Reykjavík Grapevine - 13.07.2012, Síða 12

12
The Reykjavík Grapevine
Issue 10 — 2012
Iceland | Banking
In 2008 diplomatic relations be-
tween Iceland and Britain fell to a
low not seen since the Cod Wars
of the 1970s. Iceland’s Landsbanki
bank had offered British and Dutch
depositors high interest rates un-
der the brand name Icesave. When
Landsbanki collapsed, the Icelan-
dic government, under the premier-
ship of Geir Haarde, refused to im-
mediately reimburse Landsbanki’s
foreign depositors.

Invoking the Anti-terrorism, Crime and
Security Act of 2001, UK Prime Min-
ister Gordon Brown froze as many of
the banks’ assets as legally possible
to unilaterally reimburse British sav-
ers their guaranteed €20,000 pounds
in the meantime. “They have failed not
only people in Iceland; they have failed
people in Britain,” Gordon Brown told
the BBC at the time. “What happened in
Iceland is completely unacceptable. I've
been in touch with the Icelandic prime
minister. I said this is effectively illegal
action that they have taken.”
Such unprecedented action drew
harsh condemnation from Icelanders.
“Gordon Brown made the calculated
decision that to raise his ratings in the
polls, it would be ideal to attack Ice-
land,” then-Iceland Minister of Health
Guðlaugur Þór Þórðarson told the BBC.
“This has been made very clear.”
While Iceland has begun paying
back the British government, interna-
tional courts continue to grapple with
the legality of Iceland's decision. No
matter what the legal outcome, how-
ever, the issue remains deeply personal
and is likely to have people worked up
for years to come.

“ICELAND ACTED ILLEGALLY”
Michael, a retired 62-year-old company
director from Devon, a coastal county
in southwest England (who refused
to provide his surname), had signifi-
cant investments in Icesave before the
crash. He said that he faced losing his
life savings, savings he would have
placed elsewhere had it not been for
the interest schemes once advertised
by Landsbanki.
“What many of us in the UK are
concerned about is the unbelievable
arrogance of the Icelandic government
and its population for their initial failure
to acknowledge that they were in any
way responsible for compensating the
UK government for a matter which is
entirely their responsibility,” he says.
“I understand Icelanders objected
to [the seizure of assets through anti-
terror legislation] without any thought
of the people who had invested their life
savings in their banks. I have no idea
where matters currently lie, but if the
Icelandic government has decided to
face their responsibilities then all I can
say is that would be a very good thing.
An apology to UK savers and taxpayers
would not go amiss.”
David Hodgson, a carpenter from
Lancaster, echoes this sentiment. “We
bailed out our banks, why couldn’t they
bail out theirs?”
“Under European law, to which Ice-
land is a voluntary signatory, there is no
difference between a saver in Iceland
and one in the UK. Both are guaranteed
€20,000 in the event of a bank collapse.
Yet only Icelanders got their money
back from the Icelandic government.
I’m no fan of Gordon Brown, but he was
right here: Iceland acted illegally.”

TOUGH LUCK FOR CHARITIES
While the British taxpayer has com-
pensated retail investors like the afore-
mentioned Michael through the Finan-
cial Services Compensation Scheme
(FSCS), many charities remain out of
pocket for their investments in Kaupth-
ing, Singer and Friedlander (KSF)—a
subsidiary of the Icelandic Kaupþing
bank—which offered interest schemes
comparable to Icesave.
Organisations like Charities Aid
Foundation (CAF) have spent several
years campaigning for the FSCS to
recognise small charities as eligible for
compensation. In a report published in
September 2009, 11 months after the
collapse, the CAF claims that 30 UK
charities involved in their campaign lost
a total of £50 million in deposits with
KSF. One charity—Naomi House Chil-
dren’s Hospice—claimed losses of £5.7
million equating to a third of its total as-
sets.
“In 2008, Naomi House was forced
to suspend services,” the CAF report
states. “Its hospice-at-home service,
which provides carers for families with
terminally ill children, will not be re-
sumed until the lost funds have been
returned. The charities have received
no guarantees and the administration
process could take years.”
Naomi House has since been com-
pensated by local government and fully
resumed its provision of care to pa-
tients. Sadly, not all charities have been
as fortunate, and many continue to wait
for funds reclaimed from KSF’s assets
through bankruptcy proceedings.
A common theme is clear: local
and national government in Britain has
stepped in to compensate the banks’
British depositors, which means British
taxpayers have been forced to foot the
bill.

AND WHAT OF ICELAND’S CHIL-
DREN?
However, not all British taxpayers think
Iceland should be forced to compen-
sate savers. Peter Spooner, a char-
ity worker from London, says: “Iceland
was obliged under European law to
provide compensation, but policy mak-
ers left it ill-prepared for the event and
ultimately it was the British government
that behaved atrociously.”
Peter argues that €£2.9 billion is
a big deal for Icelanders, but is mere-
ly a drop in the pond for the UK. “To
Iceland, that £2.4 billion [€2.9 billion]
means 40% of GDP,” he says. “Does
bankrupting Iceland’s children help
Britain in any way?”
He adds: “I have nothing but re-
spect for Iceland and to see our prime
minister abusing anti-terrorism legisla-
tion against them was disgusting—I've
yet to hear anyone who thought differ-
ent. Britain and the Netherlands should
have forgiven the debt for the Iceland-
ers sake, not for their leaders—even if
it created a problem for us by setting a
precedent; because a small diplomatic
problem like that is nothing when it is
for a friend.”

UNITED AGAINST IRRESPONSIBLE
BANKING
There’s no simple answer to a question
shaded by both legal and moral issues.
The EFTA Court will eventually resolve
the legal dispute according to the let-
ter of the law, but no matter what the
result, people like Michael will likely
continue to view Iceland’s actions neg-
atively while others like Peter will see
Iceland in a more favourable light.
Ultimately, we may find that what
brings us together is stronger than
what drives us apart. Indeed, the ques-
tion about the role banks play in society
is one facing most countries. It has, for
example, contributed to Occupy move-
ments in both Britain and Iceland.
Nobody wants to see banks as
highly leveraged and over extended as
they were prior to 2008. Hopefully, if
governments across the world address
these issues, Naomi House will never
again have to suspend its services, and
Michael from Devon will be able to en-
joy a long and happy retirement.
Icesave: A British Perspective
“While Iceland has begun paying back the British
government, international courts continue to grapple with
the legality of Iceland's decision”
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Words
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Photography
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Icesave? That sounds familiar... was it some sort of
IFAW campaign? Or did those crazy kids at 'Saving
Iceland' have anything to do with it?
Four years after Landsbanki’s collapse…