Iceland's 'Icesave' Deposit Victory Slams Door On European Deposit Insurance Hopes

Tyler Durden's picture

In yet another victory for not bowing to the great-and-good of modern orthodoxy, Iceland has won a court ruling that enables it to repay billions of Euros (in failed bank deposits to the UK and Holland) on its own terms. Icesave collapsed in 2008 and left thousands of depositors, who had chased higher yielding deposits, with losses. The Dutch and British governments demanded prompt payment; Iceland denied, preferring (rationally) to repay what they could from the then-bankrupt entity. As RTE notes, Icelanders in referenda twice voted against repayment schemes drawn up by their government to satisfy the British and Dutch claims, leaving the estate of Landsbanki to pay back the funds, which it has steadily done, instead of the taxpayers of Iceland being force per se to fund this shortfall. The implication being: Bank deposit insurance schemes in the European Economic Area are NOT backed by government liability, neither explicitly nor implicitly - which could well reignite concerns of the much-hoped-for Europe-wide deposit-guarantees.

 

Via RTE,

Iceland has won a court ruling allowing it to repay billions of euros on its own terms to Britain and the Netherlands for bailing out depositors in a failed Icelandic bank.

 

Iceland has said it will fully repay both countries, but through a gradual process as it runs down the assets of failed bank Landsbanki.

 

It collapsed in 2008 leaving depositors of its Icesave online accounts stranded.

 

Britain and the Netherlands stepped in to repay savers, but it sparked a political row and the two countries sought court backing to say Iceland had failed to repay the money within time limits set by a European directive for deposit guarantee schemes.

 

A European court has now dismissed the case.

 

Officials on the small north Atlantic island expressed relief over the ruling.

 

“Icesave is now no longer a stumbling block to Iceland's economic recovery," Iceland's Foreign Ministry said.

 

All of Iceland's banks collapsed four years ago, early in the financial crisis, and the UK and Dutch governments wanted Iceland to pay them back directly and quickly.

 

Iceland did not comply, triggering a row between the governments and potentially complicating the island's bid to join the European Union.

 

The court of the European Free Trade Association said Iceland did not break depositor protection laws by refusing to return the money, because the scale of its financial crisis was so big.

 

"The verdict is, of course, a fantastic and total victory for us," said Icelandic Industries Minister Steingrimur Sigfusson, who was finance minister during the dispute.

 

"It's good to have this whole unpleasant business out of the way," he said in comments on public broadcaster RUV.

 

Iceland's economy sank and the government had to take a bailout from the International Monetary Fund and Nordic countries after the 2008 crisis.

 

The row with the British and Dutch over the Icesave accounts added to bitterness in the aftermath of the crisis, when Iceland was especially angered at Britain's use of anti-terrorism legislation to freeze Landbanki assets.

 

Britain had no immediate reaction to the verdict. The Dutch Finance Ministry said in a statement that it "regrets the judgment and will study the consequences of the judgment".

 

The European Commission had also pressed the case against Iceland and said it was also studying the consequences.

 

Icelanders in referendums twice voted against repayment schemes drawn up by their government to satisfy the British and Dutch claims, leaving the estate of Landsbanki to pay back the funds, which it has steadily done.

 

The court of EFTA, a cooperation group of which Iceland is a member and which has links to the European Union, rejected all three claims brought by the EFTA Surveillance Authority - the body which oversees the bloc's rules.

 

In its ruling, the court said the deposit guarantee directive in place in 2008 did not envisage the obligation to repay savers in Britain and the Netherlands "in a systemic crisis of the magnitude experienced in Iceland".

 

The Icelandic Foreign Ministry said 585 billion Icelandic crowns of the 1,166 crowns of claims from Icesave had been repaid from the failed Landsbanki estate, representing more than 90% of the minimum deposit guarantee covering the savers.

 

"It is expected that the Icesave claims will be paid out in full by the actual debtor, the estate of the failed Landsbanki," the Foreign Ministry said.

 

(h/t BOFS blog)

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Motorhead's picture

Iceland, bitchez!

And didn't the UK put Iceland on some terrorist watchlist or something after that bank fiasco?

idea_hamster's picture

This:

Icelanders in referenda twice voted against repayment schemes

shows the very basic difference between Iceland and the US.  Why?

Not because they asked the people.  (Although that is different.)

Not because the people actually thought about it and voted.  (Although that is different.)

Not because the government counted the votes.  (Although that is different.)

Not because the government reported the vote, even though it wasn't what they wanted.  (Although that is different.)

But because the government did what the vote said.

Stackers's picture

FDIC is an illusion. If it ever had to make good on a macro-scale it would collapse in the blink of an eye as well.

The Juggernaut's picture

Is anyone watching Krugman on Bloomberg?!  The guy is such a tard!

CynicLaureate's picture

Greenspan is on record saying we'd just print the money.  Spread the hurt around, you know.

 

Stackers's picture

and there would be instant hyperinflation.....it would take years just to physically print and if people just started spending electronically, I cant imagine what digital hyperinflation would look like.

chubbar's picture

The other trick the U.S. gov't uses is to bring the legislation for a vote twice a year until the opposition is worn down and it passes.

bobthehorse's picture

Iceland did it the right way.

They fucked the bankers.

That's because the citizens made a stand.

They refused to take it in the ass.

http://www.angrysinner.blogspot.kr/2013/01/yesterday-we-went-to-mcdonalds-for.html

Al Gorerhythm's picture

So, where do they get the money to pay off all these billions? Who are they bilking this time?

ACP's picture

Looks like the EU got denied their "Ice-slave" plan.

Oh, and FUCK the EU too.

EscapeKey's picture

According to this article, most of what people say about Iceland is wrong:

http://studiotendra.com/2012/12/29/what-is-actually-going-on-in-iceland/

 

redpill's picture

Even in the worst light, it's still miles better compared to the rest of the western world.

francis_sawyer's picture

So the "platinum coin" concept finally arrived by Leif Ericksson express courier I see...

youngman's picture

Wonder if that covers the gold they have in the vaults somewhere....

redpill's picture

Sad that it was ever in question...

OutLookingIn's picture

In other words -

Iceland told the bankers to -

"Go f--k yourselves!"

NotApplicable's picture

Give 'em a Spiderman towel and send them on their way!

Motorhead's picture

OT - looking at some stocks in real time on Level 2...these fuckers are printing stocks five (5) decimal places to the right....one one-thousandth of a penny.  Give me a fucking break.

francis_sawyer's picture

Better get your ass more conveniently 'co-located'...

redpill's picture

Are you suggesting that this is not helping the vital market lifeblood known as "liquidity" ?  

What, are you some kind of terrorist?

Dr. Engali's picture

Shhhhhhh we will keep this little story to ourselves. We wouldn't want any other debtor nations getting any crazy ideas.

redpill's picture

Don't worry the rest of them are controlled by technocratic governments and central banks stacked with former Goldman execs.  Iceland was small and reclusive enough to escape full infiltration prior to their banking sector bubble bursting...

 

LongSoupLine's picture

Ha ha!
Fuck you EU and fuck you banks...eat shit.

Jack Burton's picture

And Russia has begun moving part of it's 1/2 trillion dollar reserve out of the once solid Euro.

tpgaynor's picture

and seeking pr help from goldman to remarket their assets too

ljag's picture

The13people that live there better keep the graft and corruption down to a minimum...I mean just the name alone has me scrambling for my jimmy buffet albums

dirtydroog's picture

Hang on, Iceland still promised to repay the money in full, just on their own timescale

Acet's picture

The article posted here is unclear.

What Iceland is repaying is the amount of deposit insurance which is part of their agreement to be in European Free Trade Association.

What Iceland is not paying is the additional amounts that the UK and the Dutch State paid to depositors above and beyond what's guaranteed in the EFTA agreement.

You see, both the Dutch and the British Governments decided, on their own, that the amounts guaranteed should be larger, paid those amounts to their nationals with accounts in the failed Icelandic banks and then turned around and demanded that Iceland refund them for the full amount. (At which point, the Icelandic people said "fuck off" - twice).

This court ruling basically says that Iceland is not responsible for any payments foreign governments chose to do to their nationals in conjuction with the failure of the Icelandic banks which are above and beyond the amount guaranteed under the EFTA agreement. Iceland still has to repay the EFTA guaranteed amount (in their own time) but not a cent more.

stant's picture

ulfberht thru the heart of the squid bitches!!

AgAu_man's picture

He (Sven) shoots... He SCORES!  Iceland 1, UK 0.  Iceland 1, NL 0.  Go Vikings!  Time to 'plunder' again.  :-)

The Dutch hate it when the Icelanders "Go Dutch".

debtor of last resort's picture

I don't hate it, i am laughing my fucking balls off. The more scams, the more leveraged distrust.

debtor of last resort's picture

In good trust, family had an account at Icesave. For 0,7% (whatever) moar 'yield'. They did not check if it was guaranteed by the Dutch state. It was guaranteed by the Icelandic state. A corrupt banker needed the deposits in his Madoff scam. My family got their money back, just like getting your money back when you become a 'victim' of phishing. It's about trust. Misplaced trust.

dirtydroog's picture

Icesave were advertising rates of 10% for Cash ISA (tax free) savers in the UK

debtor of last resort's picture

Oops, guaranteed 10% returns.... fucking Landesbanki banker still walks, doesn't sleep.

