Iceland Saga - how corporate debt became sovereign debt

Somerset County Council £25m

Northumberland £23m

Hillingdon £20m

Neath Port Talbot £20m

Westminster £17m

North Ayrshire £15m

Brent £15m

These top 15 include the worst case in Wales and the worst in Scotland and the total for local authorities by this list was some £800m, a little surprising when many of the finance officers will remember the BCCI fallout in 1990/91 when the tiny Western Isles Council was told they should have known better and to take the hit of around £25m. Heads rolled and jobs were lost.

Although the Icelandic Government refused to take responsibility for the actions and failures of private banks, should not the banks' balance sheets have been raising alarms with the financial regulatory authorities? It is not simply the (very) light supervision of the banks that the UK Government can reasonably point a finger of blame at their Icelandic counterparts but the fact that Iceland's depositor guarantee scheme was empty and the guarantees given in the banks' advertisements implied the same protection as offered in and by the UK.

Gordon Brown's use of the word "criminal" in his condemnation, no doubt more rhetorical than strictly legal, has therefore some justification. Forget Salomon v Salomon (1897) A. C. Held - that the company was a separate and distinct person. Forget proving just cause why the corporate veil should be lifted and that the very swift action taken by the UK authorities may not have treated Kaupthing in as fair a manner as could be expected in less anxious circumstances. It could and should have been put more diplomatically, but it's hard not to say that the Icelandic finance authorities were not grossly negligent.