Iceland’s largest bank, Kaupthing, allegedly lent ISK 84 billion (USD 660 million, EUR 500 million) in total to a selected group of clients weeks before the collapse of the country’s banking system, without approval from the bank’s loan committee.
According to Morgunbladid’s sources, these clients include Ólafur Ólafsson, the second-largest shareholder in Kaupthing.
This selected group of clients allegedly received loans because of business contracts they were making through foreign companies in their ownership, confident that they would deliver profits.
The risk was assumed by Kaupthing and the bank’s shareholders, but not by the debtors themselves, who were expecting profits of up to ISK 10 billion (USD 78 million, EUR 59 million).
Parts of these profits were supposed to be paid to Kaupthing in advance, but that didn’t work out as planned.
Morgunbladid states that Kaupthing’s loan committee had neither approved these loans before they were granted nor the bank’s funding of Sheik Mohamed bin Khalifa Al-Thani’s five-percent acquisition in the bank.
According to regulations, the loan committee of Kaupthing’s board was obligated to approve the loans before they were granted because the loan granter was the party assuming risk.
Morgunbladid reports that Kaupthing’s loan committee held a meeting one week before the emergency law was passed where a list of loans that had not been approved yet was submitted and that the committee approved them for formal reasons.
Copyright of photo: Icelandic Photo Agency.