Icelandic Crisis: the long term impact on financial institutions
17 August 2009
- 95% think the government has not responded properly to the Icelandic financial crisis
- With the result that 91% no longer have confidence in the Icelandic government
- Nearly all respondents (98%) think the government did not deal fairly with creditors
- With most (93%) saying they would be prepared to take legal action
- Almost 90% see no recovery in the country’s financial sector for at least two years
- 93% of the view that it is ‘highly unlikely’ or ‘unlikely’ they will invest in Iceland again
- And 76% think Iceland is not ready to join the EU
The Icelandic financial crisis has led to a collapse of trust in Iceland among international investors at a time when some commentators are speaking of Iceland’s application to join the European Union being “fast-tracked”, according to a survey of leading financial institutions by international legal practice Norton Rose Group.
The survey: “Financial Institutions in the Future: Icelandic Financial Crisis” is based on a survey of 60 individual respondents (from banks and other leading financial institutions each with significant investments in Iceland) from 27 July to 6 August 2009 to canvass the views of financial service professionals with exposure to the Icelandic banks on the consequences of the actions taken by Iceland in response to its financial crisis, and on Iceland’s readiness for joining the EU.
There is near unanimity (95%) among respondents that the Icelandic authorities did not respond properly to the country’s crisis, with the consequence that 91% no longer have confidence in the Icelandic government.
Overwhelmingly, almost 100 per cent (98%) think Iceland has not treated international creditors fairly and key to Iceland’s future is the investors’ belief (74%) that Iceland has failed to comply with laws. This is compounded by what investors see as a lack of transparency (77%) or dialogue (81% ). Indeed, respondents say they would be prepared to take legal action to secure a fairer settlement for international creditors, with 93% saying they would consider doing so:
Joseph Tirado, partner and Head of International Arbitration and ADR, Norton Rose LLP, said:
“The survey sends a clear and unambiguous signal of the strength of discontent amongst the international creditor community. It is striking, if not surprising, that 93% of respondents feel they have no alternative but to take legal action because of what they feel to be the Icelandic authorities' failure to engage meaningfully with them”.
The results suggest a bleak outlook for Iceland’s economic recovery with almost 90% of respondents seeing no recovery in the country’s financial sector for more than 24 months . More worryingly for the future, 93% respondents say it is ‘highly unlikely’ or ‘unlikely’ they will invest in Iceland again.
Tomas Gärdfors, partner, Norton Rose LLP, said:
“The survey suggests the sentiment from international investors is that Iceland risks isolating itself economically. The country needs to change that view if it is to restore faith in its financial system and economy, particularly at a time when Iceland is negotiating to join the EU - three-quarters of our respondents do not currently believe it is ready to do so.”
For further information please contact:
Sarah Webster, public relations manager
+44 (0)20 7444 5942
+44 (0)77 2535 0425
sarah.webster@nortonrose.com
About this survey
We surveyed 60 individual respondents from banks and other leading financial institutions, each with significant investments in Iceland, from 27 July to 6 August 2009 to canvass the views of financial service professionals on the consequences of the actions taken by Iceland in response to its financial crisis, and on Iceland’s readiness for joining the EU. The survey was conducted online and respondents were given the option to remain anonymous.
Editors note
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