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Did Darling know about the Icelandic bank collapse?

November 11, 2008 by admin  
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Earlier this month UK consumers were shocked after the collapse of Icelandic bank Landsbanki left many fearing for the savings that they had placed in UK branches of the bank. Many had been persuaded to put their cash in Icelandic accounts such as Icesave over the past couple of years due to the high rates of interest that were being offered. In fact Icesave spent a considerable amount of time at the top of the best buy tables because of the interest rates offered.

There is now speculation over whether the Chancellor of the Exchequer, Alistair Darling, was already aware of the dire problems that the ailing bank was facing. Reports have suggested that Darling had spoken to Icelandic authorities expressing his concerns about the bank, and that he had been sceptical about the reassurances provided by Icelandic officials when he tackled them over the security of the bank.

Mr Darling is said to have stated: ‘We doubted what we were being told then and I am afraid we were right.’

Vince Cable from the Liberal Democrats said: ‘If it’s true that the Government did know all about these problems and doubted Icelandic reassurances, this shifts the balance of responsibility. Mr Darling has to explain himself.’

Mr Darling also reportedly said to the Icelandic Finance Minister: ‘When I met your colleague and others, what we were told turns out not to have been right. I was very concerned about the London banking position and they kept saying there was nothing to worry about. With the position we are now in, there will be a lot of people in this country who put money in and who stand to lose an awful lot of money.’

The Treasury did not disclose when the original meeting between Darling and Icelandic authorities took place, but did state: ‘It was not necessarily the case that the Icelandic banks were going to go under at that stage but if Alistair had gone public on this earlier, it would have led to a collapse of the banks.’

An official from the Treasury also said: ‘The UK authorities acted swiftly and decisively to protect UK retail depositors and ensure a fair deal for creditors.’

The transcript of the conversation between Darling and Icelandic officials was released in Iceland – something that the UK Treasury has expressed anger over.

After being told that the Icelandic compensation fund had insufficient funds in it Darling is said to have stated: “We would have to explain to people here what has happened. It will, of course, no doubt, have repercussions for others. It really is a very, very difficult situation where people thought they were covered and then they discover the insurance fund has got no money in it.”

Tags: amount of time, uk, banks, deal, Icelandic financial crisis, official, iceland banks, darling

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