Iceland seeks UK fraud office help

By Andrew Ward

Britain's Serious Fraud Office is to meet Icelandic investigators in London next month as Reykjavik seeks international help to discover whether criminal wrongdoing played a role in bringing down Iceland's banking sector.

Richard Alderman, director of the SFO, will hold talks with Eva Joly, the French anti-corruption expert recruited to assist the Icelandic investigation, in the wake of fresh revelations about questionable lending practices at Icelandic banks.

The talks signal increasing co-operation between the UK and Iceland on the corruption inquiry, even as tensions flare between the two countries over a disputed deal to repay billions of pounds lost by British savers in Icelandic banks.

Writing in today's Financial Times, Jóhanna Sigurdardóttir, Iceland's prime minister, appealed for flexibility from the UK and the rest of the international community as her country tries to repay foreign debts while rebuilding its shattered economy.

Britain is caught up in the fallout from last October's crisis because Icelandic banks counted UK-based investors and borrowers among their biggest customers and shareholders.

The SFO has been gathering intelligence for months and next month's meeting could signal an intensification of UK interest after the recent leak of a report into unusual lending patterns at Kaupthing Bank, one of three Icelandic lenders that collapsed last October.

Iceland's fragile coalition government is struggling to win parliamentary approval this week for a deal to reimburse the British and Dutch governments for €3.9bn ($5.6bn, £3.4bn) paid out in compensation to citizens who held deposits in Icelandic accounts.

Ms Sigurdardóttir said Icelanders were willing to make sacrifices to fulfil their obligations but warned of the "lasting impact" on Iceland if the Netherlands and the UK tried to enforce a deal that proved too costly for the country to bear.

Icelandic lawmakers want to attach a series of conditions to the agreement, struck between the three governments in June, after a fierce public backlash. Critics say the terms are stacked against Iceland and would lumber the country with unaffordable debts.

Neither the UK nor the Netherlands has shown any openness to renegotiating but Ms Sigurdardóttir stressed that all three countries had a "mutual interest" in "Iceland's capacity to fulfil its debt obligation".

More than 300,000 British and Dutch savers lost money in high-interest "Icesave" accounts run by Reykjavik-based Landsbanki, which collapsed along with two other lenders last -October.

The UK and Dutch governments covered much of the losses through national bank insurance schemes and now want Iceland to reimburse them (Finanacial Times)