Íslandsbanki Loses Large Customers Following Scandal

VR Union, the Icelandic Confederation of Labour (ASÍ), and the Consumers’ Association of Iceland have all discontinued their business with Íslandsbanki as a result of the bank’s mishandling of the sale of public assets last year, Vísir reports. Íslandsbanki admitted to breaching procedure and was sentenced to pay a fine of ISK 1.2 billion [$8.8 million, €8.1 million] the highest of any financial institution in Iceland’s history, for breaking regulations in the sale of a 22.5% stake in the bank in March 2022.

VR and ASÍ each made the decision to leave Íslandsbanki independently, Hjördís Þóra Sigurþórsdóttir, second vice president of ASÍ, told Morgunblaðið. She doubts the bank can make up for the breaches it committed. “We’re talking about public assets in Iceland that are being sold to hand-picked parties for less than they’re worth.”

There have been reports of individual customers also transferring their banking away from Íslandsbanki following the scandal. Íslandsbanki’s new CEO Jón Guðni Ómarsson has stated that he has not noticed a significant drop in the bank’s number of customers.

Background to the sale

In early 2020, Iceland’s government began preparation to sell the state-owned Íslandsbanki in stages. The first partial sale was carried out in June 2021, a successful public stock offering of a 35% stake in the bank. Following that sale, 65% of the bank remained state-owned.

The next stage of the sale took place in March 2022, this time a private stock offering of a 22.5% stake in the bank. Unlike the first offering, it was only open to professional investors. The sale was successful, reducing state ownership in the bank from 65% to 42.5%. The private stock offering was immediately criticised for its lack of transparency and for the discount given to investors despite high demand. As public pressure mounted, the list of investors who took part in the share was published, revealing several who had access to inside information on the sale, such as employees of the consulting company that had been hired to manage the sale as well as the father of Finance Minister Bjarni Benediktsson.

Speaker’s Committee Must Publish Contested Report

Alþingi parliament of Iceland

A report related to the sale of public assets that has been shrouded in secrecy will now likely be made public, thanks to a two-year-old legal opinion, RÚV reports. The Speaker’s Committee of Parliament is required to hand over a report made by the Auditor General in 2018 on the dealings of Lindarhvoll ehf., a private limited company created to sell public assets acquired by the state in the aftermath of the banking collapse. An ongoing lawsuit asserts Lindarhvoll did not get the best possible price for the public assets it sold.

Report’s author calls for its publication

The legal opinion in question was carried out for the Speaker’s Committee over two years ago by law firm Magna but was only made public last week. According to RÚV, the committee decided to make the 2018 report public in April of last year, but Speaker of Parliament and Independence Party MP Birgir Ármannsson has stood in the way. Birgir asserts that the articles pertaining to freedom of information do not apply to the report as it is an internal document that was never meant for the public.

The report’s author, then-Auditor General Sigurður Þórðarson, has called for it to be made public. Opposition MPs have also called for its publication.

Committee members never received copy of report

Lindarhvoll was founded by the Finance Ministry in 2016 to handle assets acquired by the government after Iceland’s banking collapse, worth up to ISK 100 billion [$708 million, €664 million]. In 2018, when the assets had been sold, Lindarhvoll was dissolved and Sigurður’s report was submitted to the Speaker’s Committee. Nevertheless, committee members never received a copy of the report and were only permitted to look at it in a closed room, without their phones or any writing implements.

Lawsuit against Lindarhvoll ongoing

In 2020, Frigus II ehf. sued Lindarhvoll and the Icelandic state for ISK 651 million [$4.6 million, €4.3 million] due to the sale of Klakka ehf. (previous called Exista) to another company. According to Frigus, the company’s purchase offer for Klakka ehf. was rejected in favour of an offer that did not fulfil the conditions of the sale. If that assertion proves true, it would mean Lindarhvoll did not necessarily act in the public’s best interest in the sale of public assets. Other internal documents from Lindarhvoll have been handed over to Frigus II in the ongoing case.

The ties between Frigus and Klakka go beyond the sale that is the lawsuit’s focus. Frigus II is owned by Sigurður Valtýsson, who is the former CEO of Exista, as well as brothers Ágúst and Lýður Guðmundsson, who had a 45% stake in Exista before the banking collapse through their company Bakkavör.

Whether and when the 2018 report on Lindarhvoll will be published has yet to be determined.

Iceland: Internal Documents May Shed Light on Sale of Public Assets

Iceland's Althing

Lindarhvoll, a company founded to handle public assets following the banking collapse, must hand over a 37-page internal report on its dealings, the Prime Ministry’s Information Committee (Úrskurðarnefnd um upplýsingamál) has ruled. Opposition MPs have demanded the publication of other internal documents from the company that pertain to the sale of public assets that fell into state hands due to the banking collapse. The document is expected to shed light on whether the company in fact sold public assets at the best possible price. RÚV reported first.

Read More: Opposition MPs Demand Access to Banking Collapse Related Report

Lindarhvoll was founded by the Finance Ministry in 2016 to handle assets acquired by the government after Iceland’s banking collapse. In 2020, Frigus II ehf. sued Lindarhvoll and the Icelandic state for ISK 651 million [$4.6 million, €4.3 million] due to the sale of Klakka ehf. to another company. According to Frigus, the company’s purchase offer for Klakka ehf. was rejected in favour of an offer that did not fulfil the conditions of the sale. If that assertion proves true, it would mean Lindarhvoll did not necessarily act in the public’s best interest in the sale of public assets.

Internal data handed over

Opposition MPs have been calling for a 2018 internal report from Lindarhvoll to be made public, but despite pressure, it remains an internal document. Last Monday, the governing majority also voted against permitting MPs to submit questions about Lindarhvoll in parliament, leading Social-Democratic MP Jóhann Páll Jóhannsson to ask “What is it that the public is not allowed to see?”

The ruling made by the Information Committee does not concern the 2018 report, but other internal documents from Lindarhvoll: a 37-page report and memoranda on Lindarhvoll written by the law firm MAGNA for the Speaker’s Committee of Parliament. These documents will now be handed over to Frigus, as per the ruling.

Opposition MPs Demand Access to Banking Collapse Related Report

Alþingi parliament of Iceland

Iceland’s Parliament has voted against permitting MPs to put forth questions about Lindarhvoll, a company founded by the Finance Ministry in 2016 to handle assets acquired by the government after Iceland’s banking collapse, RÚV reports. Opposition MPs call for an internal report of the company from 2018 to be made public, which the Auditor General has opposed.

Social-Democratic Alliance MP Jóhann Páll Jóhannsson and Pirate Party MP Bjön Leví Gunnarsson, both submitted questions about the 2018 report last week. “Yesterday, the Independence Party, the Left-Greens and the Progressive Party used their majority power in the Alþingi to forbid me to ask the Speaker of the Alþingi about a report that deals with [current Finance Minister] Bjarni Benediktsson’s sale of tens of billions worth of state assets through the private limited company Lindarhvoll ehf.,” Jóhann Páll wrote on Facebook. “The report was prepared by an official of Alþingi, on behalf of the public, with public funds, and deals with the sale of public assets. The question remains: what is it that the public is not allowed to see?”

The Auditor General has opposed the document being made public as it was never written for publication, but rather only for internal use. He also noted that the office submitted a final report on Lindarhvoll in 2020.