Iceland

Tiny Iceland was hit uniquely hard by the credit crisis, The Economist reported. Its banks had assets eight times its GDP. When they collapsed it seemed that a life of fishing and harvesting pelts beckoned for the country’s more sophisticated inhabitants. Yet Iceland is special in another way: it did not issue a blanket bail-out to its banks, but rather let bits of them go bust. That could mean the cost to its public is less devastating than once seemed possible. When the government stepped in last October, it only took over the domestic operations of the three big banks.

The financial crisis claimed the last of Iceland's major banks Monday, as Straumur-Burdaras Investment Bank hf was taken over by Iceland's Financial Supervisory Authority and immediately shut down. Iceland fell into financial and economic chaos when the country's top three banks all collapsed in a matter of days early October as the global financial crisis swelled. Straumur, which owns U.K. stockbroker Teathers and was the fourth-biggest financial services company in Iceland when the crisis hit, had so far been able to stay afloat, until Monday.

Ukraine, once considered a worldwide symbol of an emerging, free-market democracy that had cast off authoritarianism, is teetering, The New York Times reported. And its predicament poses a real threat for other European economies and former Soviet republics. The sudden, violent protests that have erupted elsewhere in Eastern Europe seem imminent here now, too. World leaders are increasingly worried about the discontent and the financial crisis in Ukraine, which has 46 million people and a highly strategic location.

Allen & Overy (A&O) and SJ Berwin have taken lead roles as Icelandic retailer Baugur files for bankruptcy protection, LegalWeek reported. A&O, a longstanding adviser of the company, is fielding a team led by London finance partner Andrew Bamber. SJ Berwin is advising Icelandic bank Landsbanki--which was in talks with Baugur about the potential restructuring of £1 billion of debt--with a team led by London restructuring partner Mike Woollard, corporate partner David Parkes and finance partner Jen Yee Chan.

Icelandic retailer Baugur, which holds stakes in House of Fraser, French Connection and Debenhams, said today that it has applied for bankruptcy protection, RTÉ reported. The decision came after the Icelandic retailer said last week it would close its Reykjavik office and cut staff in Britain. In December, the heads of Baugur were also charged with tax evasion amounting to €1.9 million from 1998 to 2003.

Iceland’s government collapsed on Monday following political turmoil prompted by the global financial crisis, the Financial Times reported. The demise of the two-party coalition forced Geir Haarde, prime minister, to resign with immediate effect, having said on Friday that he would step down in May because he is suffering from cancer. “This is not good. We have a currency crisis, a banking crisis and now a political crisis,” said Tryggvi Thor Herbertsson, professor at the University of Iceland.

According to information from Creditinfo Iceland, 5,938 companies and 17,541 individuals were in default on January 1, Iceland Review reported. said. According to Rakel Sveinsdóttir, managing director of Creditinfo Iceland, default claims had increased slowly but surely for a year before the collapse of the Icelandic economy in October. After that the speed of new defaults being registered increased fivefold. The Central Bank of Iceland has requested data from the Icelandic banks on the debts of individuals and companies to examine the effect the crisis has on the real economy.

Iceland's state-run Kaupthing bank will sue the British government for its decision to force the bank's British subsidiary into a form of bankruptcy, the Icelandic Prime Minister's office said Tuesday. The committee appointed to run Kaupthing, which collapsed last autumn, is taking Britain to court because it forced the unit Kaupthing Singer & Friedlander into administration at the height of Iceland's financial crisis, according to the prime minister's press secretary, the Associated Press reported.

Landsbanki Islands hf sought bankruptcy protection from its U.S. creditors on Tuesday, the last of Iceland's three largest banks to do so in the last two weeks, Reuters reported. The Reykjavik-based lender filed a Chapter 15 bankruptcy petition with the U.S. bankruptcy court for the Southern District of New York. It said it had more than $1 billion of both assets and liabilities. Iceland's banks had taken on billions of dollars of debt in recent years to fund aggressive overseas expansion.

Kaupthing Bank hf, Iceland's largest bank, has sought bankruptcy protection from its U.S. creditors, Reuters reported. The Reykjavik-based lender filed a Chapter 15 bankruptcy petition on Sunday with the U.S. bankruptcy court for the Southern District of New York. The filing came after Iceland's Financial Supervisory Authority seized Kaupthing, