Sigrún Davíðsdóttir's Icelog

Ruv, the Icelandic State Broadcaster, has over the past two evenings given an overview of two recent reports on the two banks, Glitnir and Landsbanki, that collapsed in October 2008. The reports were done at the behest of Eva Joly for the Office of the Special Prosecutor, respectively by a team of French and Norwegian expert.

The findings deepen the picture already abundantly clear from the SIC report of spectacularly dubious lending to main shareholders, both in respective banks and in Kaupthing. But the most damming conclusions regard the auditor of these two banks, PwC. According to the reports both banks would have been bankrupt well before October 2008, probably a year earlier, if it hadn’t been for the willingness of PwC to do what the banks wanted and help them keep the illusion going. If that had happened the liabilities that these two banks left behind would have been a lot lower. The fact that they could operate longer has been very damaging for Iceland and everyone who did business with these two banks and, one would suspect, with Kaupthing as well.

PwC hasn’t responded yet. One would assume that it’s not only PwC Iceland that has some explanation to make but also the mother company PwC.

This kind of lending beyond all rhyme and reason, against no guarantees and with bullet loans being rolled on indefinitely went on in all the Icelandic banks. It didn’t start in 2008, it had been going on a lot longer. The question is what sort of banking had been going on in the Icelandic banks. And these banks didn’t operate in a vacuum, they were closely connected to international banks.

The Icelandic banks will provide an interesting peephole on international banking though the Icelandic way of banking was no doubt a lot more crude than in any other Western European country. Though, having just returned from Dublin, I would be interested to see similar reports on i.a. Allied Irish and Anglo Irish. Considering the fact that RBS got into trouble, it lent heavily to Icelandic businesses and had to be saved by the UK tax payers it would also be interested to see RBS scrutinised like the Icelandic banks.

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