Iceland’s Prime Minister Geir H. Haarde says that he had suggested to the leaders of Landsbanki and Glitnir banks in mid-August that they should consider a merger. His proposal was rejected on the grounds that the banks were in a strong position.
“In August I made an effort to initiate discussions of a merger between Glitnir and Landsbanki. That idea was presented by a person on my behalf to all of these individuals [leaders of Landsbanki] but they were not interested in it at the time,” Haarde told Fréttabladid.
The prime minister is responding to claims made by Björgólfur Thor Björgólfsson, one of Landsbanki’s biggest shareholders, and other leaders of the bank that they had proposed a merger between Glitnir, Landsbanki and Straumur Investment Bank to prevent their bankruptcy after the state acquired a 75 percent stake in Glitnir on September 29.
“Björgólfur Thor for example believed [in August] that [Landsbanki’s] position was so strong that such ideas were not timely,” the prime minister added. Six weeks later Björgólfsson and his associates presented their merger ideas to Haarde.
“I am not in a position to evaluate whether a merger in August would have prevented the downfall of the banks,” Haarde said. “But at the time the Lehman bank had not gone bankrupt and loan opportunities were still open.”
“Therefore I believe that those who are submitting some documents now have to take a good look at t themselves. I just say it the way it is,” Haarde added, referring to documents on Landsbanki’s ideas of a merger covered in Fréttabladid yesterday.
Björgólfsson and Landsbanki’s two CEOs, Halldór J. Kristjánsson and Sigurjón Árnason, presented these documents to the prime minister on September 29, proposing that the state contribute ISK 100 billion (USD 860 million, EUR 650 million) towards the merger. The state would instead hold a governing share in the new bank.
“That plan was reviewed by me and the Central Bank. Judging by the numbers presented, it was assumed that the owners of Landsbanki and Straumur would own two thirds of the merged bank in exchange for the state’s contribution. The owners of Glitnir would have almost disappeared from the picture. The idea was totally unacceptable,” Haarde stated.
Haarde added that if by publishing the documents from their meeting, the leaders of Landsbanki were suggesting that the government or the Central Bank had wanted the banks to go bankrupt; they were making cheap and false accusations.
“We did everything we could to prevent the bankruptcy of the banks. The truth is that they couldn’t refinance themselves. The path that we took, to introduce emergency law and to go straight to work after that, saved the things that could be saved,” the prime minister concluded.
Photo of Prime Minister Geir H. Haarde by Sigurdur Jökull Ólafsson. Copyright: IPA.