Re Kaupthing and large exposures
The exposure that Kaupthing created by offering to lend Alisher Usmanov and related parties ISK270bn exceeds the legal limit according to Icelandic legal act on financial institutions from 1996. This exposure was around 58% of the bank’s equity base whereas the legal limit is only 25%.
However, this was nothing out of the (extra)ordinary, neither at Kaupthing nor the other Icelandic banks. As the report of the Althingi Special Investigative Commission shows clearly the banks habitually broke law on limits to large exposures.
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Aren’t the laws meaningless without enforcement? Why waste the time to write such laws?
Jon
6 Jan 11 at 3:59 pm
So are the CEO and entire Board being prosecuted? What is the maximum penalty? I hope it is they are *personally liable* aka they are bankrupted and banned from being directors of any companies?
D_Boone
7 Jan 11 at 6:16 am
But hey, so long as People Who Matter(TM) are making money, why should it matter? The rest of us just need to shut up and row this slave galley.
Knute Rife
7 Jan 11 at 9:42 pm
[…] Here is a piece, appearing in the Daily Telegraph today, that I wrote with Telegraph journalist Rowena Mason on Kaupthing and Usmanov. As Icelog readers will know I had already written on Icelog about Usmanov and Kaupthing, see here and here. […]
Kaupthing’s loans to Usmanov in the Telegraph at Sigrún Davíðsdóttir's Icelog
21 Jan 11 at 11:24 am
I was intimately involved with the operation and regulation of financial intermediaries in the US, both domestic and foreign institutions with US offices, and thus became familiar with the downfall of the Thai Banks back in the late ’90s. Approximately one-third of the banks, by number, not size, were closed, and it was then discovered in several cases, more than or nearly half of the bank loans outstanding had been made to ‘insiders,’ such as directors, officers, major shareholders and their relatives, associates, and affiliates. When I first read of your banking systems failures, my experience led me to assume Iceland had no more idea what its bankers were doing than Thailand did, and eventually Iceland would discover the human temptation to lend to yourself, family, and friends, is better than lending to enemies, and strangers, when, of the course, the reverse is true. A bank won’t collect a delinquent loan from the ‘insiders,’ but will find a way to stretch the rules etc. I also could not understand why Iceland saw fit to not impose limitations on the volume of bank loans made, since there is only so much borrowing capacity that a nation has, and it is the borrowing capacity of a nation that impacts Sovereign Credit, which stands behind the collective credit of its banks. Thailand swallowed the bitter terms of the IMF, and has recovered. I note too the double standard the world banking community operates on. Small nations are dealt with forcefully, and direct, while large nations are given all administrative forbearance to conceal the true facts concerning its income and assets. In the US, if you are not too big, for example, you are shut down. Keep up the good work Iceland.
Sydney Carton
29 Jan 11 at 12:55 am
[…] I wrote on Kaupthing’s large exposures. An Icelog reader, Sidney Carton has just commented on this log and the Icelandic way of banking, […]
Re large exposures at Sigrún Davíðsdóttir's Icelog
29 Jan 11 at 11:23 am
I’m in awe of the way you handle topics with both grace and authority.
28390 Windshield Quote
23 Apr 24 at 10:59 pm
I’m genuinely impressed by the depth of The analysis. Great work!
Lin Dragula
22 Oct 24 at 12:17 am
Bookmarking this for future reference, but also because The advice is as invaluable as The attention.
Katrice Katz
25 Oct 24 at 12:33 am