It would be beneficial to have at least one trusted foreign owner of an Icelandic bank, according to a prominent economics professor. Existing laws on ownership of financial companies should ensure that foreign ownership proved positive, whereas it is not a good idea for the pension funds to have powerful shares in banks, he warns.
Recently doubts have been surfacing, among others from Frosti Sigurjónsson, chair of the parliamentary economics and trade committee, about the wisdom of selling Icelandic banks to foreigners. Foreign owners could suck billions in currency out of the economy, they warn.
Reykjavík University economics professor Friðrik Már Baldursson disagrees, saying the nationality of bank owners is unimportant compared to their trustworthiness and responsibility, and that it is possible to properly supervise the banks’ operations. He believes that current laws should ensure that this is the case, RÚV reports.
“And if this is all in place then I really think it could only be beneficial to have foreign stakeholders in this little, and in many ways closed, community we have here,” Friðrik says.
On how it might all work, Friðrik says that a powerful international bank, possibly from Scandinavia, could take on one of the Icelandic banks as a subsidiary. On the other hand, it is by no means certain a foreign bank would want to get involved in Iceland.
Capital controls remain a major barrier to investment, but they are in the process of being dismantled, and many other economic indicators in the country are looking good.
On the subject of domestic investors and bank owners, Friðrik says: “I don’t think we want to repeat the game of selling investments in banks in Iceland to some tight-knit groups—groups which have a lot of other activities on the go, meaning that conflicts of interest emerge.”
It is also not ideal for the pension funds to own banks: “They are big shareholders in a different sector, so it is unfortunate for them to mix together,” he says.
It is extremely important for the Icelandic economy to get the sale of the banks right this time. “We have been through maybe the biggest banking crisis any country has ever been through and I think we should be very careful this time round.”
