Central Bank

"But no control without loopholes. The Central Bank did indeed not scrutinize the daughter-daughter companies in Liberia. And then they were back to square one. The simplest way to bypass Norwegian tax rules was to make deals abroad, and then "skim" off a few million kroner to a bank account, for example on Jersey, owned by a company from Liberia, for example."

"In a talk in Reykjavik in October 2011, the chief economist at Citigroup, Willem H. Buiter, likened the talent pool in Iceland to that which could be found in a mid-sized city such as Coventry in England. The nation couldn’t therefore logically expect to provide good people for the Treasury, the Central Bank, the FSA, the courts, the parliament, the Foreign Office or the business sector. Buiter told his stunned audience that he had never witnessed such collective stupidity in any developed country as was so dominant in Iceland during the last fifteen years before the crash of 2008. Strong words indeed, but he had a good point."

"It is a fact that the governor of the Central Bank and the prime minister had a phone call to discuss the loan to Kaupthing, but what the two men said has never been revealed, even though the call was recorded and the parliament itself asked for the information. The prime minister, who didn’t know at the time that the conversation was being recorded, has vetoed all requests to make it public."

"Extracting myself from my misplaced investments in Icelandic banks was much more difficult. I knew that I could not sell the 40 per cent stake in Landsbanki or the 38 per cent holding in Straumur, the Icelandic investment bank of which I was chairman. I held both stakes jointly with my father but realised that they were simply too large a piece of the financial infrastructure for them to be allowed to be sold without a great deal of time-consuming regulatory scrutiny. And I had grave concerns about the strength of the krona, the management of the Central Bank and Iceland’s financial system. I kept thinking of what had happened in Russia ten years earlier. The Icelandic krona was being artificially strengthened by the government, which was offering foreign investors krona-denominated bonds at excessive rates of interest. As the coupon on the bonds went from 10 per cent to 12 per cent then 14 per cent and 16 per cent, my forebodings grew. More and more it seemed like Russia all over again, with a government boosting interest rates to get cash so it could fund itself; and the krona exchange rate was just as artificial as that of the rouble in 1998. But this time it was happening in my own country where I was heavily exposed to the economy. I needed an exit plan."