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| Kaupthing took on staff's loan liability before nationalisation: bank |
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Time is GMT + 8 hours
Posted: 6-Nov-2008 03:31 hrs |
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| A view of the headquarters of Iceland's biggest bank Kaupthing in Reykjavik. Kaupthing, gave its staff loans to buy shares in the bank but took over their personal liability just days before the bank was nationalised in October, the new management said Wednesday. |
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Iceland's biggest bank, Kaupthing, gave its staff loans to buy shares in the bank but took over their personal liability just days before the bank was nationalised in October, the new management said Wednesday.. Kaupthing's staff, mainly management, had personal debts to the bank worth 36.8 billion kronur (292 million dollars, 224 million euros).. The new management of the bank, which has since the nationalisation been renamed New Kaupthing, said in a statement late Tuesday the loans had not been cancelled, but staff members' personal liability "was completely abandoned in September 2008.". "The board of New Kaupthing bank has taken the initiative to get outside legal council to determine whether the decision from September can be undone," it said.. The revelation has caused an uproar among Icelanders, who are angry that bankers are getting special treatment for their loans.. Kaupthing said that at the time the decision was taken in September, the value of the shares was higher than the debts on the shares.. But because the share price was falling and the cost of financing was rising, the bank's board saw two options: staff could either sell their shares to pay back their loans, or the bank could relieve them of their personal liability.. The board decided on the second option, judging that, in light of the delicate situation on the financial markets, it might have damaged the bank if key staff began selling their shares in large numbers.. Iceland's once booming financial sector has collapsed under the weight of the worldwide credit crunch, forcing the government to take control of the major banks as its currency has nosedived.. Iceland, a country of just 320,000 people, has already agreed with the International Monetary Fund on a loan of 2.1 billion dollars (1.6 billion euros) and has said it needs a total of about six billion dollars to overcome the crisis. — AFP
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