The status of Arion bank
The big question of today is about the real owners of the Icelandic banks Arion (the restored Kaupthing) and Íslandsbanki (the restored Glitnir). The debt collections are large, and the stakeholders who own the debts got the banks from the Icelandic government.
The main question is this: Who really owns the banks?
The answer is not a simple one, but short.
We do not know. The government claims it to be foreign investors who have stakes to claim from the old estates. That is true, but we are not allowed to know who those investors are.
There is an company registered in Irelend that is a large shareholder in one of the banks, but nobody seems to know anything about that company. 
A rumor has been going on for a long time, and one of the most influential journalists in Iceland, Egill Helgason aired it again just the other day, that Ólafur Ólafsson of Samskip and one of the biggest culprits of the whole economic crisis is said to be one of the largest owners of Arion bank.
According to reliable source it has been claimed that Arion bank was very weak. Even weaker than the government is letting on. At this time, according to our source, it is really a matter of touch and go for the survival of the bank. Arion could be on the verge of bankruptcy….again. So serious is the status of the bank that the government is trying to save it and to spin the discussion away from this possible disaster.
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Old Kaupthing was put into bankruptcy by the Icelandic government, so technically Arion, or rather, any net assets it may have, belong to the preferred creditors.
The creditors do not want to take possession of Arion, because if they did, there would be no assets to sell and no income coming from the operation of the bank. This is mainly because the Icelandic government wants Arion to guarantee the savings accounts. The savings accounts are more than the net, saleable assets. Also, the creditors do not want Arion bank to be managed by the old cast of corrupt Icelandic bankers.
The creditors would prefer to simply sell the assets of Arion bank and split the proceeds among the creditors. Technically, under the rules of bankruptcy, this is what should be done.
I don’t know how Olafur Olafsson got significant ownership of Arion, since apparently he was not a major preferred creditor of Old Kaupthing. However, it is easy to see why he wants to control the bank. First, he could use his control to stop any lawsuits against the old Kaupthing owners and management, including himself. Second, he could use Arion as his own piggy bank, to hand out write-offs and new loans to the usual cast of corrupt Icelandic businessmen.
I do not know how this is going to end. Arion is really a zombie bank that would be insolvent if its assets were evaluated mark-to-market value.
The creditors should bring a lawsuit simply to sell the Old Kaupthing assets currently in Arion, and possibly sue the Icelandic government, the current actual owners of Arion. Probably Icelandic courts would deny such a request.
It’s possible that Arion, after writing down lots of loans, could be placed into bankruptcy and a New Arion would be formed.
The news has come out that the new CEO of Arion is someone named Hoskuldur Olafsson. He worked for Eimskip for many years, was involved in an anti-competition lawsuit and scandal there, then worked for Visa.
If he worked for Eimskip for 17 years, he must be an old servant of the Kolkrabbi. So you can expect the following: no lawsuits by Old Kaupthing against any of the “old guard”, lots of write-offs to the usual suspects, loans for the usual suspects, no relief for home-mortgage holders, and eventual bankruptcy of Arion within 3-6 years.
Steingrimur Jod said recently that “all deposits are guaranteed”.
Now, why would he say such a thing right now?
Precisely because the banks — and the government — do not have the money to guarantee these deposits! In other words, the government is trying to build up confidence so that Icelanders will not go to the banks and demand their money.
The truth is that something like 90% of deposits are ” loftbólupeningar” – imaginary money that can’t be paid back.
Who can pay out the deposits? Not the banks, after all the write-offs (=lossees) are added to their books. And not the government, except by printing more money, which would make the deposits worth only half or less of their supposed value. The government is struggling now to come up with a deficit of 100 billion ISK — so how can they guarantee 1600-2000 billion ISK of deposits?
The government is trying to cover up reality, but sooner or later the truth will come out.
He said all depositors are guaranteed and then added… as things are now.
The bubble is alive and well.
One needs to keep the bubble alive, and by doing so,keeping a faulty, flawed and unusable system alive.
The system needs to keep it self going.
Old Kaupthing was put into bankruptcy by the Icelandic government, so technically Arion, or rather, any net assets it may have, belong to the preferred creditors.
The creditors do not want to take possession of Arion, because if they did, there would be no assets to sell and no income coming from the operation of the bank. This is mainly because the Icelandic government wants Arion to guarantee the savings accounts. The savings accounts are more than the net, saleable assets. Also, the creditors do not want Arion bank to be managed by the old cast of corrupt Icelandic bankers.
The creditors would prefer to simply sell the assets of Arion bank and split the proceeds among the creditors. Technically, under the rules of bankruptcy, this is what should be done.
I don’t know how Olafur Olafsson got significant ownership of Arion, since apparently he was not a major preferred creditor of Old Kaupthing. However, it is easy to see why he wants to control the bank. First, he could use his control to stop any lawsuits against the old Kaupthing owners and management, including himself. Second, he could use Arion as his own piggy bank, to hand out write-offs and new loans to the usual cast of corrupt Icelandic businessmen.
I do not know how this is going to end. Arion is really a zombie bank that would be insolvent if its assets were evaluated mark-to-market value.
The creditors should bring a lawsuit simply to sell the Old Kaupthing assets currently in Arion, and possibly sue the Icelandic government, the current actual owners of Arion. Probably Icelandic courts would deny such a request.
It’s possible that Arion, after writing down lots of loans, could be placed into bankruptcy and a New Arion would be formed.