Investors Flee Iceland Banks

[katty]

more:

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2006/03/14/cnice14.xml&menuId=242&sSheet=/money/2006/03/14/ixcity.html

excerpt: The cost of insuring against a bond default by Iceland's three big banks - Kaupthing, Landesbanki, and Islandibanki - shot up another 20 basis points yesterday as investors became increasingly alarmed over their use of foreign debt to fund an equity spree. "This is a warning sign the euphoria we've se en in global markets is dissipating rapidly," said Julian Callow, an economist at Barclays Capital.

Funds had piled into Iceland to milk 10.75pc rates but panicked after warnings of a "hard landing" by the credit agency Fitch. The krona's crash set off global dominos, hitting New Zealand, South Africa, Hungary, Poland and Turkey. The rumbling thunder of monetary tightening by all the world's big central banks provided the background music.

The banking crisis followed when Fitch and Merrill Lynch warned that the banks could have trouble rolling over their foreign debts. Merrill Lynch said the big three faced refinancing on $17.8bn of foreign debt by the end of 2007, equal to 130pc of Iceland's GDP.

"With a debt distribution that is front-loaded, Icelandic banks are particularly vulnerable to shifts in market confidence," it said.

Analysts said the banks had leveraged the nation to the hilt, borrowing vast sums on the global capital markets for a Viking conquest of corporate Europe. "The whole county has become a hedge fund," said one economist.

[TheBaldyMan]

1. 130% of GDP, what the hell were the 'financial wizards' doing

another victory for get rich quick capitalists. This is as stupid as Bushco's economic mismanagement.


The Guardian has printed a few stories about Icelandic corporate raiders on the hunt in the EU for a couple of years now, the following link gives some insight into the methods involved.

Different strokes for Icelandic folk

edited for spelling

[katty]

2. take the money and run