Icelandic banks give savers reassurance

Icelandic banks Landsbanki (IceSave) and Kaupthing Edge have been under real scrutiny since early this year over concerns that they might collapse.  They have always maintained that they are not in difficulty.

But Tryggvi Herbertsson, economic adviser to the Icelandic prime minister, said the government could and would step in.

“Definitely we would come to the rescue of a bank – definitely.

“The banking system in Iceland is very large compared to the economy, but still we think we can maintain the problem because the balance sheet of the bank is very good.”

“They have not been involved in sub-prime or buying housing debts from abroad and we are pretty confident that the balance sheet is healthy and the banks can operate healthily in the future.”

BBC Money Box, 4 October 2008

Both Icesave and Kaupthing are larger than the Icelandic economy.  It seems to me that the Icelandic government is saying is that they would come to the rescue because they believe the banks are well managed and run – their only problem being their inability to raise money on the markets.  Quite an assumption to make.

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2 responses to “Icelandic banks give savers reassurance

  1. We all know the Icelandic authorities have been lying shamelessly about the true state of health of Landsbanki,kaupthing Edge,etc. However, now that the scale of UK deposits becomes clearer with local council revelations.London Transport etc., are we being lied to again re full compensation to individual savers? After all, they ‘would say that, wouldn’t they?’

  2. Savers in Landsbanki Guernsey stand to lose 70% of their savings. Geir Haarde has been rather silent about that – odd considering the ultimate guarantee falls on him.

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