Did Landsbanki Foresee Collapse of Iceland’s Banks?

According to new information, leaders of Landsbanki Bank reviewed the economic situation in Iceland with Prime Minister Geir H. Haarde on September 29, presenting ideas on how to prevent the collapse of the banking system.

Allegedly, Björgólfur Thor Björgólfsson, one of Landsbanki’s owners, and the bank’s two CEOs, Halldór J. Kristjánsson and Sigurjón Árnason, met with Haarde in his ministry—shortly after the state had acquired a 75 percent stake in Glitnir Bank—to discuss a possible merger of Landsbanki, Glitnir and Straumur Investment Bank, Fréttabladid reports.

According to documents which were used in relation to the meeting and Fréttabladid business supplement Markadurinn has gained access to, the leaders of Landsbanki proposed a contribution of ISK 100 billion (USD 830 million, EUR 650 million) from the state—in addition to the more than ISK 90 billion which the state was prepared to pay for a 75 percent stake in Glitnir—so that the merger could take place and the state would instead hold a 37.3 percent governing stake in the new bank.

Although the leaders of Landsbanki realized that the amount they requested was high—65 percent of Iceland’s foreign currency reserves, almost one third of public income last year or 15 percent of gross domestic product (GDP)—according to written documents, they believed that “these percentages are nothing compared to the damage which Iceland will suffer in case of a collapse of the Icelandic banking system.”

In response to these claims, Prime Minister Haarde told Fréttabladid yesterday, “I do not wish to comment on any of these items. I do not believe it is timely.” He added that it was “impossible” to claim that the government and the Central Bank had not been prepared to solve the problems of the banks in any way possible.

Fréttabladid reported on the meeting between the leaders of Landsbanki and the prime minister the following day, on September 30. At that time, Haarde said “nothing special” had been discussed during the meeting and that he had wanted to review the economic situation with Björgólfsson as he often did when the latter was in the country.

icelandreview.com