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UK News

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Iceland at risk of isolation over failure to repay loans

Talks between Iceland and the Treasury over the repayment of a $5 billion (£3.3 billion) bailout loan hit a stalemate yesterday after the Government in Reykjavik insisted that the proposed interest bill was too onerous.

While Johanna Sigurdardottir, the Icelandic Prime Minister, said that she hoped a deal was still possible in the short term, Britain and the Netherlands, which are owed the money, are dismayed that a revised interest repayment schedule has been rejected.

If the stalemate continues, it is expected that Icelanders will effectively vote to reject repaying the money in a referendum scheduled for March 6.  27-Feb-10.

British, Dutch propose new Icesave deal

REUTERS: The Netherlands and Britain are proposing a new debt repayment deal with Iceland which may save the island nation holding a politically risky referendum on the Icesave crisis, a source said Friday.

Speaking on condition of anonymity, the source familiar with the situation said the offer's main feature is a floating interest rate designed to ease Iceland's burden as it repays $5 billion (3.24 billion pounds) to the two European Union countries.

The offer maintains other elements of a deal the three sides agreed in October, including full debt repayment and a 7-year grace period, the source told Reuters.

The source described it as "an offer they can't refuse," specifically designed to address the Icelandic government's primary concerns about the existing arrangement while guaranteeing a reasonable rate of interest for its creditors. Yahoo! UK & Ireland News website - 19-Feb-10.

Thinking the unthinkable

The unthinkable had happened on both sides of the Atlantic. One of Wall Street’s biggest banks had been allowed to fail and, in Britain, the Treasury had nationalised Bradford & Bingley to prevent a run across the financial sector.

Against this backdrop, Alistair Darling and his Treasury officials were desperate to identify which bank might fail next. And so tiny Iceland became the new focus of the Chancellor, the Bank of England and an array of civil servants in Whitehall.

At stake was £3 billion of British investors’ money that had been sunk into the overheated and teetering Icelandic economy. Far from an esoteric investment target of City professionals, Mr Darling was faced with the prospect of local authority pension funds, charities and NHS retirement schemes bearing substantial losses. . .

Only weeks ago, Paul Tucker, the Deputy Governor of the Bank of England, pointed out to MPs the utmost importance of having a state-funded deposit guarantee scheme that paid out within weeks of a lender’s failure.  19-Feb-10.

Icelandic bailout exposed rift at the Treasury

'Sir Nicholas Macpherson appears to have put his opposition to a loan for Iceland on record in a letter to the Chancellor'

Lehman Brothers had collapsed three weeks earlier, but as the world banking system teetered on the brink of collapse, Alistair Darling and his chief civil servant were engaging in a heated dispute about whether to bail out an Icelandic savings bank.

Letters obtained by the Liberal Democrats and shown to The Times offer extraordinary details of the battle between the Chancellor and Sir Nicholas Macpherson, the Permanent Secretary to the Treasury, over using taxpayer money to extend a £3 billion loan to Iceland in October 2008.

While Sir Nicholas expressed his deep concerns about underwriting the deposits of Icesave, Landsbanki’s online savings business, and warned that Britain might not be repaid, Mr Darling overruled both the civil servant and the Bank of England, ordering the Government to extend a multibillion-pound loan to Reykjavik. 19-Feb-10.

As Iceland resists paying our billions, let’s not forget just who is to blame

Icelandic bankers and British ‘rate tarts’ caused the Icesave folly, yet the two nations’ taxpayers will be footing the bill.

Iceland was a nation that took huge pride in the fact its government used to owe nothing. The phrases “net debt-free” and “debtless” would pepper the briefings of its senior financial officials before the crisis. But then came the crazed ingenuity of Iceland’s bankers in funding themselves through thrifty British and Dutch internet savers, rather than sophisticated international financiers. And so from the likes of Icesave arose a giant Icedebt. . .

The path to this point was novel but predictable. The causes of the crisis have lessons that should be heeded well beyond this northern Atlantic rock. Business and Marketing News, Funds, Finance and Stock Market website - 18-Feb-10.


Icesave talks to start in London on Monday -sources

Iceland will meet Britain and the Netherlands in London on Monday to present a new proposal for repaying more than $5 billion (3.2 billion pounds) lost in Icelandic bank accounts, sources familiar with the plans said. . .

A Icelandic government source has said the new proposal involves quicker repayment of the country's debt from a sale of the assets of failed bank Landsbanki.

A spokesman at Iceland's finance ministry said the government hoped to present the new proposal "very soon."

One creditor nation source said he "could not rule out" that the talks would stretch more than one day.

The source also said the talks were not likely to be at the highest levels, particularly as European Union finance ministers are meeting early this week to focus on the public debt crisis in Greece.  IBTimes website - 15-Feb-10.

Landsbanki under restriction due to FSA regulations before terrorist laws applied

A letter sent from the UK FSA, Financial Services Authority, to Landsbanki on the 3rd October 2008 established that assets were frozen five days before the British government introduced the terrorist law.

According to sources from a local Icelandic newspaper (Morgunbladid), the letter referred to the legislation of financial services and markets from the year 2000. GENPRU, the rules of supervision, said that the FSA had decided to put Landsbanki under certain conditions, including an unbound account in the UK containing no less than 10 percent of the overall deposit amount held on permanent deposit in British pounds.

These accounts would then have to increase up to no less than 20 percent of the funds before 6th October. During this time, Lanksbanki claimed it was almost impossible to provide such funds under extremely short notice. The FSA also stated that the account must be held at the British central bank, the Bank of England, or at a different account approved by the FSA. [Ends]  16-Dec-09.

LGA issues legal threat over Icelandic investments

Councils have threatened to legally challenge a decision not to make local authorities priority creditors on the recovery of investments in a failed Icelandic bank.

The Winding Up Board of Glitnir Bank, in which local authorities have deposits of £217m, has opted to specify the claims as ‘general unsecured’ rather than ‘priority’ under the Icelandic Bankruptcy Act.

Without priority status, authorities would be likely to get in the region of 25-30% of their deposits back rather than 100%. . . .

Glitnir’s decision is at odds with that of Landsbanki, where council deposits of £414m were last month recognised as priority  claims.   Local Government Chronicle website - 15-Dec-09.

SFO to launch probe into Icelandic banks

The Serious Fraud Office is poised to announce an investigation into collapsed Icelandic banks that operated in the UK. A probe, which will examine Kaupthing, Glitnir and Landsbanki, could be announced within days. Sources at the SFO said investigators were particularly interested in loans made to a number of "high-profile individuals".

Allegations of fraud, embezzlement and market manipulation have been under investigation in Iceland since February. But the SFO has separately been gathering intelligence on the Icelandic banking sector and its UK operations.  13-Dec-09.

SFO to probe collapse of Icelandic bank

Intelligence finds and plight of UK savers prompt prosecutor to investigate possible criminal activity in failure of Kaupthing.

The Serious Fraud Office is preparing to launch a formal investigation into Kaupthing, the failed Icelandic bank, amid suspicions that it may have been involved in criminal activity.

According to sources, the SFO is expected to announce this week that following four months of intelligence gathering it is to launch an official inquiry. The prosecutor is expected to appoint one of its most experienced investigators to take charge.  12-Dec-09.

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