse. Also to take away the shareprice/liquidity headaches, and as the bank with the highest ratio of domestic buisness, it’s the one they really want to save.
Contrary to all the speculation the Board has not been sacked, and the bank continues to operate day to day, domestically. It is NOT in liquidation, under the Icelandic law, and therefore the bank (at least acording to icelandic law), is not in default. This means I think that the FCSC scheme for icesave will not kick in until or unless it, or icesave is declared so.
Icesave and Heritable bank have stopped withdrawels, and deposits to prevent a run. Landsbanki Gurnsey, has been put into administration, to ‘protect’ it’s depositors, from a run, in the absence of a compensation scheme. Also to I suspect to ring fence it’s assets & liabilities, (deposits mainly) and seek a return of it’s assets (loans it made to it’s parent)
I suspect that the Icesave, Heritable Bank, the other overseas operations and business will end up being sold, as a going concerns, to other non icelandic institutions, in a forced asset sale.
Kaupthing.
The news here is not so good, Kaupthing has 90% of it’s operations, overseas, and despite a loan of 500,000 euros’s I suspect that the Icelandic Government will let it fail, if it’s going to, or sell it, or break it up : being as the state will protect the deposits on what’s left of the the domestic accounts. (there’s been mass domestic withdrawels over to Landsbanki) - Also when combined with Landsbanki, its far to big for the government to take on, at least for now. Having said thisI doubt that Kaupthing will survive the next couple of weeks intact.

Polka_dot_4

Can anyone tell me (in the simplest language!), is this all down to Chinese whispers?

What I mean by that is, have the media created this mess and like lemmings, depositors have been withdrawing all the cash so that Icesave inevitably goes bust? Or is that too simplistic?

ianmr65

Polka_dot wrote: »

Can anyone tell me (in the simplest language!), is this all down to Chinese whispers?

What I mean by that is, have the media created this mess and like lemmings, depositors have been withdrawing all the cash so that Icesave inevitably goes bust? Or is that too simplistic?

No, not really.

The nationalisation and technical recivership of landsbanki, (icesaves parent) and glitner banks, was due to a combination of factors.

1) The desire of the Icelandic state to have a functioning banking system.
2) The inability, or unwilligness of the icelandic state to support it's banks.
3) The rapidly plunging icelandic currency.
4) The extreme difficulty that the banks, and the state had in obtaing operating cash, as all there lines of credit had dried up.
5) The credit freeze
6) The hedge fund short selling activties over the last year.

I really don't think that a depositers run has been the cause of this at all.

Landsbanki continues to operate, as a functioning bank - whilst technically in recivership - i don't see how Icesave in and of itself can be declared 'insolvent'

The UK goverment should step in now an take over the assets, and put it into administration.

The administartor should then seek to recover Isesave's assets, from the icelandic state, and/or sell icesave to another institution, something that the Icelanders seem unwilling to do.

This is pretty much what has happened with Landsbanki Gurnsey.

At the risk of reapeting myself. Kaupthing is high risk, if you have funds there i would withdraw them asap.