On Sky Now... Iceland to refuse to pay UK 2.3 Billion to savers

tomterm8

Generali wrote: »

AIUI, the course of events was like this.

- Iceland agreed to guarantee the first £50,000 of bank deposits for UK branches of Icelandic banks.
- Gordon Brown decided that instead, the deposits would be 100% guaranteed
- When the banks went bust, Gordon Brown tried to insist that the Icelandic Government cover his guarantee. When they refused, he had Iceland delcared a 'terrorist country'*, froze their assets and made it a crime punishable by imprisonment for any Briton to do business with an Icelandic financial institution.

...

AIUI

-Iceland areed to guarantee the first £15k of deposits, the british government agreed to guarantee the rest up to the british limit ( standard european economic area rules)
-Iceland gets into trouble, asks for currency swaps like UK, many other eurozone governments and et had at the time
- UK government is widely reported to have used its relationship with US to persuade them not to do so.
-Iceland goes to britain tries to make arrangements over banks for several months prior to the collapse without success
-Weekend of the bank collapse, the british government gets panicky, offers the icelandic government a deal: if the icelandic government puts up roughly £300 million of UK bank deposits money, the UK government will cover the rest.
- this is far less commitment than the Icelandic government had originally agreed to under the original bank guarantee scheme.
- Prior to all this, the US had stuffed the british government over Lehman brothers by withdrawing all money from the UK subsidieries.
- Icelandic government refuses the offer of the british government.#
- Icelandic government changes Icelandic laws, to prioritise Icelandic citizens, to guarantee to repay Icelandic citizens back all their deposits, and publicly refuses to guarantee foreign depositors will get back any money at all.
- British government really !!!!ed off, uses a provision of UK law not intended to deal with terrorism, which gave it the power to freeze Icelandic assets temporarily to prevent Iceland acting like the US had done a few months before.
- These capital restrictions were very quickly removed on icelandic citizens and businesses, and only remained against the assets of the bankrupt banks.

This is the point: the UK government gave the Icelandic government an out, which was significantly better than repaying the debt as provided for under European laws, prior to the disaster. Instead, the Icelandic government basically said '!!!! you', and left Brown with little choice.

dopester

Really2 wrote: »

I find the story an odd one and one that is supported by people who often think people should foot their full responsibility.

In the end of the day this money went in to iceland and never came out, if you think the savers should foot the bill so be it.

But I do find a certain amount of irony in that the way this as happened is no different to any other insolvancy, the money was lent, spent then they went bust.
but this time the simpathy is with the borrower.

TBH I feel for the average icelander as it is a big debt to them, but they can't say they protested about the money coming in, why should a lender not want it's debt repaying.

Rinoa wrote: »

I also have sympathy for Icelandic citizens, it's not their fault their government was incompetent.

StevieJ wrote: »

To us yes (divided by 61 million), to Iceland no (divided by 400k).

It should be interesting how people in the UK take to servicing UK debt ... if and when creditors and global markets begin to call the tune for the UK.

In the future it wouldn't surprise me in the least if another country - encouraged by their market backers - use their own Anti-Terrorism Acts against the UK.

For instance, if Labour/the UK tries to wriggle from our debt burden or seeks to pay creditors back in cheap money due to attempting ever more QE against the deflationary forces.

baby_boomer

Democracy in action.

Dontcha just luv it ?

Or is the rule of law preferable?

Degenerate

kabayiri wrote: »

What disturbed me about this episode was the way the UK government exercised terrorist legislation to bring the Icelanders into line.

This is an example of function creep.

This is from the same government who promised that data collected by us for the purpose of ID cards would not be used for purposes beyond it's original remit.

Yeah, right...

It's not function creep, it wasn't ever intended to be an exclusively anti-terror bill, it was a roll-up of general powers, including asset freezing/seizure that can be invoked in the national interest under various circumstances. Unfortunately it was badly titled, allowing the Icelandic Government to use it for propaganda purposes as a diversionary tactic.

Degenerate

Generali wrote: »

AIUI, the course of events was like this.

[Totally wrong account of events snipped]

Well you don't understand it very well then.

JasonLVC

http://news.bbc.co.uk/1/hi/business/8444829.stm

Apparently, Iceland will be repaying their debts after all....although they are still vetoing the agreement

Generali

Degenerate wrote: »

[Totally wrong account of events snipped]

Well you don't understand it very well then.

We all make mistakes.

lemonjelly

Generali wrote: »

We all make mistakes.

Unfortunately, we only tend to notice other people's though...

Mr_Mumble

There is disagreement amongst the FT staff about the whether Iceland should pay the money back. Martin Wolf makes the same analogy I did a few pages back about HSBC (it's spookily similar :snow_grin) :

“This is not about cutting a running deficit, which is, indeed, unavoidable. It is about forcing innocent people to assume gigantic liabilities for which they have no legal or moral responsibility. How would UK citizens feel if they were forced to assume a debt of £400bn because of HSBC’s failure to meet deposit insurance liabilities in Asia? Let the UK take the bank’s assets and leave it at that.”

There is a real problem asking Iceland to pay back so much money, with only 400,000 residents and many emigrating it could be in Iceland's own self-interest to default - Argentina and Russia were only pariah states for around a decade. You'd think some arrangement with regards future cashflows or profit sharing with regards fishing, mining, minerals or energy supplies could be reached tho'.

The dumbest aspect of the whole saga is that a similar scenario could happen again at any time. Some dodgy bank in a far-flung European outpost could start offering the highest interest rates in Britain, taking advantage of the moral hazard afforded by the FSCS, and the FSA insists it has no power to stop such action thanks to EEA rules.

CDOs, SIVs, MBSs, Synthetic ABSs... its understandable these could perplex regulators without dozens of rocket scientists on tap but the UK authorities don't even have the balls to deal with saving deposit accounts. The FSA has 2,800 staff, why? No wonder the Tories want it scrapped!

Thrugelmir

Mr_Mumble wrote: »

There is disagreement amongst the FT staff about the whether Iceland should pay the money back. Martin Wolf makes the same analogy I did a few pages back about HSBC (it's spookily similar :snow_grin) :
There is a real problem asking Iceland to pay back so much money, with only 400,000 residents and many emigrating it could be in Iceland's own self-interest to default - Argentina and Russia were only pariah states for around a decade. You'd think some arrangement with regards future cashflows or profit sharing with regards fishing, mining, minerals or energy supplies could be reached tho'.

The dumbest aspect of the whole saga is that a similar scenario could happen again at any time. Some dodgy bank in a far-flung European outpost could start offering the highest interest rates in Britain, taking advantage of the moral hazard afforded by the FSCS, and the FSA insists it has no power to stop such action thanks to EEA rules.

CDOs, SIVs, MBSs, Synthetic ABSs... its understandable these could perplex regulators without dozens of rocket scientists on tap but the UK authorities don't even have the balls to deal with saving deposit accounts. The FSA has 2,800 staff, why? No wonder the Tories want it scrapped!

But Iceland is happy enough to seek help from the IMF. Like people, country's need to take responsibility. As Iceland itself benefited from the boom in financial services and tax revenues generated.