Report reveals excess loans
(16 April 2010 – Global) Iceland’s banks dished out ‘excessive’ loans to a handful of powerful billionaires, according to a damning parliamentary inquiry into the events that lead to the nation’s banking system collapse.
The investigation revealed numerous potential cases of illegality, including possible share price manipulation and exaggeration of asset values within the island nation’s three banks, Kaupthing, Glitnir and Landsbanki.
The report also indicated that the banks were largely controlled by five investors who had ‘unlimited influence’, and accuses the bank’s owners of pressuring management into awarding loans to their companies and friendly clients, with little or no collateral.
The UK lost £8 billion (A$13 billion) in the October 2008 collapse and the British Treasury repaid 300,000 of its citizens lost ‘Icesave’ account savings, to the tune of £2.3 billion, when Landsbanki failed.
The report revealed that companies connected to Mr Gudmundsson, whose family owned 40 percent of the bank, had borrowed almost as much as the entire £2.3 billion Icesave debt to finance their own private investments. The loans amounted to 140 percent of the bank’s equity.
Sigurjon Arnason, ex-chief executive of Landsbanki, said, and was subsequently published in the report, that resisting the requests from the owners of the banks would have equalled quitting from his position.
The report also criticises Kaupthing’s loans to London-based property entrepreneur Mr Tchenguiz, whose companies received £1.4 billion.
The report states that Kaupthing’s loans to Robert Tchenguiz and companies were in excess of that which could reasonably be considered a commercial assumption. Rules on large exposures were not followed.
The report adds that it is ‘difficult to see how loans of this magnitude were taken with the bank’s interests in mind’.
The report also indicated that the banks were largely controlled by five investors who had ‘unlimited influence’, and accuses the bank’s owners of pressuring management into awarding loans to their companies and friendly clients, with little or no collateral.
The UK lost £8 billion (A$13 billion) in the October 2008 collapse and the British Treasury repaid 300,000 of its citizens lost ‘Icesave’ account savings, to the tune of £2.3 billion, when Landsbanki failed.
The report revealed that companies connected to Mr Gudmundsson, whose family owned 40 percent of the bank, had borrowed almost as much as the entire £2.3 billion Icesave debt to finance their own private investments. The loans amounted to 140 percent of the bank’s equity.
Sigurjon Arnason, ex-chief executive of Landsbanki, said, and was subsequently published in the report, that resisting the requests from the owners of the banks would have equalled quitting from his position.
The report also criticises Kaupthing’s loans to London-based property entrepreneur Mr Tchenguiz, whose companies received £1.4 billion.
The report states that Kaupthing’s loans to Robert Tchenguiz and companies were in excess of that which could reasonably be considered a commercial assumption. Rules on large exposures were not followed.
The report adds that it is ‘difficult to see how loans of this magnitude were taken with the bank’s interests in mind’.
Subscribe