Friday, 10 October 2008

ICELAND MELTS

No doubt Justin Allen who used to have a heavy interest in EU politics will be interested in what is happening in Iceland.

The Sweeper says with the cash leaving the country as the carry trades unwind and the Japanese and Chinese take their funds home to safety against yield and interest, it could be an interesting time for the government as a lot of the carry trade money is in Govt bonds over 2 and 3 years.


This from the Guardian

The financial meltdown in Iceland continued this morning when Kaupthing became the third bank to fall into the hands of the authorities.Kaupthing was forced to turn to the country's financial watchdog after the evaporation of confidence in the Icelandic economy left it unable to keep operating as a private company.The collapse of Iceland's biggest bank comes just days after Glitnir and Landsbanki were also nationalised. Virtually the entire Icelandic banking sector is now under state control.The board of Kaupthing has resigned, handing control of the bank to Iceland's Financial Supervisory Authority. The regulator has said that branches will be open for business, with domestic deposits fully guaranteed.Iceland's whole economy appears on the verge of breakdown, with debts 12 times larger than its GDP. Its stock exchange was today shut down until Monday, due to the "unusual market conditions". Three days ago trading in financial firms was stopped.But Sigurdur Einarsson, executive chairman of Kaupthing, claimed that the company had been performing well just two weeks ago, before the first reports of problems at Glitnir sparked panic."Credit rating agencies downgraded their credit ratings for the Icelandic state and the Icelandic banks, and foreign investors unleashed a landslide in which they tried to get rid of Icelandic assets, regardless of how solid they were," he said.Einarsson also appeared to lay some of the blame on the UK, claiming that the panic over Landsbanki's Icesave deposit scheme had led to a flood of funds out of Kaupthing Edge, his bank's UK offering.Kaupthing's British operations were placed in administration yesterday by the UK's Financial Services Authority. Its £3bn of deposits were swiftly sold to ING, leaving hundreds of staff fearing for their future.The crisis at Kaupthing has also forced property tycoon Robert Tchenguiz to sell major stakes in J Sainsbury and Mitchells & Butlers, Britain's largest pub operator, leaving the billionaire nursing losses estimated to exceed to more than £800m.
Yesterday Gordon Brown said that the UK government will compensate individual savers with Icesave, and vowed to take legal action against Iceland to recoup any losses. Unlike Icesave, Kaupthing's UK accounts were already covered by Britain's banking guarantee.But up to 20 UK councils who banked with Icesave could lose millions of pounds because wholesale deposits are not protected.

4 comments:

alex masterley said...

I wonder who will turn up to buy Iceland when it goes up for mortagee sale.

Anonymous said...

Iceland is not part of the EU. And here we were thinking the "blonde" part was just a nom de plume.

bustedblonde said...

uk is

moneymanagement said...

We have been blind about Europe's problems they are far larger than that of US http://moneymanagement.wordpress.com/2008/10/10/financial-crisis-taking-nations-under/