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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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Mon, 01/28/2013 - 16:56 | 3192558 Motorhead
Motorhead's picture

Iceland, bitchez!

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

Mon, 01/28/2013 - 17:03 | 3192584 idea_hamster
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.

Mon, 01/28/2013 - 17:05 | 3192597 Stackers
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.

Mon, 01/28/2013 - 17:09 | 3192602 The Juggernaut
The Juggernaut's picture

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

Tue, 01/29/2013 - 01:08 | 3194021 Lord Of Finance
Lord Of Finance's picture

And Bloomberg is such a turd!

Mon, 01/28/2013 - 17:21 | 3192651 CynicLaureate
CynicLaureate's picture

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

 

Mon, 01/28/2013 - 17:24 | 3192660 Stackers
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.

Mon, 01/28/2013 - 17:30 | 3192677 chubbar
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.

Mon, 01/28/2013 - 19:44 | 3193055 bobthehorse
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

Tue, 01/29/2013 - 07:09 | 3193265 Al Gorerhythm
Al Gorerhythm's picture

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

Mon, 01/28/2013 - 16:57 | 3192559 ACP
ACP's picture

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

Oh, and FUCK the EU too.

Mon, 01/28/2013 - 16:56 | 3192560 EscapeKey
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/

 

Mon, 01/28/2013 - 17:02 | 3192586 redpill
redpill's picture

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

Mon, 01/28/2013 - 16:57 | 3192562 francis_sawyer
francis_sawyer's picture

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

Mon, 01/28/2013 - 16:57 | 3192566 youngman
youngman's picture

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

Mon, 01/28/2013 - 16:58 | 3192568 redpill
redpill's picture

Sad that it was ever in question...

Mon, 01/28/2013 - 16:58 | 3192569 OutLookingIn
OutLookingIn's picture

In other words -

Iceland told the bankers to -

"Go f--k yourselves!"

Mon, 01/28/2013 - 16:58 | 3192570 NotApplicable
NotApplicable's picture

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

Mon, 01/28/2013 - 17:00 | 3192575 Motorhead
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.

Mon, 01/28/2013 - 17:01 | 3192585 francis_sawyer
francis_sawyer's picture

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

Mon, 01/28/2013 - 17:10 | 3192611 redpill
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?

Mon, 01/28/2013 - 17:03 | 3192588 Dr. Engali
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.

Mon, 01/28/2013 - 17:13 | 3192618 redpill
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...

 

Mon, 01/28/2013 - 17:05 | 3192591 LongSoupLine
LongSoupLine's picture

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

Mon, 01/28/2013 - 17:06 | 3192596 Jack Burton
Jack Burton's picture

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

Mon, 01/28/2013 - 18:44 | 3192895 tpgaynor
tpgaynor's picture

and seeking pr help from goldman to remarket their assets too

Mon, 01/28/2013 - 17:09 | 3192604 ljag
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

Mon, 01/28/2013 - 17:12 | 3192613 dirtydroog
dirtydroog's picture

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

Mon, 01/28/2013 - 20:26 | 3193202 Acet
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.

Mon, 01/28/2013 - 17:12 | 3192616 stant
stant's picture

ulfberht thru the heart of the squid bitches!!

Mon, 01/28/2013 - 17:13 | 3192617 AgAu_man
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".

Mon, 01/28/2013 - 17:18 | 3192638 debtor of last ...
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.

Mon, 01/28/2013 - 17:15 | 3192631 debtor of last ...
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.

Mon, 01/28/2013 - 17:20 | 3192648 dirtydroog
dirtydroog's picture

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

Mon, 01/28/2013 - 17:35 | 3192688 debtor of last ...
debtor of last resort's picture

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

Mon, 01/28/2013 - 17:20 | 3192650 BurningFuld
BurningFuld's picture

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

Mon, 01/28/2013 - 17:21 | 3192655 NoWayJose
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.

Mon, 01/28/2013 - 17:23 | 3192659 NoDebt
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?

 

Mon, 01/28/2013 - 17:23 | 3192662 CrimsonAvenger
CrimsonAvenger's picture

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

Mon, 01/28/2013 - 17:26 | 3192670 Darth Mul
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.

Mon, 01/28/2013 - 18:19 | 3192799 flacorps
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.

Tue, 01/29/2013 - 06:07 | 3194246 MisterMousePotato
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.

Mon, 01/28/2013 - 17:29 | 3192674 Vegetius
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

Mon, 01/28/2013 - 17:28 | 3192675 wisefool
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?

Mon, 01/28/2013 - 17:29 | 3192676 Martin T
Martin T's picture

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

Mon, 01/28/2013 - 17:38 | 3192692 Joe A
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?

