Fourteen Awarded Order of the Falcon

Icelandic President Guðni Th. Jóhannesson awarded 14 individuals with the Order of the Falcon yesterday, June 17 (Icelandic National Day). The Order of the Falcon is the only chivalric order in Iceland, originally founded by King Christian X of Denmark and Iceland on July 3, 1921. Honorees are selected by the President of Iceland and a five-member council.

This year’s recipients include ornithologist and falcon enthusiast Ólafur Karl Neilsen for his research into Icelandic birdlife; former Governor of the Central Bank Már Guðmundsson for his work on behalf of the government; producer and activist Rakel Garðarsdóttir for her efforts on raising awareness of food waste and environmental issues; and filmmaker Egill Eðvarsson, for his contributions to television programming and Icelandic cinema.

Complete List of Honorees:

  1. Már Guðmundsson, economist and former Governor of the Central Bank
  2. Dagný Kristjánsdóttir, professor of Icelandic literature
  3. Edda Jónsdóttir, visual artist and gallerist
  4. Egill Eðvarðsson, filmmaker
  5. Felix Valsson, anaesthetist and intensive care physician
  6. Jón Kristinn Cortez, choir director and music instructor
  7. Lára Stefánsdóttir, headmaster
  8. Margrét Kristmannsdóttir, former Deputy Chair of SA (Confederation of Icelandic Enterprise)
  9. Ólafur Flóvenz, geologist
  10. Ólafur Karl Nielsen, ornithologist and Chair of BirdLife Iceland
  11. Páll Halldórsson, pilot-in-command
  12. Rakel Garðarsdóttir, activist
  13. Rósa Björg Jónsdóttir, library and information specialist
  14. Þorbjörg Helgadóttir, former dictionary editor at the Arnamagnæan Institute in Copenhagen.

 

The award is bestowed twice a year, on January 1 and June 17.

Central Bank Was Wrong to Grant Loan During Banking Collapse

Central Bank of Iceland

Central Bank of Iceland Director Már Guðmundsson says that the institution made the wrong decision when it granted a loan to Kaupþing Bank during the banking collapse, RÚV reports. The Central Bank has published a report on the controversial ISK 75 billion ($605m/541m) loan, which it granted to Kaupþing Bank just days before it went bankrupt in the 2008 economic crisis. The report states, however, that no laws were broken in the granting of the loan.

The Central Bank of Iceland granted Kaupþing Bank an ISK 75 billion ($605m/541m) loan on October 9, 2008, just before emergency trading restrictions were put in place by the government. Kaupþing went bankrupt only two days later, leading to a loss for the Central Bank purportedly amounting to ISK 35 billion ($282m/€252m). The decision to grant the loan proved controversial and the reasoning behind it opaque.

No written documentation

The main objective of the recently published report was to clarify the reasoning behind the loan. It has been in the works since 2015 and its release was repeatedly postponed. The report states that information on the loan is lacking, making it difficult to determing the reasoning behind it. Notably, there is no written documentation that Kaupþing requested a loan in the first place. There is also no evidence that the Central Bank’s Board of Directors approved the loan. There is, however, no doubt that the decision was made by the Board in consultation with then-Prime Minister Geir H. Haarde.

Geir was highly criticised for his response to the banking collapse and tried by the High Court in Iceland, which convincted him on one the four charges, namely, not having held cabinet meetings on important matters in the lead-up to the economic collapse. A recorded telephone conversation reveals that Geir did not expect the loan granted to Kaupþing to be repaid.

Hindsight and lessons

Although hindsight reveals that granting Kaupþing a loan was the wrong decision, Már asserted that it was not clear at the time the decision was made. The loan would have been justified had it succeeded in rescuing the bank. “It’s not always appropriate to use the metrics of information of later times when assessing particular decisions. In the financial whirlwind that raged around the world then, banks and central banks were fighting to stay afloat and other authorities came to their aid.”

Már stated that two important lessons can be learned from the situation. The first is that regulations on the granting of emergency loans need to be better clarified. The second is that shares in foreign banks are not suitable collateral for such loans, as it can quickly become worthless in a financial crisis.

Pay Raises of State-Owned Bank’s CEO Draw Criticism

Halldór Benjamín

Halldór Benjamín, director of the Confederation of Icelandic Enterprise, SA, is highly critical of the Landsbankinn bank council’s decision to raise the pay of its chief executive officer Lilja Björk Einarsdóttir twice in one year, Fréttablaðið reports. He accuses the council of being tone-deaf.

The CEO of Landsbankinn bank, Lilja Björk Einarsdóttir, received a pay raise of 1.2 million ISK in July 2017 and then another increase of 550 thousand ISK in early 2018, making her total salary 3.800.000 ISK a month.

The pay raise is now being questioned by union leaders and the public, after Már Guðmundsson, governor of the Central Bank of Iceland, warned against excessive pay raises in a recent video, saying they would inevitably lead to increased interest rates and unemployment in the country. Már’s remarks have caused debate and now Lilja Björk’s pay raises are being questioned.

“The news of her pay raises are bad,” Halldór says. “The fact that this is happening in a state-owned bank, going against the will of its owner makes it both an unwise and indefensible decision, in my opinion. This rate of pay raise does in no way represent norms in the job market. Luckily, this kind of behaviour is an exception amongst the largest companies in Iceland. That, however, doesn’t lessen its seriousness or the lack of judgement that is revealed by this decision.”

Katrín Jakobsdóttir, Iceland’s Prime Minister has also chimed in, calling the the pay raises “incomprehensible”.

“This doesn’t affect the leeway of companies in the open market, of course,” Halldór adds. “Most companies in Iceland are small or medium sized, and the economy is now slowing down. The economic upswing is over, and pay agreements must take that into consideration. We at SA have in recent years recommended that pay raises of CEOs are in harmony with other raises.”

 

Central Bank Warns Against Pay Raises

Central Bank of Iceland

Már Guðmundsson, governor of the Central Bank of Iceland, warns against excessive pay raises in a new video, saying they would inevitably lead to increased interest rates and unemployment in the country. His words are expected to ruffle some feathers amongst union leaders who are now working to do exactly that.

This morning, the bank revealed its plans to keep official interest rates the same as they’ve been. “We are now experiencing economic challenges due to a shrinking tourist industry,” Már said. “More companies are looking to reduce staff rather than increase and inflation is expected to rise due to a reduction in the value of the Icelandic króna.”

“The good news is that inflation predictions have lowered slightly after a rise just before Christmas, and due to this the Central Bank’s real interest rates have increased.”

Már then seemingly directed his words to union leaders, saying that “opposing forces have influenced our decision not to change official interest rates,” adding that “we shouldn’t experience capital decay unless we suffer any new blows. Strikes and pay raises that exceed our capacity would be exactly that kind of blow. The result would be increased interest rates and unemployment. Let’s try to make sure that doesn’t happen.”

Asked about the current redundancy in apartments in Reykjavík, Már said that a cooling in the housing market was expected after the past years’ upswing, RÚV reports. “I’m not that worried at the moment. We always expected things to eventually slow down, possibly lowering the króna’s high exchange rate and, in turn, lowering housing prices. This has come to pass.”