Deposits of over 10,000 Finns stuck in Icelandic bank

RATA takes control of Finnish office of Kaupthing

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      The Financial Supervision Authority of Finland (RATA) took control of the Finnish branch office of the Icelandic bank Kaupthing on Thursday, effectively freezing the assets of more than 10,000 Finnish depositors.
      The bank fell into the hands of the Icelandic state, after which RATA suspended operations of the office.
      The aim of the move was to make sure that the Finnish customers of Kaupting are treated equally. Without a suspension of operations, there may have been a danger that the quickest customers may have managed to get their money out, while the slower ones would have been left empty-handed.
      RATA says that there are about EUR 111 million in Finnish deposits in Kaupthing, mostly by private citizens. Municipalities and other institutions have about EUR 23 million.
      RATA said on Thursday that it would ascertain how to minimise losses of depositors and other creditors. The bank has lost large numbers of customers in recent weeks.
     
Already on Monday RATA said that it had demanded that transfers by Icelandic banks of assets collected in Finland should be suspended.
      Lauri Rosendahl, CEO of the Finnish branch office of Kaupthing, insists that Finnish deposits in the bank are safe. He emphasises that the bank’s operations are on hold at the insistence of the Financial Supervision Authority, and that there is no other reason.
      He also said that the assets of the bank have been lent to Finnish companies under long-term contracts, which means that converting the assets into cash cannot possible at a moment’s notice.
      “The situation now is very good. I am quite sure that we will not end up in any kinds of deposit protection discussions, whether or not the Finnish, or the Icelandic deposit protection is involved.”
      For the time being, he called for help from the Finnish state. He notes that Sweden and Norway have promised to pay customers of Kaupthing the money they have invested in Kaupthing. The bank, meanwhile, has agreed to pay the debt to the state, once its invfestments are converted into cash.
      Mari Kiviniemi (Centre) the Minister of Administration and Local Government, who is responsible for the Financial Supervision Authority, does not yet want to say what will happen to the deposits. “It is not yet known if the protection of the deposit guarantees will even be needed”, she said in the online financial publication Taloussanomat.
     
As Kaupthing is not registered as a bank in Finland, and operates as a branch office of the Icelandic bank, the Icelandic deposit guarantee system is responsible for the first EUR 20,8878, and the Finnish deposit guarantee kicks in with the remaining EUR 4113.
      The reliability of the Iceland’s deposit guarantee system was called into question earlier this week, when another Icelandic bank, Landsbank, fell into the hands of the state. British Chancellor of the Exchequer Alistair Darling said that customers of the bank’s British operations, the Icesave Bank, would not get their deposits back from Iceland.
      The Finnish Deposit Guarantee Fund will not pay anything to Kaupthing depositors if the Icelanders do not first meet their obligations.
      However, the Finnish state can guarantee Finnish deposits, which is what happened in Britain with Icesave.


Previously in HS International Edition:
  Financial crisis: Banks in Finland and elsewhere raise deposit protection limit (9.10.2008)

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