Iceland essentially paid off domestic depositors by stiffing their foreign counterparts - possible because of the large relative size of the latter’s deposits.
And the current government is still having to force lenders to write off around 1.3B in domestic consumer debt.
I remember this : Iceland had a referendum on the arrangements to pay back the UK and Dutch governments for bailing out Icesave depositors on Iceland’s behalf.
I believe Iceland’s new banks will not be in the market for several more years.
They’ll have to find work for 2,000 ex-financial people (the equivalent of us finding new jobs for 25,000).
Asset values and incomes are still way down, and Icelanders aren’t able to pay back mortgages and loans. All of the arrangements made in respect of the new banks and old debt are under legal challenge.
So, Just to re-affirm this again.
Iceland had a referendum on the terms under which they repay depositors of the banks. They are still going to pay the depositors.
Iceland faced the same decision we did:
Option 1: wind up the banks, tell the bondholders to shove it and deal with the depositors.
Option 2: keep the banks open, keep the bondholders sweet and deal with the depositors over a 10-15 period
In Iceland’s case, their deposit debt was smaller than their bondholder debt, so they took that option. The oppositive applied to us. Our deposit liability was much larger than our bondholer liability.
Iceland may still have to pay its bondholders, in which case it will have suffered a double-whammy.
“Iceland essentially paid off domestic depositors by stiffing their foreign counterparts - possible because of the large relative size of the latter’s deposits.”
Wow imagine a country that actually took care of their own people first sounds good to me.
It was not the people’s debt to begin with it was the banks debt so the people didn’t stiff anyone the banks did.
Business’s fail to pay all the time for example how about all the CRE loans going belly up. It’s the cost of Capitalism if they fail they fail the Banks write it off. If that is true of all other’s it should have been true for the banks.
“Construction loans made up more than half of the total, at $391 million, while commercial mortgages contributed $209 million, or 29% of the total nonperforming pool.
Bad residential loans, by way of comparison, made up $90 million in nonperforming loans.”
http://www.housingwire.com/2011/01/31/cre-extend-and-pretend-reaching-breaking-point