Minister tells banks to “do better”

Iceland’s Finance Minister has warned the country’s financial institutions that they must “do better” in ensuring fairness and transparency in their dealings and “work in harmony with society”.

The criticism comes following accusations of possible market abuse aimed at one of Iceland’s leading banks Arion Bank.

Pre-sale buyers got cheaper shares

Arion Bank recently sold its share in Icelandic telecommunications company Síminn as part of an operation to float Síminn on the Icelandic stock exchange earlier this month.

During a seven-week period leading up to the official sale, however, a select group of investors and clients were given the opportunity to buy shares from Arion at a much lower rate than subsequently emerged from the sale.

The total value of the shares bought by this select group has therefore increased by ISK 720 million (over €5 million) in just seven weeks.

The pre-sale shares were sold at ISK 2.5 and ISK 2.8 each, while the average price obtained during the official sale was ISK 3.3.

Wise with hindsight or a predictable situation?

This was an unpredictable circumstance, according to Arion’s Head of Investment Banking Halldór Bjarkar Lúðvígsson.

“What is clear today was not clear a few weeks or months ago before the official sale took place. Demand for shares is unpredictable and there was no way of knowing what the result would be,” he explains, dismissing the criticisms as “wisdom in hindsight”.

Not necessarily so, according to Icelandic news website Kjarninn (link in Icelandic), since analysts had predicted a ISK 3.2 result before the official sale got under way.

Gunnlaugur Þór Þórðar­son, the MP who first raised the issue of possible market abuse, also dismisses this argument. “Who knows the company better than its management?” he asks.

Lúðvígsson also suggests that it was natural for the pre-sale buyers to enjoy a lower price since they are committed not to sell their shares for a given period of time, entailing greater risk.

The select group of investors benefiting from the lower price includes a director of Síminn itself.

“Banks must do better”

Iceland’s Finance Minister Bjarni Benediktsson has described the sale as a “mess”.

“Icelanders do not appreciate such behaviour,” he says. “Banks must realise that there is no place in society for such conduct on the part of financial institutions. All I am asking of bank management is to work in harmony with society. They must do better that has been the case here.”