KSF victims demand inquiry as SFO gathers intelligence on banking practices

The Kaupthing action group (KSFIOMDAG) has called for a public inquiry into the management of Kaupthing Singer & Friedlander Isle of Man (KSFIOM) following the leak of a Kaupthing loan book which suggests unusual lending practices could have contributed to the bank’s collapse.

KSFIOMDAG believes skeletons tumbling out of the KSF closet in the form of the leaked document on the Wikilinks website, bolsters its call for an independent public inquiry into the management and regulation of the bank, which collapsed last October trapping thousands of depositors' savings.

The confidential 210 page file, which was produced just two weeks before the bank's demise, reveals Kaupthing lent billions of pounds to companies linked to a key director and top shareholders.

The highest loans, totalling over €6.4bn were spread between companies connected to just six clients, four of whom were major shareholders, leaving it dangerously exposed to potential collapse.

"As skeletons continue to tumble out of the KSF closet, it strengthens the DAG's demand for a full and independent public inquiry into the management and regulation of KSFIOM and the actions that led to the demise of KSFUK and KSFIOM," says KSFIOMDAG.

The Isle of Man Government is set to return over three quarters of depositors' savings trapped in the bank in full by September, using a £193m Government funding package. However, it will not cover savings of more than £50,000 under the Depositor's Compensation Scheme (DCS).

KSFIOMDAG says: "The loan book revelations deepen the concern for KSFIOM depositors who hope the shortfall after liquidation of the Isle of Man branch will be covered by the Parental Guarantee."

While there is currently no suggestion any of the shareholders in Kaupthing acted illegally and the SFO says it has no plans to launch an official criminal investigation at present, it has received "significant" information about the UK operations of Kaupthing and Landsbanki.

The SFO has called on IFAs and ex-employees of UK subsidiaries to come forward with any illuminating information via its whistleblower hotline on 020 7239 7388.

"We want to hear from anyone with any kind of insight," says a spokesman.

The SFO has been examining the practices of the trio of Icelandic banks which collapsed last October for a number of months and says the investigation is likely to continue for a while yet.

It estimates two thirds of the loans concerned are attached to UK businesses and wants to find out what was going on and whether there was any fraud.

According to the spokesman, the SFO is writing to the Icelandic authorities next week as there are "certainly things we are interested in".