The 2008–2009 Icelandic financial crisis is a major ongoing economic crisis in Iceland that involves the collapse of all three of the country's major banks following their difficulties in refinancing their short-term debt and a run on deposits in the United Kingdom. Relative to the size of its economy, Iceland’s banking collapse is the largest suffered by any country in economic history.
In late September 2008, it was announced that the Glitnir bank would be nationalised. The following week, control of Landsbanki and Glitnir was handed over to receivers appointed by the Financial Supervisory Authority (FME). Soon after that, the same organisation placed Iceland's largest bank, Kaupthing, into receivership as well. Commenting on the need for emergency measures, Prime Minister Geir Haarde said on 6 October, "There a very real danger ... that the Icelandic economy, in the worst case, could be sucked with the banks into the whirlpool and the result could have been national bankruptcy." He also stated that the actions taken by the government had ensured that the Icelandic state would not actually go bankrupt. At the end of the second quarter 2008, Iceland's external debt was 9.553 trillion Icelandic krónur (€50 billion), more than 80% of which was held by the banking sector. This value compares with Iceland's 2007 gross domestic product of 1.293 trillion krónur (€8.5 billion). The assets of the three banks taken under the control of the FME totaled 14.437 trillion krónur at the end of the second quarter 2008.
The financial crisis has had serious consequences for the Icelandic economy. The national currency has fallen sharply in value, foreign currency transactions were virtually suspended for weeks, and the market capitalisation of the Icelandic stock exchange has dropped by more than 90%. As a result of the crisis, Iceland is currently undergoing a severe economic recession; the nation's gross domestic product decreased by 5.5% in real terms in the first six months of 2009. The full cost of the crisis cannot yet be determined, but already it exceeds 75% of the country's 2007 GDP. Outside Iceland, more than half a million depositors (far more than the entire population of Iceland) found their bank accounts frozen amid a diplomatic argument over deposit insurance. German bank BayernLB faces losses of up to €1.5 billion, and has had to seek help from the German federal government. The government of the Isle of Man will pay out half of its reserves, equivalent to 7.5% of the island's GDP, in deposit insurance.
Development
Currency
The Icelandic króna had declined more than 35% against the euro from January to September 2008. Inflation of consumer prices was running at 14%, and Iceland's interest rates had been raised to 15.5% to deal with the high inflation.
On the Wednesday night, 8 October , the Central Bank of Iceland abandoned its attempt to peg the Icelandic króna at 131 krónur to the euro after trying to set this peg on 6 October. By 9 October, the Icelandic króna was trading at 340 to the euro when trading in the currency collapsed due to the FME's takeover of the last major Icelandic bank, and thus the loss of all króna trade 'clearing houses'. The next day, the central bank introduced restrictions on the purchase of foreign currency within Iceland. From 9 October to 5 November, the European Central Bank quoted a reference rate of 305 krónur to the euro.
The Central Bank of Iceland set up a temporary system of daily currency auctions on 15 October to facilitate international trade. The value of the króna is determined by supply and demand in these auctions. The first auction sold €25 million at a rate of 150 krónur to the euro. Commercial króna trading outside Iceland restarted on 28 October, at an exchange rate of 240 krónur to the euro, after Icelandic interest rates had been raised to 18%. The foreign exchange reserves of the Central Bank of Iceland fell by US$289 million during October 2008.
During November, the real exchange rate (discounting inflation) of the Icelandic króna, as quoted by the Central Bank of Iceland, was roughly one-third lower than the average rate from 1980–2008, and 20% lower than the historical lows during the same period. The external rate as quoted by the European Central Bank was lower still. On the last trading day of the month, 28 November, the Central Bank of Iceland was quoting 182.5 krónur to the euro, while the European Central Bank was quoting 280 krónur to the euro.
On 28 November, the Central Bank of Iceland and the Minister for Business Affairs agreed a new set of currency regulations, replacing the central bank's restrictions imposed early on in the crisis. Movements of capital to and from Iceland were banned without a license from central bank. It is estimated that foreign investors hold some €2.9 billion in króna-denominated securities, popularly known as "glacier bonds".
The foreign exchange rules also oblige Icelandic residents to deposit any new foreign currency they receive with an Icelandic bank. There is anecdotal evidence that some Icelandic exporters had been operating an informal offshore foreign exchange market, trading pounds and euros for krónur outside the control of any regulator and starving the onshore market of foreign currency. Hence the central bank had to sell €124 million of currency reserves in November 2008 to make up the difference, compared with an estimated trade surplus of €13.9 million.
The last currency auction was held on 3 December. The domestic interbank foreign exchange market reopened the following day with three market makers, all of them government-owned. On the first two days of domestic trading, the króna climbed to 153.3 to the euro, up 22% against the last currency auction rate.
