5 COMPOSICIÓN Y ANÁLISIS DE LAS DIMENSIONES
5.5 CONSIDERACIONES FINALES DEL CAPÍTULO
The deposits in Landsbanki’s Icesave accounts in the UK reached their highest point at the beginning of 2008 when they totalled £ 4.9 billion, cf. further discussion in Chapters 7 and 18.2. It is evident that in discussions with the Board of Governors of the CBI at the beginning of February 2008, Landsbanki’s CEOs had themselves presented a proposal to transfer the Icesave deposit accounts from the bank’s branch to a subsidiary in London. It should be mentioned that Landsbanki obtained a legal opinion around the same time on what other means were available in these matters. The conclu- sion there was i.a. that it would probably take six months to complete the transfer. It must be assumed that the representatives of Landsbanki subse- quently knew what options were available in these matters and how long the process would take. On 3 March 2008, the chairman of the Board of Governors of the CBI met with Mr. Mervyn King, Governor of the Bank of England. There they discussed i.a. Landsbanki’s raising of deposits in the UK and the concerns this raised within the Bank of England. Three days later the chairman of the Board of Governors of the CBI had a meeting with the Prime Minister where he informed the latter of the Bank of England’s con- cerns. Following this meeting, the Prime Minister met one of the CEOs of Landsbanki on three occasions where they i.a. discussed the Icesave accounts and the financing of Landsbanki.
In the comments from the Minister of Business Affairs at the time, submit- ted in accordance with Article 13 of Act No. 142/2008 to the Commission, it was revealed that in February 2008 the minister had, with the aim of reacting to unrest of the financial markets, appointed a highly experienced individual as the new Chairman of the Board of Directors of the FME. The new chair- man considered the transfer of the bank branches abroad to subsidiaries to be the main task ahead for the FME. This was discussed by the officials, i.a. in communications relating to their duties. From that point on and until August 2008, the minister had assumed that the FME and Landsbanki were working together on the matter.
Regarding to what extent the concerns, that the Icelandic authori- ties had when it came to the raising of deposits by Landsbanki in the UK, were noted and discussed in the Icelandic system of governance during the period preceding the collapse of the banks, it is unequivocally demonstrated by the Commission’s data and information that the issues were repeatedly discussed within the government consultative group. This took place e.g. in the consultative group meeting held on 25 March 2008 and in the follow- ing meetings, including the group’s meeting on 1 April. On that particular
day the Chairman of the Board of Governors of the CBI met with the Prime Minister and the Minister for Foreign Affairs, as mentioned earlier, where they discussed i.a. issues relating to Icesave and the large outflow of deposits from the accounts which significantly strained Landsbanki. It is appropriate to note that in the comments from the Minister of Business Affairs at the time, submitted in accordance with Article 13 of Act No. 142/2008 to the Commission, it is revealed that the minister for his part received information regarding these issues from the representative of the ministry in the consulta- tive group and did not think they constituted a reason to interference in the work or the plan concerning the transfer of the deposits that was ongoing in collaboration with the FSA.
The investigation of the SIC did not reveal any documents, data or une- quivocal confirmation in its hearings that would clarify whether and to what extent the Icelandic authorities pushed Landsbanki towards this solution. It has not been demonstrated that the three ministers who had representa- tives in the consultative group, called for, or requested that the CBI or the FME call for, a plan with a schedule from Landsbanki on the transfer of the Icesave accounts to a subsidiary and information on whether something was to prevent compliance with the FSA’s wishes of transferring the accounts to a subsidiary. Official information on the subject must have constituted an important element in the decision making process on whether there was occasion for intervention on behalf of the Icelandic government to facilitate the transfer. In this process there is nothing to indicate that the government and the Icelandic surveillance authorities coordinated their response with special actions or plans to facilitate the transfer of the Icesave accounts. No decision was made either as to which party or parties within the Icelandic administration should lead the effort to push for a solution to the matter, nor were particular employees entrusted with working on the matter specifically. In fact, in the hearings before the SIC, it was repeatedly stated in answers by ministers and administrators of the ministries, that the FME and the CBI did not consider it the responsibility of their respective bodies to push for the transfer or lead the effort.
On 2 July 2008, the UK FSA strongly reiterated its emphasis to transfer Landsbanki deposits in the UK from the bank’s local branch to its subsidi- ary. In a correspondence to Landsbanki on 15 August 2008, warnings were raised regarding the possibility of the FSA exercising its power with respect to deposit taking at the UK branch. It has been disclosed that the Chairman of the Board of Governors of the CBI briefed the Prime Minister on the let- ter immediately the following day. If it was at all the policy and will of the Icelandic authorities that the Icesave accounts be transferred as soon as pos- sible from Landsbanki’s branch in London to a subsidiary there, it should have been clear to the Prime Minister and the administrators of the CBI and the FME upon receiving the letter that regardless of Landsbanki’s expectations of reaching an agreement with the FSA, the direct involvement of the Icelandic authorities in the matter was needed. That approach had to focus on deter- mining whether and how the Icelandic authorities could through a financial facility or by other means facilitate the transfer of the accounts. Significant interests relating to the preservation of financial stability in Iceland, and therefore public interest, were at stake. It should also be mentioned that in meetings of the consultative group, both on 20 August and 4 September
2008, the view was advanced that the directors of Landsbanki did not fully grasp the situation.
