April 9 is a big day for the Icelandic people as that is when the Icesave referendum is scheduled. There is a good chance that the nation will vote against the referendum, which means that it will be up to the courts to decide whether or not Iceland is obligated to take responsibility for the Icesave affair. Or will it?
Following the financial/economic collapse, Icelandic banks lost credibility in the international markets and so did Iceland. The arguments in favor of Icesave claim that a YES vote will restore that credibility whereas the NO arguments claim that it will have no effect and cause more damage in the long-term. According to former Minister Gylfi Magnusson in an article published today (in Icelandic), the obligation that falls on the government is estimated to be around 30 billion (or 230, there seems to be quite a range). Against that, consider the fact that the three banks reported net income of 69.2 billion 2010:
- Arion: 12.6 billion
- Islandsbanki: 29.4 billion
- Landsbanki (NBI): 27.2 billion
In the event that the referendum receives a majority of NO votes, Iceland will enter into a period of uncertainty. As a counter move, is it possible for the banks to step in and negotiate a conclusion directly with the injured parties (UK and Netherlands) against the reopening of credit lines? Legal issues would have to be addressed since the new banks are not responsible for the debt, but doing so could restore credibility to some extent and resolve this situation before it is taken to court. The banks toppled the economy and with the same people in place rebuilding them, the banks should do everything in their power to restore it. After all, the government is a stakeholder in all of them through ISFI so it should perhaps explore that option instead of attempting to roll liability onto the nation:
ISFI (Icelandic State Financial Investments) is the state’s holding company on the financial market, while the reconstruction and restoration of the financial system is still in progress. ISFI aims to ensure that the administration of the holdings is professional and reliable. ISFI (Icelandic State Financial Investments) is the state’s holding company on the financial market, while the reconstruction and restoration of the financial system is still in progress. ISFI aims to ensure that the administration of the holdings is professional and reliable.
ISFI aims to restore and reconstruct a dynamic domestic financial market and promoting natural and effective competition in the market, to guarantee transparency in all decisions regarding the state’s participation in financial activities and ensure an effective dissemination of information to the public.
Something to think about.