Icelandic currency soon to be delisted in Finland
"We won't be buying back any leftovers from these Icelandic krona, mind", said the teller at the Forex bureau de change in Helsinki's main railway station.
His comment is extremely exceptional, since one of Forex's sales edges has been that the company always promises to buy back excess currency without a handling charge.
It was still possible to buy Icelandic krona (currency code: ISK) from Forex on Tuesday, but today the currency will no longer be up on the board.
Forex is not the only one shying away: many Finnish banks have decided to delist the Icelandic currency and stop trading in it.
At least Nordea, Pohjola Bank, and Aktia announced on Tuesday that they were no longer able to determine a price for Icelandic krona owing to the uncertainty and instability of the market.
Only Kaupthing and Evli reported they were still doing business with krona, and the Sampo Bank branch close to the railway station also announced it would be accepting the Icelandic currency.
Then again, exchanging euros for the Icelandic banknotes would not be a particularly wise exercise. A 500-krona note was not enough on Tuesday to cover the standard EUR 3.50 handling charge for changing money.
"The country is getting like Zimbabwe", commented the Forex owner and board chairman Rolf Friberg. Forex's 125 foreign exchange outlets around the Nordic region have stopped listing the Icelandic currency or will do so in the course of this week.
"If the value of something drops like a stone, ten per cent in a day, then it is really not worth keeping it in stock."
On Tuesday, one euro would buy you ISK 165 at Forex, compared with a rate of 90 krona to the euro at the beginning of this year.
Large consignments of the currency were being offloaded at panic prices: 230 krona and more were being asked for a euro.
The Icelandic central bank announced on Tuesday that it would try to stabilise the market by pegging the currency at 131 to the euro.
However, such actions will take some doing, as the country's current account deficit has swelled to around 34% of gross domestic product, and there are doubts over the ability of the foreign exchange reserve of USD 3 billion to sustain the peg in place.
The ongoing global liquidity squeeze has hit Iceland particularly hard after the rapid expansion of the country's commercial banks had left the financial system terrifyingly overleveraged and with unsustainable debts.
Iceland has rapidly gone from being the darling of business journalists - deregulation of its financial markets in the 1990s saw a boom and the buying up of high-profile companies abroad such as the Hamley's toy store in London or West Ham United F.C. - to become the shining example of overreach come undone. Icelandic companies were also highly active in Finland, buying up real estate and taking a slice of telecoms operators such as Elisa.*
All the new wealth rested on a fragile card-house of foreign debt. According to the Bloomberg news agency, the country's four largest banks currently hold foreign liabilities in excess of USD 100 billion, dwarfing Iceland's GDP of USD 14 billion.
*The fate of the Elisa shares is examined in another story in today's dailies.
Previously in HS International Edition:
Icelandic shareholder gets two seats on Elisa board (28.2.2008)
Icelandic banks in Finland report no exodus of depositors (2.10.2008)
Major Finnish investors seek to calm worries about financial crisis (30.9.2008)
DNA holding talks with Icelandic investor on Elisa shares (8.10.2008)
Fear, rumours and irritation hit Iceland as investors express doubts over economy (3.4.2008)