Mon, 01/28/2013 - 17:39 | 3192695 Vegetius
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

 

Mon, 01/28/2013 - 17:45 | 3192706 falak pema
falak pema's picture

posted here this morning EST :

3190835

Mon, 01/28/2013 - 17:49 | 3192714 Arthur
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.

Mon, 01/28/2013 - 23:27 | 3193725 mendigo
mendigo's picture

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

Mon, 01/28/2013 - 18:40 | 3192876 FunkyOldGeezer
FunkyOldGeezer's picture

Isn't there a distinction to be made between people who risk their money in a business venture and those who merely 'lend' their cash to a bank in return for a relatively low reward? In fact, do those people who deposit money with a bank give their explicit permission for the bank to then go and use said money as the bank sees fit, or is it assumed to be given by the bank only?

Iceland may have been brave to face up to their predicament, but ultimately they simply put two fingers up to everyone and said f**k you! Should that really be tolerated and does that show that basically the Icelanders have no real sense of morality? It's not as if they wouldn't have all benefitted to some degree in the high standard of living they enjoy(ed), to which the Icelandic banks must have been a fairly major contributor.

I bet 100/1 on, that if it was your money that eveaporated from an Icelandic bank's coffers, you'd be the first to call them all the names under the sun and somehow seek to wreak revenge.

Yeah, the Icelanders were right to do what they did, only if it wasn't your money they did it with. Asswipes.

Mon, 01/28/2013 - 18:50 | 3192916 wisefool
wisefool's picture

sure there is moral hazard abound, but isn't what they did a far peice more than just peircing the corporate veil holding the perps personally liable?

Put another way. the people in jail wont need the stuff they bought with the ill gotten gains. can they be marked to market and repo'ed? most of that stuff was probably produced by the european nations left holding the bag.

Mon, 01/28/2013 - 19:02 | 3192953 css1971
css1971's picture

Your average person has no fucking clue what a bank is. What is happening when they put their money in a bank. What the difference between cash and credit are. Most think the bank puts the money in a vault and leaves it there. Yes, they believe the children's cartoons with banks stuffed to the gills with notes and coins.

The legality is generally that a bank deposit is a loan to the bank with which they can do as they please. In return the bank provides you an accounting entry in it's books. It is the bank's money once you have handed it over.

Mon, 01/28/2013 - 23:58 | 3193825 mendigo
mendigo's picture

When one does business with a private entity it is a business venture.
Were these banks underwritten by the icelandic government?
It is not a question of being pleased that people lost money. By what rational do the public assume the debts of a private, failed business?

Mon, 01/28/2013 - 18:51 | 3192918 SmittyinLA
SmittyinLA's picture

So in the end the bankrupt EU gets another "permanent" member and Iceland gets the pleasure of joining a bankrupt entity in which they'll have no sovereign rights, ya that's a victory for Iceland kinda like the NAZI invasion of Poland was a victory for Poles. 

Mon, 01/28/2013 - 19:13 | 3192975 toomanyfakecons...
toomanyfakeconservatives's picture

After the traitors face the firing squads here in the U.S. and the debt is repudiated, the moneychangers can pound sand.

Mon, 01/28/2013 - 19:37 | 3193008 100pcDredge
100pcDredge's picture

Viva Snorri!

Mon, 01/28/2013 - 19:32 | 3193014 Aurora Ex Machina
Aurora Ex Machina's picture

Say what you want: Icelanders are amongst the last truely free & authentic people I've met, in terms of Being Human.

 

If only the USA had gone a different way, and produced 300 million similar beings. We'd have to make time to get the Tardis to solve that one though.

Mon, 01/28/2013 - 23:59 | 3193818 newengland
newengland's picture

Northern people  whispered to each other before battle:

'Lo there do I see my father, Lo there do I see my mother, my Sisters and my brothers , Lo there do I see the line of my people, back to the beginning. Lo, they do call me, they bid me take my place among them, in the halls of Valhalla, where the brave may live forever.'

Genuine community means one for all, all for one. The inbred money grubbers are the enemy of every land, although some lands bow down before the hateful tribe.

Just say NO, and prepare to defend yourself, your family, your community.

 

Tue, 01/29/2013 - 02:18 | 3193844 Lord Of Finance
Lord Of Finance's picture

Ahhhhh! That little, but beautiful land. The coastel regions are breath taking. Looks like the Icelandic people finally woke up to smell the beautiful clean air and scanned the magnificent landscape and said to themselves, "We have it better here, and so now we deserve better."

 

   Note to self:

       Apply for Iceland visa application

Tue, 01/29/2013 - 01:31 | 3194050 squexx
squexx's picture

Drive the Satanic Tribe out!

Tue, 01/29/2013 - 02:26 | 3194124 Lord Of Finance
Lord Of Finance's picture

 And David Hasselhoff is the anti-christ!

  www.esquilax.com/baywatch/

Do NOT follow this link or you will be banned from the site!