“Oddsson claimed that individuals of nationwide fame were involved with some of these companies, both from the cultural and political arenas”

Oddsson’s grip on power is remarkable given that he oversaw the unfolding debacle of Iceland’s financial system. Does this give us a clue why?

Iceland Review

25t February, 2009

Governor and chairman of the Central Bank of Iceland Davíd Oddsson stated in an interview on RÚV’s news magazine Kastljós yesterday that several hundred private limited companies had received special services in the banking system, calling for an investigation into their operations.

Oddsson claimed that individuals of nationwide fame were involved with some of these companies, both from the cultural and political arenas, Morgunbladid reports.

Central Bank governor and chairman Davíd Oddsson. Copyright: Icelandic Photo Agency.

“It has been sidelined. I think it is completely unacceptable how it has been handled,” Oddsson said. He explained that people had come to him privately with information on various cases that need to be investigated thoroughly and that they had confided in him because they didn’t trust anyone else.

This is how he had found out about the private limited companies that had received special services, Oddsson described.

In some cases, discussions that had taken place in relation to these services had not been recorded, as is mandatory, Oddsson stated, discussed instead over cell phones or by other means.

Oddsson also said on Kastljós that in February last year the Central Bank had hired “one of Europe’s most qualified financial stability experts” to work on a contingency plan. The expert’s report had expected the banking system to “go bankrupt” in October 2008.

Oddsson stated that the report had been sent to the government. The Central Bank is currently looking into whether the report will be released to the media.

Furthermore, Oddsson claimed that he had requested to attend a cabinet meeting on September 30 where he told the government, “I believe that the Icelandic banking system in its entirety will collapse within two to three weeks.”

The government’s reaction to these words was that it was unnecessary to “dramatize” things, Oddsson stated. He had then repeated his words, saying that it was impossible to “dramatize” this account.

Moreover, Oddsson commented on the UK government’s implementation of the anti-terrorism legislation, claiming that transactions worth GBP 400 and 800 million (USD 582 million and 1.2 billion, EUR 454 and 907 million) from Kaupthing’s subsidiary in the UK, Singer & Friedlander, had influenced the decision.

Oddsson argued that British authorities may have been concerned that Landsbanki might do the same, relocating funds from its subsidiary in the UK, and therefore invoked the anti-terrorism legislation.

With regard to Kaupthing, Oddsson revealed that he had sent a letter to the police on December 2, 2008 to inform them of the circumstances of the acquisition of Sheik Mohamed bin Khalifa Al-Thani of Qatar in shares in Kaupthing a few months earlier.

The Financial Supervisory Authority (FME) is currently investigating suspicions that Kaupthing financed the acquisition itself by granting a loan to Al-Thani.

Following the investigation, five employees of New Kaupthing were laid off, but director Finnur Sveinbjörnsson said it had not had anything to do with Oddsson’s letter to the police, claiming he had not known that Oddsson had sent such a letter.

The Unit for the Investigation and Prosecution of Economic and Environmental Crimes at the National Commissioner of the Icelandic Police confirmed that Oddsson had sent the letter. Previously, the letter was said to have arrived from an anonymous source.

Click here to read more about Al-Thani and here to read more about the government’s bill on changes to the Central Bank’s senior management, which, once passed, will automatically make Oddsson redundant.