I might be right about Iceland you know

In asserting that Iceland must repay in full, Britain is making two contestable assertions. The first is that if Iceland’s private fund can’t pay, the responsibility passes to the Government and taxpayers. EU rules do not say this, if only because they fail to provide for such dramatic circumstances. The second is that Iceland must pay not the amount set by its own guarantee rules nor even the British £50,000, but the full amount of British savers’ losses, even though the Government chose to pay out more than UK rules obliged.

3 comments on “I might be right about Iceland you know

  1. Yeah, but you’re assuming Bromwen Maddox knows more about it than various commenters here, at Lib Conspiracy and othe blogs, which history suggests won’t be the case, and the article doesn’t seem to go much beyond her havin read the Economist.

  2. In particular, this is bollocks:
    Britain claims that responsibility for foreign activities of a bank falls on the taxpayers of a country in which its headquarters happen to sit.

    No, we claim that responsibility for retail deposit protection falls on taxpayers of the *country in which that particular activity is regulated*. That’s why we’re only chasing the Icelandic government for Icesave, and not for Kaupthing (because Kaupthing was a subsidiary, hence regulated in the UK, hence depositors protected by the UK scheme).

    But while Britain has courted foreign banks assiduously, it is unthinkable that if it faced paying £720 billion to foreign savers (as, scaled up for the UK population, a comparable bill would be) it would pay without murmur.

    Because UK regulators *wouldn’t let* UK banks run up gbp720bn of foreign retail deposits in their UK regulated entities. UK retail banks’ foreign operations are almost all regulated in their country of operation, not in the UK.

    UK regulators also approved Icesave, and bear responsibility too.

    No they didn’t – that’s not how the equivalence rules work – so no they don’t.

  3. Landsbanki was acting in the UK as a foreign bank. Kaupthing, Singer and Friedlander wasn’t. It is somewhere between bollocks and non-bollocks depending on how pendantic you want to be over where KSF ends and Kaupthing begins.

    The British Government’s claim is, however, bollocks. The responsibility of a bank’s activities (foreign or otherwise) depends on what that bank’s guarantee says – and in the case of Landsbanki the guarantee was up to 1% of your deposit paid for by an insurance fund not by Icelandic taxpayers. Amount of cover aside that is exactly the same as the UK. Taxpayers in either country should not be put on the hook on the whim of their politicians wanting to look good by guaranteeing every last penny.

    The Icelandic Government made a rod for their own back by compensating Icelandic savers in full when they didn’t have to. The British Government did likewise.

    The article goes from saying Icelanders are being strong-armed to making the case for this being a beneficial crisis for the EU and that Iceland should just pay up and join the club. What a potty direction to go in. Iceland was small and independent when foreigners were throwing money at their banks. That was not the problem – the shysters running their banks, regulators not doing their job and savers not being choosy about chasing rates were the problem.

    Our Government decided to absolve those savers of their responsibility. The Icelandic Government decided to absolve those savers of their responsibility. Neither of those will be the ones footing the bill. Is this really what taxpayer’s money should be used for?

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