In January 2009, the exchange rate of Icelandic króna (ISK) against Euro seemed to be more stabilized compared with the situation in October 2008, with the lowest rate at 177.5 ISK per EUR on January 1, January 3, and January 4, 2009, and the highest at 146.8 on January 30, 2009. In the meantime, however, Iceland's 12-month inflation in January 2009 climbed to a record high of 18.6%.
Banks
On 29 September 2008, a plan was announced for the bank Glitnir to be nationalised by the Icelandic government with the purchase of a 75% stake for €600 million. The government stated that it did not intend to hold ownership of the bank for a long period, and that the bank was expected to carry on operating as normal. According to the government, the bank "would have ceased to exist" within a few weeks if there had not been intervention. It later turned out that Glitnir had US$750 million of debt due to mature on 15 October. However, the nationalization of Glitnir never went through, as it was placed in receivership by the Icelandic Financial Supervisory Authority (FME) before the initial plan of the Icelandic government to purchase a 75% stake had been approved by shareholders.
The announced nationalisation of Glitnir came just as the United Kingdom government was forced to nationalise Bradford & Bingley and to sell its retail operations and branch network to Grupo Santander. Over the weekend of 4–5 October, British newspapers carried many articles detailing the nationalisation of Glitnir and the high leverage of Iceland's other banks. Influential BBC business editor Robert Peston published an opinion piece on the banks, stating that debt insurance for Kaupthing, the largest bank in Iceland, required a premium of £625,000 to guarantee the return of £1 million: "the worst case of financial BO I've encountered in some time" was his graphic description. The Guardian said "Iceland is on the brink of collapse. Inflation and interest rates are raging upwards. The krona, Iceland's currency, is in freefall". These articles spooked investors discussing Icesave (the brand name of Landsbanki in the UK and the Netherlands) in online forums and many started moving their savings out of the Internet bank. Problems with access to the site hinted at a run on savings.
On 6 October, a number of private interbank credit facilities to Icelandic banks were shut down. Prime Minister Geir Haarde addressed the nation, and announced a package of new regulatory measures which were to be put to the Althing, Iceland's parliament, immediately, with the cooperation of the opposition parties. These included the power of the FME to take over the running of Icelandic banks without actually nationalising them, and preferential treatment for depositors in the event that a bank had to be liquidated. In a separate measure, retail deposits in Icelandic branches of Icelandic banks were guaranteed in full. The emergency measures had been deemed unnecessary by the Icelandic government less than 24 hours earlier.
That evening, the Guernsey subsidiary of Landsbanki went in
LiveAuctioneers.com signs 500th auction-house client
New York auction-house, Guernsey's, is signed as LiveAuctioneers' 500th client. The first Guernsey’s event utilizing LiveAuctioneers’ services will be the Dec. 5-6 auction of ...
Smuggled dinosaur eggs withdrawn from auction. 24/06/2004. ABC News ...
"We made a decision ... to remove them from the auction," Guernsey's auction house president Arlan Ettinger said. He said the amicable decision was taken once the auction house was ...
Guernsey's - the unique at auction
About Guernsey's. For three decades Guernsey's has built a reputation as an auction house known for the presentation of extraordinary properties.
Guernsey's - the unique at auction
Statement from Guernsey’s Regarding Pugliese Collection Auction ...
For complete information, please visit guernseys.com or contact the auction house in New York at 212-794-2280 or auctions@guernseys.com. On Friday afternoon, February 15, Guernsey ...
Guernsey’s Pugliese Pop Culture Collection Auction: Terms and ...
While Guernsey’s is a New York auction house, this sale is taking place in Las Vegas. 15. Should any disputes arise pertaining to purchases at this auction or any other matters ...
New LiveAuctioneers.com signs 500th auction-house client
New York auction-house, Guernsey's, is signed as LiveAuctioneers' 500th client. The first Guernsey’s event utilizing LiveAuctioneers’ services will be the Dec. 5-6 auction of ...
CNN Transcript - Morning News: Guernsey's Auction House President ...
Morning News Guernsey's Auction House President Previews Unsual Objects Aired October 26, 2000 - 11:52 a.m. ET THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND ...
Live Auctioneers
The Vintage Tennis Auction - Day 1 - Sept. 11. Guernsey's - Sep 11th, 2009 ... become a live auctioneer auctioneer testimonials auction house login
Antiques and the Arts Auction Listing -- Guernseys Location:The United ...
For the full story, go to www.guernseys.comor give the auction house a call (212-794-2280). By the way, if you've got a great bit of tennis history stored away in your attic ...