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> When it all went belly up those savers realized these Icelandic banks were not quite the same thing as UK banks and Iceland refused to make depositors whole.

by avar 8y ago

> When it all went belly up those savers realized these Icelandic banks were not quite the same thing as UK banks and Iceland refused to make depositors whole. That's a very inaccurate recalling of history which you can see from reading the intro to the relevant Wikipedia article[1] and a summary of the EFTA Court's decision on the matter[2]. The case centered around a dispute between mainly Britain, The Netherlands and Iceland about how to interpret certain EFTA regulations. Iceland's position ultimately prevailed in court. 1. https://en.wikipedia.org/wiki/Icesave_dispute https://en.wikipedia.org/wiki/Icesave_dispute 2. https://en.wikipedia.org/wiki/EFTA_Surveillance_Authority_v_Iceland https://en.wikipedia.org/wiki/EFTA_Surveillance_Authority_v_...

hn_throwaway_99 8y ago
I read both your links, and I don't think my characterization is an inaccurate recalling of history at all. From the second and third paragraphs of that wikipedia page: ---- When Landsbanki was placed into receivership by the Icelandic Financial Supervisory Authority (FME), 343,306 retail depositors in the UK and Netherlands that held accounts in the "Icesave" branch of Landsbanki lost a total of €6.7bn of savings. Because no immediate repayment was expected by any Icelandic institutions, the Dutch and British national deposit guarantee schemes covered repayment up to the maximum limit for the national deposit guarantees – and the Dutch and British states covered the rest.[1] The Icelandic state refused to take on this liability on behalf of the guarantee fund. Originally this was because the state lost funding access at credit markets due to the Icelandic financial crisis, but later proposed bilateral loan guarantees for repayment were rejected by Icelandic voters. ---- At the end of the day there were a ton of foreign depositors who felt like these were just normal savings accounts with higher rates, but when the financial crisis came they were in a much more difficult position than people who used domestic banks.
- avar 8y ago
  I took issue with the abrupt ending of "refused to make depositors whole[...]". That sounds like unilateral action, whereas what happened was that there was a dispute about how deposit guarantees should be treated within the EFTA agreement, and all parties involved ultimately didn't insist on what they individually felt like doing, but followed the rulings of the EFTA Court. But yes, it was a big learning experience for everyone involved. But that's exactly the reason it's important to make the distinction. It's not that Iceland was unilaterally callous and pursuing those relatively small amounts was deemed small potatoes. Rather, EFTA rules were clarified in a way that would also apply to e.g. French depositors in Danish banks should a similar Danish default occur in the future. What happened with domestic depositors is that the Icelandic state was free to selectively grant benefits to whomever it pleased once it became clear that its banks weren't subject to the EFTA deposit guarantees for anyone. That's also an important distinction, and is why the action didn't violate the rules of the trade area.

by avar 8y ago

hn_throwaway_99 8y ago

I read both your links, and I don't think my characterization is an inaccurate recalling of history at all. From the second and third paragraphs of that wikipedia page: ---- When Landsbanki was placed into receivership by the Icelandic Financial Supervisory Authority (FME), 343,306 retail depositors in the UK and Netherlands that held accounts in the "Icesave" branch of Landsbanki lost a total of €6.7bn of savings. Because no immediate repayment was expected by any Icelandic institutions, the Dutch and British national deposit guarantee schemes covered repayment up to the maximum limit for the national deposit guarantees – and the Dutch and British states covered the rest.[1] The Icelandic state refused to take on this liability on behalf of the guarantee fund. Originally this was because the state lost funding access at credit markets due to the Icelandic financial crisis, but later proposed bilateral loan guarantees for repayment were rejected by Icelandic voters. ---- At the end of the day there were a ton of foreign depositors who felt like these were just normal savings accounts with higher rates, but when the financial crisis came they were in a much more difficult position than people who used domestic banks.

avar 8y ago
I took issue with the abrupt ending of "refused to make depositors whole[...]". That sounds like unilateral action, whereas what happened was that there was a dispute about how deposit guarantees should be treated within the EFTA agreement, and all parties involved ultimately didn't insist on what they individually felt like doing, but followed the rulings of the EFTA Court. But yes, it was a big learning experience for everyone involved. But that's exactly the reason it's important to make the distinction. It's not that Iceland was unilaterally callous and pursuing those relatively small amounts was deemed small potatoes. Rather, EFTA rules were clarified in a way that would also apply to e.g. French depositors in Danish banks should a similar Danish default occur in the future. What happened with domestic depositors is that the Icelandic state was free to selectively grant benefits to whomever it pleased once it became clear that its banks weren't subject to the EFTA deposit guarantees for anyone. That's also an important distinction, and is why the action didn't violate the rules of the trade area.