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Economic war between UK and Iceland Thursday, October 09, 2008

Image via WikipediaFollowing the collapse of Iceland's banking sector, the impact on the UK will have come as a considerable surprise to many. Yet the Icelandic banks have been aggressive players in the market for deposit and loans, as evidenced by the large number of depositors and borrowers affected.

The £1bn of deposits placed with Icelandic banks by Local Authorities, now at risk, will widen the pain across the UK via its' impact on local services. Similarly, many Charities will find themselves constrained because of their exposures.

Gordon Brown insists that Iceland has acted illegally with regard to failing to honour its deposit protection scheme and consequently has initiated measures to seize Icelandic assets.

This marks a dramatic escalation in events which will leave a deep scar on international relations. Notably, the UK actions will give a number of international companies operating in the UK cause for thought about emerging political risks, which they have probably never had to do before.

Labels: Iceland, United Kingdom

posted by John Wilson @ 10:34 PM Permanent Link ,

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Anti-terror laws abused again for non-terriorst purposes

After the use of terror suspect laws by the US authorities to extradite UK bankers in connection with Enron, the UK Government has followed suit by using the 2001 Anti-Terrorism, Crime and Security Act, passed after the September 11 attacks, to freeze Landsbanki’s estimated £4bn UK financial assets.

The reason for the seizure is to prevent the repatriation of assets back to Iceland and to allow the Government to recoup sums to cover the Icelandic Deposit Protection payment shortfall.

There are reportedly 300,000 Landsbanki depositors in the UK who will be hoping to get the same protection as those in Icesave.

Whilst the motives of the Government may be "pure" and their inventive use of law may have achieved the best outcome for UK plc, I am greatly concerned that laws enacted to provide Government with sweeping powers are being used for a purpose other than that which they were intended.

When passed into law, Government Ministers were undoubtedly providing assurances about why such laws were required [not including banking crisis], how they would obviously be responsible in using such laws to fight terrorism and laughing off concerns about the potential misuse of sweeping powers - much like the debate over detention without charge for 42 days has played out.

Labels: Iceland, Icesave, Landsbanki, UK Government

posted by John Wilson @ 8:36 AM Permanent Link ,

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Icesave accounts have been frozen Tuesday, October 07, 2008

Following the nationalisation of Iceland's second largest bank, Landsbanki, its' UK internet banking arm which has the unfortunate name of Icesave has frozen all activity on accounts.

Its' home page has the simple and concise message

We are not currently processing any deposits or any withdrawal requests through our Icesave internet accounts. We apologise for any inconvenience this may cause our customers. We hope to provide you with more information shortly.

The internet bank is covered by the UK Deposit Protection Scheme, which protects each customer for up to £50,000 [changed from £35,000 today].

For the superstitious amongst you, the jinx of Newcastle appears to have struck again - Icesave's contact details indicate that it is the location of their processing centre, as well as being home to Northern Rock. Worryingly, whilst they disagree on the location of the postcode given for Icesave of NE28 5AL (Microsoft can't even find that postcode!), Google maps suggest the Bank is in the middle of a housing estate near Wallsend.

On a related note, some funny emails doing the rounds on several themes related to the crisis

Mums in trouble with their families for going to Iceland, a twist on the foodstore slogan, with Fathers quoted as saying they always knew its' business model was on slippery ground
Mock-ups of queues forming outside Iceland stores as shoppers panic about its' possible collapse
Questions in banking circles about why no-one realised their was something fishy about Iceland and whether their Govt can revert to any slush funds