Iceland's government has seized control of Kaupthing Bank hf, the nation's biggest bank, which makes a royal flush for them of septic banks as the Icelandic banking industry has finally ( and predictably) collapsed under the massive weight of foreign debt.
Iceland is guaranteeing Kaupthing's domestic deposits and taking control of banks in an attempt to provide a ``functioning domestic banking system,'' the country's Financial Supervisory Authority said in a statement on its Web site this aftrenoon....
"Kaupthing Bank has now requested that the Icelandic Financial Supervisory
Authority, in accordance with the provisions of the new Act no. 125/2008, which
was passed into law because of the unusual circumstances in the financial
market, assume the power of Kaupthing Bank shareholders' meeting. Furthermore,
the entire board of directors of the bank has resigned. "
The banks are unable to finance about US $61 billion of debt, 12 times the size of the economy, - Pop approx 300K. The collapses have affected 420,000 British and Dutch customers, and frozen assets held by universities, hospitals, councils and even London's police force. The government is seeking a loan from Russia and may ask for aid from the International Monetary Fund to help guarantee deposits.
Trading in the krona ground to a halt today after the central bank yesterday ditched an attempt to fix the exchange rate at 131 krona to the euro. Nordea Bank AB, the biggest Scandinavian lender, said the krona hadn't been traded on the spot market today, while the last quoted price was 340 per euro, compared with 122 a month ago.
Assets at Iceland's three biggest banks, Glitnir Bank hf, Landsbanki Island hf and Kaupthing, had grown five-fold since 2004 as the companies expanded massively . Most of that expansion was debt financed.
The cost of borrowing in dollars for three months in London soared to the highest level this year today as coordinated interest-rate reductions worldwide failed to revive lending among banks for any longer than a day, partly on concern over who holds Icelandic debt.
U.K. taxpayers will probably face a bill of at least £2.4 Bn. (US$4.1 billion) to compensate about 300,000 U.K. holders of accounts at Icesave, a unit of Landsbanki says the Financial Times .
All Iceand equity markets remain closed until (at least) Oct. 13.
Kaupthing's entire board of directors has resigned and the FSA has appointed a committee to wind up the lender's business, the bank said in a statement today.
The debts of the Icelandic banking system are too big for the government to repay.
The Icelandic population cannot assume responsibility for the private debt that the banks have built up yet it appears that Debt Rating Agencie were providing AA ratings for the banks
Kaupthing has 5 billion euros of debt obligations maturing, Glitnir's debt obligations over the same period are about 4 billion euros and Landsbanki has about 2 billion euros to finance.
Russia move to save NATO member state
Iceland has commenced talks with Russia on Tuesday to secure a loan of as much as 4 billion euros (U$5.48 billion), Prime Minister Geir Haarde said late yesterday. He added that loans from the IMF and Russia ``are not mutually exclusive,'' though the government hadn't, ``at this point at least,'' asked the IMF for a standby loan or an economic program.
See Sunday, October 08, 2006 Iceland - Russians pay a visit - unannounced - two Russian bombers flew through Icelandic airspace last Friday 30th September 2006(the day the last US forces left).
US pulls Defence Forces out of IcelandIn - a little noticed move, Geir Haarde the Icelandic Foreign Minister told the Althingi (the Icelandic Parliament), on March 16th 2006 that president Bush had made the final decision to end the permanent deployment of US forces in Iceland based on the recommendation of the US secretary of defense, Donald Rumsfeld. (See Wednesday, April 05, 2006 Arctic warms ? Iceland market cools down ?
It is expected that all forces will be withdrawn from the Keflavik base by September 2006.Icelandic employees (approx 600) have been informed that they would all be dismissed by October 1st.
In a related news story yesterday ...
Japan scrambled fighter planes on Wednesday intercepting Russian bombers on a "training exercise" over the Sea of Japan.
"Four Japanese air force F-15 fighters escorted the strategic aviation crews as they flew over the Sea of Japan," Lieutenant-Colonel Vladimir Drik was quoted as saying by the Interfax and RIA Novosti news agencies.
Two Russian Su-27 fighter jets were also sent up to join the bombers after the Japanese intercept to ensure that the Russian Tu-22 bombers, known in NATO parlance as "Backfire" bombers, completed their mission as planned, he said.
The Russian bombers were sent on the patrol as part of Russia's "Stability 2008" military manoeuvres in the region, the reports quoted Drik as saying.
Mr Robert Tchenguiz
It is with very deep regret that Lord Patel notes that Mr Tchenguiz sold his 10% stake (168 Mn) in Sainsbury's, at 250p a share (bought at 520-590p per share)through Kaupthing, the troubled Icelandic bank. This follows the forced sale of the Tgenguiz 25 % stake in Mitchells & Butlers, the pub group, for £137m to the British billionaire Joe Lewis (Who lost US$800 Mn on Bear Stearns) on Tuesday. Aaron Brown and Tim Smalley who are mouthpieces for Mr T have left the board.
Mr Tchenguiz seems is ready to sell his 22 % stake in SCi Entertainment, the listed holding company of Eidos, the publisher of the Lara Croft Tomb Raider computer games. Aaron Brown, the mouth piece for Mr Tchenguiz at his investment vehicle R20, stepped down from SCi Entertainment's board yesterday.
Shares in SCi Entertainment fell by 15.6%.