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Business

Iceland's last independent bank closes down

Video by FRANCE 24

Latest update : 2009-03-10

Icelandic investment bank Straumur Burdaras, the last independent bank in the country, was shut down due to liquidity problems as Iceland continues to battle the effects of the global economic recession. Deposits were covered.

AFP - Investment bank Straumur Burdaras, the last of Iceland's big banks left independent after the state seized control of three others in 2008, said Monday it had been shut down due to liquidity problems.

"In spite of its strong capital position and the support of funding banks, Straumur Burdaras Investment Bank believes that its liquidity position is no longer enough to sustain its activities," the bank said in a statement.

"The Icelandic Financial Supervisory Authority (IFSA) has therefore decided to assume the powers of a meeting of the shareholders of Straumur and immediately suspend the board in its entirety," it said.

"Further, the IFSA hereby appoints a resolution committee, which will take over all authority of the board of directors," it said.

"As a result of this Straumur is closed."

The government took control of Iceland's three biggest banks -- Kaupthing, Landsbanki and Glitnir -- in October after the over-extended financial sector collapsed in the wake of the global credit crunch.

The main shareholder in Straumur was Bjorgolfur Thor Bjorgolfsson, a wealthy and influential businessman who was also one of the main shareholders in Landsbanki, once the country's second-biggest bank.

Straumur, ranked fourth, noted that all deposits of Icelandic commercial banks were fully secured following the government's move last year.

Straumur chief executive William Fall has resigned, effective immediately, the bank said.

Straumur posted a net loss of 574.5 million euros in the fourth quarter, registering client-driven income of just 35.9 million euros.

In February, it took over bankrupt rival Baugur's holdings in Danish department stores Illum and Magasin du Nord, as well as a several other investments in Denmark.

According to the financial authorities, the bank was to have paid 33 million euros in debt due Monday but had only 15.3 million euros available.

The Nordic stock exchanges suspended Straumur.

Iceland, a North Atlantic island of 320,000 people that is not a member of the European Union, saw its centre-right government resign at the end of January amid massive public protests over the country's economic crisis.

An interim left-wing government has been in power since early February and elections are expected to be called soon for April 25.

Icelandic business daily Vidskiptabladid said the fall of Straumur may in the short term weaken the Icelandic currency, the krona.

However, it speculated that in the long term, it may strengthen the currency as capital outflows to cover Straumur's foreign debt may be less.

Business Affairs Minister Gylfi Magnusson said it "was clear late last year that Straumur's situation was difficult. They lost a great deal then.

"They have, on the other hand, survived until now and people had some hope that they could continue."

He said he did not believe the bank's collapse would lead to an increase in public debt as there were no state guarantees, except on deposits, and no state claims.

He said he hoped the bank's assets would cover deposits.
 

Date created : 2009-03-10

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