Treasury Lost Out on “Significant Funds” with Íslandsbanki Sale

A professor at the University of Iceland’s School of Business has told RÚV that the state treasury forfeited “significant funds” in its sale of Íslandsbanki shares last March. Minister of Finance Bjarni Benediktsson rejects the idea that a higher share price could have been secured without “sacrificing other interests.”

Losses “obvious” shortly after markets opened

Dr Ásgeir Brynjar Torfason is an assistant professor at the University of Iceland’s School of Business. He focuses on accounting and finance. In an interview with RÚV earlier today, Ásgeir stated that the government had lost out on “significant funds” in its sale of Íslandsbanki shares last March. The losses were obvious shortly after the markets opened on the following morning.

Yesterday, the National Audit Office released a report concerning the sale. The report reviewed, among other things, the dissemination of information prior to the sale, the determination of the share price, the selection process for determining qualified investors, and the reliance on outside consultants.

The report – focusing on the technical execution of the sale and valuation of shares – did not pass judgement on whether any laws had been broken; the opposition has demanded that a parliamentary committee be entrusted with such an investigation.

Concerning such an investigation, Ásgeir Brynjar stated that it was important for independent institutions – such as the parliamentary commissioner, the National Audit Office, and the Financial Council – to supervise such a process:

“These institutions play a hugely important role for parliament, and given that the National Audit Office has brought these facts – which we suspected or feared – to light, it’s clear, after a thorough review, that the execution of the sale wasn’t sufficiently well handled … it’s as if the sellers were trying to get rid of something that they didn’t want to own in the quickest possible way, which isn’t good when you’re handling publicly-owned entities and trying to secure the best possible price.”

Welcomes the publication of the report, constructive criticism

In a separate interview with RÚV, Minister of Finance Bjarni Benediktsson stated that he did not want to place himself on a high horse and mete out responsibility following the National Audit Office’s report. According to Bjarni, there wasn’t much in the report that suggested wrongdoing on behalf of his Ministry.

“There were, however, many things, which were asserted last spring – that buyers had been hand-picked or that the bank had been subject to a fire sale, for example – which have been rejected.”

Bjarni added that it was good that the report had finally been published and that the many considerations detailed in the report were “unsurprising” given that they had been discussed last spring: “Dissemination of information in the run-up to the sale could have been better.” Bjarni also stated that the report made many useful points and that he welcomed any constructive criticism.

Finally, the Minister of Finance rejected the idea that the report was an indictment on the execution of the sale and stated that he “remained focused on the big picture,” namely that they had been successful in selling shares in the bank, securing diverse ownership, and a reasonable share price. “The sale is not above criticism,” Bjarni added, “but I think that it was largely successful.”

As noted in the RÚV article, the authors of the report suggest that a higher share price could have been secured, a suggestion that Bjarni rejects without sacrificing other interests: “We had several aims, among them diverse ownership. We got a pretty good price, and the report indicates that the financial interests of the government were safeguarded.”

Bjarni added that after the sale the government continues to be the majority owner of the bank, which now enjoys a higher valuation: “The fact that we managed to sell of over ISK 100 billion ($693 million / €672 million) with this group of owners, I just say: ‘Well done.’”

Execution “Not Good Enough,” Minister of Business states

Vísir also published an interview with Minister of Culture and Business Affairs Lilja Alfreðsdóttir today. Lilja stated that it was clear that the execution of the sale was “not good enough” and that this was confirmed by the National Audit Office’s excellent report. Lilja added that it was disappointing that the experts had not handled the sale, which shouldn’t be overly complicated, in a better way.

“The execution wasn’t good enough. We can see that the valuation should have been better as well as the execution of the sale, for which the Icelandic State Financial Investments are responsible,” Lilja observed.

PM Katrín Jakobsdóttir has also weighed in on the Audit Office’s report: “First and foremost, I’m disappointed in the execution itself: one of it being the price, and the difference therein. But first and foremost I’m disappointed in how this could affect trust in Iceland.”