Local government leaders have argued that councils could not have foreseen the risks involved in the Icelandic financial sector when they invested public money.
But The Daily Telegraph has established that some local government managers did act on warnings from international credit ratings agencies that the Icelandic banks were becoming less secure.
In February, Moody’s Investors Service cut its ratings on all the major Icelandic banks. Landsbanki’s long-term rating was downgraded “in light of the weaker credit environment.”
In May, Fitch, another agency, cut the ratings of Glitnir Bank and Kaupthing Bank. Standard & Poors said it had only rated one Icelandic bank, Glitnir, and had cut its rating from A- to BBB+ in April.
Martin Winn, a spokesman for the agency said: “We have been highlighting a growing risk about the Icelandic banking system since February 2007. The rating BBB+ is very high risk for a Western European bank.”
Those warnings were passed on to many local council financial managers, prompting some to stop investing in Iceland.
Thursday, October 09, 2008
Did councils ignore warnings on Iceland banks?
From the Daily Telegraph: