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Iceland parliament committee implicates former PM, bank chief in banking crisis

By Bernard Hibbitts (editor) and University of Pittsburgh School of Law students.

[JURIST] Seven Icelandic government officials acted with gross negligence in their management of the country's financial system prior to a 2008 bank collapse, according to a report released Monday by a parliamentary panel. The Special Investigation Committee (SIC), convened in 2008 by the Icelandic Parliament to investigate the collapse of the country's three largest banks, determined that then-Prime Minister Geir Haarde and former central bank head David Oddsson knew that banks were assuming overseas debt but took no action to prevent or mitigate the effects of the accumulation. The SIC also found that former Minister of Finance Arni Mathiessen, then-banking minister Bjorgvin Sigurdsson, former Financial Services Authority director Jonas Jonsson and central bank officials Eirikur Gundason and Ingimundur Fridriksson failed to take appropriate action when presented with information about the poor state of the country's financial sector. When Kaupthing, Landsbanki and Glitnir were taken over by the Icelandic government in 2008, they were holding debt equal to more than 900 percent of Iceland's gross domestic product, causing the country's economy to collapse and the government to rely on loans from the International Monetary Fund (IMF) to meet its obligations. A parliamentary panel will decide whether to take legal action against the officials. Iceland was hit hard by the financial crisis that emanated from securities related to the US mortgage market. The country began considering whether to seek EU accession last year, with Prime Minister Johanna Sigurdardottir arguing that adopting the Euro would help stabilize the country's economy. In 2008, the United Kingdom used anti-terrorism laws to freeze $4 billion in assets held by Landsbanki after its takeover by the Icelandic government.

Full post as published by JURIST - The Paper Chase on April 12, 2010 (boomark / email).