It should be kept in mind that the information gathered by the SIC indi- cates that the motive of Landsbanki in bringing the matter to the attention of the FSA was mainly to avoid negative media coverage on the standing of the Icelandic banks and the Icesave accounts, which would have reduced deposits to the accounts. The same could be seen happening when the negative discus- sion in Britain quieted down temporarily during the spring months of 2008, there was a certain priority shift in the bank regarding the conclusion of this matter. The bank thus notified the FSA in a letter that the plan to transfer the deposits would fall within the bank’s medium or longer term strategy, and that the transfer would have to be carefully thought out before any decisions were made. It cannot be seen that Landsbanki notified the Icelandic authori- ties of this priority shift despite extensive communication regarding this matter up to that point. The Governors of the CBI believed that work was progressing as planned on the matter up until July 2008. .
It is be pointed out that the interests of Landsbanki and the interests of Iceland regarding such a transfer were thus in their nature different. The bank was first and foremost defending its private interests, while the Icelandic State was duty bound to defend the general interest. Icelandic Authorities could therefore not hand this important issue exclusively over to Landsbanki and trust that the bank would pursue the matter. Regardless of the opinion held by the CEOs of Landsbanki with regard to whether and when the Icesave accounts should be transferred from the London branch to a subsidiary of the bank and their legal authority to determine the arrangement of the bank’s operations, it was the position of both the UK and the Icelandic authorities that it was important, both for the public interest and the interests of deposi- tors, that the aforementioned transfer to a subsidiary would take place. This position of the authorities had emerged in the first half of 2008. It needed to be pursued ardently. This is discussed in more detail in Chapter 18.2.5.
Earlier in the summer 2008, Landsbanki established Icesave accounts in their Dutch branch, which as a result increased the commitments of the Icelandic Guarantee Fund. The cooperation between Landsbanki and the FSA during the summer 2008, following the FSA’s growing pressure, broke down as Landsbanki considered that it was not being treated fairly. On 5 August 2008, Landsbanki sought assistance from the CBI with the transfer of the Icesave accounts from the branch to the bank’s subsidiary. Later that same month the directors of Landsbanki turned to the Minister of Business Affairs and had a meeting with him regarding the matter. The minister subsequently requested a meeting with the Chancellor of the Exchequer of the United Kingdom. That meeting took place in London on 2 September 2008. It must be pointed out that the meeting took place after the directors of Landsbanki requested that the Minister of Business Affairs acted directly in the matter. The Chairman of the Board of the FME spoke on behalf of the Icelandic delegation during the meeting, i.a. to follow up on Landsbanki´s wish to be granted an extension for the transfer of assets to the subsidiary even if the deposits would be transferred earlier.
From the accounts of the meeting on 2 September 2008 between the Minister of Business Affairs and the delegation of the Icelandic government on the one hand, and the British Chancellor of the Exchequer on the other, it
seems that it should have been clear to the Icelandic delegates that from the standpoint of the British Chancellor there was at that time a significant risk that Landsbanki would not be able to meet its obligations vis-à-vis the own- ers of the Icesave accounts. The British minister stated that the intention was for the British authorities to guarantee deposits in full and simply asked the Icelanders where the bill should be sent. Even though the meeting certainly discussed Landsbanki’s request to be granted a reasonable grace period to transfer the Icesave accounts to a subsidiary, and it has already been stated that the British minister was sympathetic to the viewpoint that the reaction could not be too harsh, it should have been clear to the Icelanders that the reaction of the British authorities was primarily focused on protecting the interests of British depositors and to prevent problems in the operation of the Icesave accounts from prompting runs on banks in the UK and unrest among deposit owners. This state of affairs and HM Treasury’s grave estimation of the situation should have been even clearer to the Icelandic authorities after a staff member of HM Treasury contacted the Icelandic ambassador in London on 5 September 2008 and told him that the British minister had been disap- pointed with the meeting on 2 September 2008 since he did not sense that the Icelandic authorities fully appreciated the serious nature of the matter.
It must be underlined that the Icelandic delegation that met with the British Chancellor of the Exchequer on 2 September 2008 was in fact requesting that the British authorities would agree to insufficient assets in Heritable Bank for a certain period of time to meet the obligations arising from the deposits transferred from the branch. Judging from the discussions between Landsbanki and the FSA, this would presumably equal up to half of the assets that the FSA had required to be transferred to the subsidiary or £ 2.5 billion. The Icelanders were thus requesting that any loss resulting from this would be the responsibility of the British.
Notwithstanding the meeting in London on 2 September 2008 and indi- cations subsequently received from the UK regarding the position of the British Chancellor of the Exchequer, there is nothing to indicate that the Minister of Business Affairs or the Prime Minister explored what options might be available to facilitate the transfer of the Icesave accounts to a subsidi- ary or follow them up vis-à-vis Landsbanki or the British authorities in the weeks that followed.