Icelandic Prime Minister Sigmundur Davíð Gunnlaugsson appeared on CNBC yesterday, and attributed “European regulations” to the cause of the Icelandic bank collapse of 2008, contrary to the primary findings of the Special Investigative Commission report on the crash.
The Prime Minister made his appearance (auto-loading video) on CNBC to discuss the general state of the Icelandic economy, and its relations with the European Union.
Sigmundur said that he believed Iceland would be “the first country out of the crisis” that still grips much of Europe and the US. He said that Iceland will be finalising a free trade agreement with China this October, and expressed “uncertainty” in European export markets.
The discussion then turned to Iceland’s current state of accession talks with the EU. “We’ve decided to take a break from those discussions,” the Prime Minister said, referring in fact to a decision made by the previous government, the Social Democrat/Leftist-Green coalition.
The Prime Minister then gave his explanation for his personal misgivings about the EU, as well as his explanation for why Iceland’s banks collapsed in October 2008:
“What happened in Iceland is that we were using European regulations, we were members of the EEA Agreement, which meant that we were part of the internal market, and the Icelandic banks took full advantage of that. However, things went as they did, but the European regulators, the European banks, survived, most of them, but they hadn’t learned from the experience, so they are still functioning on the regulations that brought down the Icelandic banks.”
In point of fact, the Special Investigative Commission report on the causes for the 2008 bank crash place primary emphasis on bank mismanagement, an incapable supervisory apparatus, and a lack of political will, stating in part, “The balance sheets and lending portfolios of the banks had grown beyond their own control and infrastructure. Hence management and supervision did not keep up with the rapid expansion of lending.”
The report also cites market manipulation. In 2010, the Special Prosecutor’s office began its investigation of Landsbanki and Kaupthing, on charges that they had purposefully engaged in illegal market manipulation. The charges included touting false information about the status of the bank, and giving an inflated outlook on stocks owned by the bank managers themselves. Those charges were filed earlier this year.
You can watch the Prime Minister’s interview below: