Iceland's Kaupthing Bank Granted High Loans Weeks before Collapse

[Magda Hassan]

More business as usual.


Kaupthing Granted High Loans Weeks before Collapse
Iceland’s largest bank, Kaupthing, allegedly lent ISK 84 billion (USD 660 million, EUR 500 million) in total to a selected group of clients weeks before the collapse of the country’s banking system, without approval from the bank’s loan committee.
According to Morgunbladid’s sources, these clients include Ólafur Ólafsson, the second-largest shareholder in Kaupthing.
This selected group of clients allegedly received loans because of business contracts they were making through foreign companies in their ownership, confident that they would deliver profits.
The risk was assumed by Kaupthing and the bank’s shareholders, but not by the debtors themselves, who were expecting profits of up to ISK 10 billion (USD 78 million, EUR 59 million).
Parts of these profits were supposed to be paid to Kaupthing in advance, but that didn’t work out as planned.
Morgunbladid states that Kaupthing’s loan committee had neither approved these loans before they were granted nor the bank’s funding of Sheik Mohamed bin Khalifa Al-Thani’s five-percent acquisition in the bank.
According to regulations, the loan committee of Kaupthing’s board was obligated to approve the loans before they were granted because the loan granter was the party assuming risk.
Morgunbladid reports that Kaupthing's loan committee held a meeting one week before the emergency law was passed where a list of loans that had not been approved yet was submitted and that the committee approved them for formal reasons.

[David Guyatt]

It would be interesting to know to whom the loans were paid and whether they are required (and will be forced to repay) the loans, as otherwise it will look as though the funds were knowingly drained from the bank prior to a government rescue package.

That, I imagine, would make it a criminal act?

[Peter Lemkin]

That, I imagine, would make it a criminal act?

Almost the definition of banking, it seems....

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[Magda Hassan]

It would be interesting to know to whom the loans were paid

One of them was paid to Ólafur Ólafsson. He is the banks 2nd largest share holder. Another was Sheik Mohamed bin Khalifa Al-Thani (a long way from home?) who was buying 5% of the bank with the bank's money.

and whether they are required (and will be forced to repay) the loans

The risk was assumed by Kaupthing and the bank’s shareholders, but not by the debtors themselves.

Looks a bit criminal to me. :ridinghorse: