Glitnir and Landsbanki were breaching banking regulations by the time 64 British local authorities deposited most of their £800m into the Icelandic lenders, according to two secret reports on the collapse.
Documents commissioned by Iceland’s special prosecutor and seen by The Sunday Telegraph suggest Glitnir was operating below the legal limits of its capital adequacy ratios by the end of 2007. A second report for the prosecutor’s office claims Landsbanki also breached the conditions of its banking licence at the end of 2007.. . .
Both reports are critical of Landsbanki’s and Glitnir’s auditors, the Icelandic branch of PricewaterhouseCoopers (PwC), arguing that it should have spotted mis-statements.
Landsbanki Guernsey depositors fighting for the return of their entire savings are now facing another battle - against the island's chief minister, who is accused of misleading the Guernsey States Assembly over the proportion of their funds depositors are likely to see returned.
Depositors are considering making a formal complaint to the States Members Conduct Panel against Chief Minister Lyndon Trott, who twice stated they could recoup in excess of 100 per cent of their savings - a remark referred to by administrators Deloitte as "speculation."
Deloitte have long estimated that the best depositors should hope for is a recovery of 81-90p in the pound over the next few years. A higher return is, in theory, possible if legal action in Iceland proves successful although Deloitte "remain cautious about the prospects of success." 09-Dec-10.
Iceland's anti-corruption expert, Eva Joly, investigating "suspicions of criminal actions" at Kaupthing, Glitnir and Landsbanki, has threatened to resign if the inquiry continues to be dogged by lack of political will.
Eva Joly, who advised on France's Elf Aquitaine scandal and the UK's BAE inquiry, said the scale of potential corruption at the Icelandic banks should be treated as one of the important financial investigations Europe has ever known. . . .
In a television interview, she criticised a lack of political will in the Icelandic government to bring anyone who has committed economic crimes to justice.
Iceland's special investigation team is now working on more than 30 potential cases relating to the banking system, after Kaupthing, Glitnir and Landsbanki collapsed and were taken over by the Icelandic government last October. 02-Dec-10.
Landsbanki, the Icelandic bank which owned Icesave, bought more than £220m of its own shares in the days leading up to its collapse, creditors have been told.
The Resolution and Winding Up Committee told a meeting of creditors in Iceland that the purchases were being "investigated".
The revelation will prove embarrassing for London-based advisers of Landsbanki . .
Creditors were also told that the committee was suing former executives of the bank who authorised £200m of loans to "related parties". 02-Dec-10.
A petition for help from the British Government signed by over 400 depositors who lost money in the collapse of Landsbanki Guernsey has been rejected.
Because the Crown Dependency did not have a deposit protection scheme, savers were not included in the UK Government's bail-out, and are still fighting for their return of their money.
The petition, which was submitted by campaign group The Landsbanki Guernsey Depositors Action Group (LGDAG), contained 433 signatures and implored the UK government "to support British savers in Landsbanki Guernsey in seeking the full and prompt return of their savings.”
The Government response however declared that because Landsbanki Guernsey was not a subsidiary of a UK bank but an Icelandic company, “regulatory oversight of Landsbanki Guernsey Limited is the responsibility of the Guernsey Financial Supervision Commission and therefore arrangements for depositors in Landsbanki Guernsey are a matter for the Government of Guernsey.” 16-Nov-10.
In the wake of the Landsbanki Guernsey bank collapse and the loss of depositor savings, confidence in Guernsey as a financial safe haven continues to be questioned as its government equivocates over compensation plans.
The States of Guernsey Treasurer Charles Parkinson said that if another bank collapsed tomorrow, the taxpayer would have to foot the bill until the money could be recovered from the industry. . . .As a consequence of the 2008 Landsbanki collapse approximately £12 million is still owed to the 1,600 depositors, a third of whom are expatriates.
The island dropped four places in this year's Global Financial Centre Index, while the value of Guernsey deposits for the three month period to the end of June this year fell by nearly £2 billion. 03-Nov-10.
As Jersey and Guernsey emerge tentatively from the global financial crisis, the islands’ financial institutions and professionals are increasingly targeting fast-emerging economies, notably China and India, as a source of new business.. . .
However, the Guernsey scheme was introduced too late to help 1,600 customers of Landsbanki Guernsey, which fell victim to the Icelandic banking crisis two years ago. . .
Disgruntled Landsbanki customers who formed an action group remain highly critical of the way the Guernsey authorities handled the situation, and want depositors to be paid in full.
Bank deposits in Guernsey have fallen from £187 billion in 2008 to £117 billion at the end of June this year, while Jersey has seen a fall from £200 billion to £167 billion, although the figures for June this year for Jersey show deposits rising again.
The Landsbanki collapse accounted for only a small proportion of this fall, but other banks have since withdrawn. 07-10-10.
A special investigation committee, known popularly as the Truth Commission, recommended that Geir Haarde, the former prime minister, stand trial, along with Björgvin Sigurdsson, the former minister of commerce, and Árni Mathiesen, the former minister of finance.
It found during an 18-month inquiry that the three men showed recklessness in their handling of Iceland's financial crisis, which brought down its three banks and crippled the currency in October 2008 . . .
Johanna Sigurdardottir, Iceland's left-leaning Prime Minister, called the report's conclusions "a serious accusation against our political system, our politicians, the parliament, stock market". 12-Sep-10.
Expat depositors battling for the return of their entire savings from Landsbanki Guernsey have learned they face hefty legal costs if they wish to continue the fight.
At a settlement meeting with the Icelandic Winding Up Board (WUB) on August 13th, depositors' claims for "priority status" were rejected and deferred to the district court of Reykjavik where legal representation could run into the thousands.
In contrast, UK and Dutch depositors with Landsbanki subsidiaries, represented by their respective governments, were awarded priority status and refunded in full within weeks of the bank's collapse in October 2008. 24-Aug-10.
The former chief executive of Singer & Friedlander is preparing to take the Financial Services Authority to judicial review over its refusal to hold an inquiry into the failure of the Icelandic banks. Tony Shearer, who led the 100-year-old City investment bank before it was taken over by Kaupthing in 2005, accuses the regulator of not doing enough to prevent the crash that cost the British taxpayer £8bn and left hundreds of UK savers out of pocket. . .
Mr Shearer has written to Gordon Brown, the Prime Minister, Lord Myners, the City minister, and Lord Turner, chairman of the FSA, asking for a formal inquiry into why all the warning signs about the instability and potential criminal activity at Kaupthing were ignored. . .
However, the FSA has washed its hands of responsibility for the bank's activities in London before the crash, claiming that it was powerless to act when the home regulator in Iceland was meant to be monitoring Kaupthing.
Lord Turner has told Mr Shearer that he sees no need for a public inquiry, adding "there is nothing further to be gained from further exchanges on the subject of Icelandic banks and our past regulation of banks generally".
Hundreds of UK-based savers with Kaupthing in the Isle of Man and Landsbanki in Guernsey have still not been fully compensated for their losses, while dozens of British councils, hospitals and charities are also waiting in line with commercial creditors.
"The papers have reported that you have called for the FSA to carry out a special investigation into Goldman Sachs," Mr Shearer wrote to Mr Brown. "Will you now call for the FSA to carry out and publish such an investigation into the activities in the UK of Kaupthing and the other Icelandic banks? 09-May-10.