On 18th July 2005 £35000 was transferred from Lloyds Bank and invested in what was then Singer & Friedlander. This to my knowledge was on an approved list and was a firm well known to the treasurer. Unfortunately this was taken into the control of Kaupthing and became Kaupthing Singer and Friedlander. I say unfortunately not because there was anything amiss with Kaupthing who were (and perhaps are!) the premier bank registered in Iceland but because Iceland has since entered a freefall situation. News of Iceland's decline was hardly extensively reported here and the bank itself seemed well run. Unfortunately the wave of hysteria powered by nervous speculators resulted in the dire consequences related below.
Kaupthing Bank: No indication of government intervention
Following the extraordinary legal measures taken by the government last night, allowing the Icelandic Financial Supervisory Authority (FME ) to intervene in the operations of Icelandic financial institutions, Kaupthing would like to clarify the following:
Kaupthing has not been approached by the Icelandic FSA regarding any intervention in Kaupthing's operations. Furthermore, the Central Bank of Iceland has provided Kaupthing with a 500 million euro loan to facilitate operations, and Kaupthing is committed to working with the government to ensure regular workings of the Icelandic financial system.
Published: 08:30 08.10.2008 GMT+2 /HUGIN /Source: Kaupthing Bank /SSE: KAUP /ISIN: IS0000001469
Talks on participation in the reorganization of Glitnir Bank
Kaupthing Bank hf. has, after consulting the Icelandic authorities, discussed with the Icelandic Financial Supervisory Authority Kaupthing's involvement in the reorganization of Glitnir Bank hf. Further talks will be held over the next several days.
Published: 08:30 09.10.2008 GMT+2 /HUGIN /Source: Kaupthing Bank /SSE: KAUP /ISIN: IS0000001469
Kaupthing Bank turns to the Icelandic FSA
Statement from Sigurdur Einarsson, Executive Chairman of Kaupthing Bank:
"When the board of directors reviewed the position of the bank at a meeting on 25 and 26 September, the bank was performing well and it appeared that the third quarter results would be good. Deposits had increased by an average of almost ISK 4 billion a day for the previous six months. The bank's liquidity position was therefore strong and there were plans to start buying back bonds issued by the bank. The liquidity position of Kaupthing Singer & Friedlander, the bank's UK subsidiary, was also good - probably the best of any bank in the United Kingdom.
Kaupthing had for a long time been preparing for a downturn in the markets, especially in Iceland since it had been clear for several years that the Icelandic krona was too strong. In order to counteract this possible downturn, Kaupthing had hedged its equity by transferring it into foreign currencies, decelerated the growth of corporate loans in Iceland and cut back its market share in that area. Kaupthing had not marketed loans in foreign currencies. Furthermore, it had increased the inflation indexed assets in its portfolio in Iceland and massively raised the proportion of deposits in its funding.
At the same time, dark clouds began to form in the international financial markets and trust between financial institutions quickly decreased. Banks became more reluctant to lend money to each other and retracted previous credit lines. On the morning of 29 September news emerged of the difficulties at Glitnir Bank and the authorities announced their plans to acquire a 75% stake in the bank. This triggered a series of events which nobody predicted or was able to control. This had an effect on the Icelandic economy and the króna went into freefall. Credit rating agencies downgraded their credit ratings for the Icelandic state and the Icelandic banks, and foreign investors unleashed a landslide in which they tried to get rid of Icelandic assets, regardless of how solid they were.
After British depositors withdrew their deposits from Icesave, Landsbanki's deposit account in the United Kingdom, the Icelandic Financial Supervisory Authority assumed control of Landsbanki. In the wake of this news, there was a significant increase in the outflow of deposits from Kaupthing Edge in the United Kingdom, despite the fundamental difference between Kaupthing Edge and Icesave that Kaupthing Edge was guaranteed by the British compensation scheme and Icesave by the Icelandic scheme.
After the British chancellor of the exchequer stated that Iceland did not intend to honour its obligations to British depositors, the Financial Services Authority in the UK transferred Kaupthing Edge from the bank's subsidiary, Kaupthing Singer & Friedlander. Kaupthing Singer & Friedlander was subsequently placed into administration and Kaupthing Bank's creditors pointed out that this situation represented an event of default according to the parent company's loan agreements and was therefore a technical default. It did not matter that the parent company had sufficient liquidity and its position was solid."
Kaupthing Bank has now requested that the Icelandic Financial Supervisory Authority, in accordance with the provisions of the new Act no. 125/2008, which was passed into law because of the unusual circumstances in the financial market, assume the power of Kaupthing Bank shareholders' meeting. Furthermore, the entire board of directors of the bank has resigned.
The Icelandic FSA has appointed a winding-up committee which now wields all the authority of the board of directors. The aim of these actions is to ensure adequate activities of the bank in Iceland and the stability of the Icelandic financial system. The bank's branches in Iceland will be open as usual, and it is hoped that the bank's clients will be inconvenienced as little as possible by these changes.
While the winding-up committee is in control of the bank, the bank may not be made subject to enforcement, preliminary seizure or insolvency proceedings. Call notices to the bank's creditors will not be issued.
We have been informed that, although our money has not been transferred to ING, we are covered by FSCS compensation scheme. On Friday 31st October our claim was posted to FSCS and we await in hope in these uncertain times.