Iceland regulators ‘lied’, says Dutch banker

Icelandic banking regulators “lied” to Dutch officials about the health of the country’s banks only days before the lenders collapsed in 2008, the head of the Dutch central bank said on Thursday.

Seeking to reject claims that Dutch regulators had been inattentive as Icesave online bank slipped towards bankruptcy, Nout Wellink, central bank president, said Icelandic regulators had given him what amounted to false assurances.

The remarks threaten to deepen tensions between the countries as Iceland prepares to hold a referendum over legislation to repay €3.9bn (£3.4bn) in debts to the UK and the Netherlands to cover money lost by British and Dutch depositors.

Icesave, the online arm of the Reykjavik-based Landsbanki, operated in the Netherlands and UK under European rules that meant its home-country regulator was responsible for oversight.

Mr Wellink told a parliamentary committee that his questions to Icelandic regulators on September 3 2008 about the strength of the banks met with florid assurances about the country’s natural resources.

“They told me stories about the strength of the Icelandic economy over the long-term . . . Geysers, fish, everything was put on the table,” he said.

Five days later, during a conversation with his Icelandic counterpart in Basel, Mr Wellink said he was told that Iceland’s central bank had warned the government of the dangers the banks faced six months previously. “For a while, I just hoped that they hadn’t been looking properly but after what my colleague said about warning them, I thought they just lied to us,” he said.

A letter from Iceland’s regulators on September 24 2008 claimed that everything was under control and threatened the Dutch central bank with legal measures if it tried to take action since this might cause a run on the bank, according to Mr Wellink.

He said: “We asked ourselves: should we skate on very thin ice and put ourselves at the risk of a claim running into the billions?”

His remarks will stir the debate over who should take responsibility for money lost by more than 400,000 British and Dutch citizens attracted by Icesave’s high interest rates.

Olafur Ragnar Grimsson, Iceland’s president, refused to sign legislation last month approving repayment of money paid out by the British and Dutch governments to cover lost deposits, triggering a plebiscite planned for March 6. Critics said the deal was unfair and British and Dutch regulators must share blame for Icesave’s failure. They said the sum equated to charging each citizen €12,000 for bankers’ and regulators’ mistakes.