BurningFuld's picture

Why would Brittain even give a shit since they just print money and hand it out?

NoWayJose's picture

The difference between Ireland and Iceland is a lot more than one letter.  It's pretty easy to see why the Irish always lost to the Norsemen.

NoDebt's picture

I really love that frozen, lava-covered little island nation.  Is it going too far for me to say they represent the slimmest possibility that there is reason to hope?

"We can never let the banks fail or the entire economy will go into permanent depression."  Oh, yeah?  What about Iceland?  They took the pain and are bouncing back already.  How we looking compared to that?

 

CrimsonAvenger's picture

What's in your wallet? Not a banker's grubby hand, that's for sure.

Darth Mul's picture

Apropos of little, if you can take a long weekend trip to Iceland some time, do it.  Icelandic women are gorgeous.  Even the fatties are eminently taggable.

It is a small, industrious, educated nation which has handled the banks as would we, were we not hijacked by them.

I suspect Iceland will be subject to pressure, especially if it still in fact wants to bother joining the EU, to allow lots of new immigration from various African and Asian countries... the better to fracture that nation's identity and create strife and demands for an even bigger welfare state.

And the usual suspects, whether you're tired of hearing it or not, will be behind it - as Shatter is in Ireland.  Divirsity and multiculturalism are fine ideals, but when the loudest proponents include people who won't apply it to their own tribe, but will emigrate to european nations to work toward increased immigration, I have to wonder if the Protocols is not quite the forgery {even if it's a fake} that it's cracked up to be.

Also - the Iran shit is coming fast, I think.  Weeks, not months.

flacorps's picture

The pressure so far has taken the form of trotting out Pierce Brosnan to get a boycott going on Icelandic seafood exports on account of them doing a little whaling too. Bankers will stop at nothing ... I expect this campaign to ramp up until Iceland ponies up.

 

But I question whether or why anyone would want to join the EU at this stage of the game?

 

Also, Iceland has a free doomsday weapon in the Katla volcano ... a little drilling, a little dynamite and you can kiss Europe goodbye.

MisterMousePotato's picture

Is Iceland the place where they do that totally weird and barbaric yearly bachanalian slaughter of ? what were they? whales? dolphins? seals? Can't recall. Just remember the pictures of hundreds of families, women, children, babies, toddlers, all covered in blood and guts.

Maybe it was Norway or something. Just can't recall.

I am sure no save the whales kinda guy at all, although those little white seals kinda tug at my heart a bit. But this ... this thing was really weird.

Vegetius's picture

And for those still in the EU here another bit of fun news to share -

"Michel Sapin made the gaffe in a radio interview, which left French President Francois Hollande battling to undo the potential reputational damage.

“There is a state but it is a totally bankrupt state,” Mr Sapin said. “That is why we had to put a deficit reduction plan in place, and nothing should make us turn away from that objective.”

- http://www.telegraph.co.uk/finance/financialcrisis/9832845/France-totall...

In case your wondering he IS talking about France

wisefool's picture

Isn't finance basically a closed loop? Iceland was the only country to actually remove, and in some cases imprison the profiteers.

Those folks bought yauchts, wine, property and other investments that certainly were not made in Iceland. Can't the Euroes just take the stuff the profiteers bought back?

Martin T's picture

Gordon Brown in the UK branded Iceland a "terrorist" state for not complying to the full refund initially...

Joe A's picture

All very nice and stuff but the fact remains that Dutch and British savers could not access their accounts for weeks while the local population could. By the time the accounts got released, nothing was left. That hardly seems fair, right?

Vegetius's picture

Gordon Brown of (Browns Bottom I believe)

A good reason to wonder how elections work and are they really any good?

When someone like that gains office who is ignorant grasping, vicious and best of all self-righteous

“Reader, suppose you were an idiot. And suppose you were a member of Congress. But I repeat myself.”
-  Mark Twain

 

falak pema's picture

posted here this morning EST :

3190835

Arthur's picture

Can some one please tell me why Ireland assumed the debt of its banks and did not follow Icelands lead.

All Irish tax payers should be really pissed off at their government.

mendigo's picture

I believe it was largely a result of pressure from US UK and EU.