x Abu Dhabi, UAEFriday 28 July 2017

Iceland settles dispute with Qatari over collapsed bank Kaupthing

Authorities acting for Kaupthing have settled a financial dispute with a Qatari businessman over a controversial share deal completed weeks before the lender collapsed in 2008.

A Qatari businessman was reported to have invested 25.6 billion Icelandic krona in Kaupthing in September 2008. EPA / KAUPTHING / HO
A Qatari businessman was reported to have invested 25.6 billion Icelandic krona in Kaupthing in September 2008. EPA / KAUPTHING / HO

Authorities acting for the Icelandic bank Kaupthing have settled a financial dispute with the Qatari businessman Sheikh Mohammed bin Khalifa bin Hamad Al Thani concerning a controversial share deal completed weeks before the lender collapsed in 2008.

According to a statement posted on Kaupthing's website late on Friday, the committee charged with winding up the affairs of the Icelandic bank reached a confidential settlement with Sheikh Mohammed following a dispute over the share deal, in which he took a 5.01 per cent stake in the bank.

Sheikh Mohammed was reported to have invested 25.6 billion Icelandic krona (Dh735.5 million) in Kaupthing in September 2008 through his Icelandic company just as overleveraged banks around the world were struggling with the impact of the global financial crisis.

The deal, brokered by Kaupthing to boost market confidence in the struggling bank, left Sheikh Mohammed as the bank's third-largest shareholder. However, less than three weeks later the bank failed, owing billions of krona, forcing Iceland's financial supervisory authority to take control of the lender. It was later revealed that Kaupthing had lent Sheikh Mohammed the cash to buy the stake.

Last year the country's Office of the Special Prosecutor, which has been looking into the Icelandic banking collapse, charged three former Kaupthing executives with a breach of fiduciary duty and market manipulation.

They said that the bank had issued a number of loans to companies owned by Sheikh Mohammed, some of which were allegedly not repaid.

Kaupthing's statement on Friday revealed for the first time that authorities acting for the failed Icelandic bank had taken legal action against Sheikh Mohammed before settling.

"Kaupthing and Sheikh Mohammed bin Khalifa bin Hamad Al Thani, together with other related parties, have reached an agreement concerning the settlement of all claims and liabilities between them," the bank said.

"This agreement has been reached on a commercial basis with no admission of liability by any party.

"As a result of the settlement, the proceedings commenced in Iceland by Kaupthing against Sheikh Mohammed bin Khalifa bin Hamad Al Thani have been discontinued and all other claims and liabilities have been released," it added.

"All other terms of the settlement remain confidential."

The case bears a number of similarities with reports in the British media this month that the United Kingdom's Financial Services Authority and Serious Fraud Office are looking into allegations that the British bank Barclays lent money to Qatari investors to participate in its fundraising efforts during the 2008 financial crisis.

Qatar Holding and Challenger, an investment vehicle owned by the Qatari prime minister Sheikh Hamad bin Jassim bin Jabr Al Thani, participated in Barclays fundraisings during the banking crisis.

Qatar Holding invested £5.3 billion (Dh30.76bn) in Barclays in June and October 2008 as the bank participated in two cash calls to avoid being bailed out by the British government like rivals Lloyds and Royal Bank of Scotland.

According to theFinancial Times, UK rules forbid public companies from giving financial assistance to acquire either their own shares or those of a parent company.

Neither of the Qatari companies are accused of any wrongdoing, according to media reports.

lbarnard@thenational.ae