Thursday, 16 October 2008

Now is not the time for blame games

Hat tip to Custard
It appears that the Local Gummint Association are in a bit of a quandry as to why so many councils kept our money in Lceland when every ther fucker got theirs out. They have released a statement.
For immediate release: Tuesday 14 OctoberContact: LGA Media Office 0207 664 3333
The Local Government Association has today called for a Government inquiry, led by the Financial Services Authority, into how credit ratings agencies continued to give Icelandic banks high credit ratings right up until a matter of days before they went into administration or receivership.
The call came as the LGA:-
Reveals the outcome of encouraging discussions with the administrators Ernst &Young. The administrators consider that that the value of the book value of the assets of Heritable Bank Plc and Kaupthing Singer & Friedlander Limited (both inadministration) appeared to be of the same order of magnitude as the liabilities.
- Publishes an update on how many councils have been affected, which shows that 116 councils are currently known to have had deposits in Icelandic banks, with deposits totalling £858.3m.
- Calls on councils that invested after the credit ratings were downgraded to anunacceptable level on 30 September to carry out their own inquiries to discover what happened.
Analysis by the LGA of the ratings issued by the main credit ratings agencies shows that Icelandic banks and their UK subsidiaries continued to receive relatively high ratings up until the afternoon of 30 September.
Analysis shows that:
28 February
Fitch's long-term ratings for Glitnir Bank h.f (Glitnir), Kaupthing Bank h.f(Kaupthing) and Landsbanki Islands (Landsbanki) were all A. Their correspondingshort-term ratings were all F1. Moody's reduced its long-term rating forLandsbanki from Aa3 to A2, and held their short-term rating at F1. Its long-term and short-term ratings for Glitnir were Aa3 and F1 respectively.
Fitch announces that Icelandic banks were being put on negative rating watch, warning that short and long term ratings on Icelandic banks could be reduced.
9 May
Fitch reduced the ratings for Glitnir and Kaupthing to A minus (long-term) and F2(short-term). Landsbanki's ratings remained the same but the outlook rating was changed to Outlook Negative.
30 September
Fitch reduced Landsbanki's long-term ratings from A to BBB and its short-termratings from F1 to F3. The long-term and short-term ratings for Glitnir were reducedto BBB minus and F3 respectively. The long-term and short-term ratings forKaupthing were reduced to BBB and F3 respectively. Moody's announced it was reviewing Landsbanki's ratings.
8 October
There was a general downgrade of the Icelandic banks' ratings.
Cllr Margaret Eaton, Chairman of the LGA, said: "This isn't the time for a blame game. This is an unprecedented situation, the extent of which could not have been forseen. However, at the appropriate moment, there needs to be a full and independent inquiry to find out just how these banks continued to get relatively strong credit ratings until a few days before they went under.
"No council should rely solely on credit agencies and must use their financial nous. But there must be confidence in credit ratings as councils continue to invest billions of pounds in a whole range of financial institutions. Our analysis dispels the myth that many councils were investing recklessly after credit warnings were issued."The good news for council taxpayers is that discussions with the administrators have been hugely encouraging. The administrators considered that the book value of the assets of each business appeared to be of the same order of magnitude as the liabilities, although it is too early to give exact figures."The evidence shows that, overwhelmingly, town halls have acted prudently and within strict guidelines to get the best rates of interest on savings whilst investing in institutions deemed to be strong. If it is discovered that individual councils invested significant sums following the credit rating downgrading, the LGA expects them to set up their own inquiries to find out what happened."Prudent financial management means that councils put their money into a diverse range of banks to make sure that any risk is spread to minimise the impact ofproblems in the financial markets. We are not aware of councils that are in serious imminent liquidity problems and in the long term we are confident that vital frontline services will remain unaffected.
I am awaiting the results of my FOI request to find out WHO advised my local council and WHO should have noticed in April that it was going tits up. Then I am gong to go round and burn his house down.
I want my money back. All £5 Million of it.


Guthrum said...

This is such bollocks- if it is not the time for the blame game why are they blaming the credit agencies ?

Even the Audit Commission was caught with its trousers down for £10m

I think their should be an enquiry, a judicial one, so the public can submit evidence

terrence bull said...

I suppose they'd never heard of sub-prime and how it was all AAA rated.

Still, lets be honest every finance 'expert' with more three brain cells has been stealing zillions in hedge funds/banks. Only a moron would work with fuckwits in Local Authorities...

TheFatBigot said...

I don't understand how they can seek to justify what they did.

The meaning of a downgrading is that the institution is considered not to be as creditworthy as it was before. Simple as that. It doesn't mean it's likely to fold but it does mean there is more of a chance of it folding than there was previously.

When you're dealing with your own money you can do what you want with it, when in charge of other peoples money you should not take risks.

Only two things can cause a risk like that to be taken. Either someone decided to take the risk or nobody bothered to even think about it. No other reason.

Simply inexcusable.

tb said...

I've just read that the Audit Commission also stuffed money down the Icelandic drain.

What chance have any of us got?

Lilith said...

The Councils were warned here on Channel 4

or here

or here

from March which includes the paragraph below...

"Credit insurance for debts at Iceland's biggest bank, Landsbanki, is priced at 610 points while that for Kaupthing is priced at a hair-raising 856. Given that these two have taken billions in UK retail deposits, it may be a sobering thought for savers to consider where they are putting their cash. These banks are now seen as the most unsafe in the developed world."

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