Gordon Brown 'was told about Iceland's banking crisis six months ago'
Ian Drury
Nov 02 2008

Gordon Brown was warned that Iceland's banks had serious problems in April - six months before they crashed, it was claimed last night.

The Prime Minister was allegedly told by his Icelandic counterpart Geir Haarde that his country's banking sector was experiencing severe trouble.

The Bank of England also had concerns about the parlous state of Iceland's financial institutions as long ago as March, Channel 4 News reported.

But they chose not to alert British savers, companies and public bodies, including local councils, police forces and charities, which continued to pour money into the teetering banks.

Opposition MPs last night called for an investigation into exactly what the British Government knew.

The collapse of Iceland's major banks in October left UK investors facing the loss of hundreds of millions of pounds.

Chancellor Alistair Darling has promised to compensate individual investors - but not local authorities and charities.

According to Channel 4 News, the Central Bank of Iceland approached the Bank of England for help in March to try to shore up its currency.

It warned that international confidence was draining away from Iceland's debt-laden banks because the economy was unstable.

Mervyn King, Governor of the Bank of England, was said to have asked his officials to assess the risks to Iceland's banks in April.

The Bank then rejected the request, said the report, because the 'Icelandic system was far too large'.

Later that month, Mr Brown met Mr Haarde at Downing Street. It was claimed they discussed the problems affecting Iceland's banks and Mr Brown advised Mr Haarde to approach the International Monetary Fund for assistance.

Last night LibDem Treasury spokesman Vince Cable said: 'There is a need for an investigation and at the very least a proper statement of exactly what the British Government was told, when they were told and what they did.'

Source: http://www.thisismoney.co.uk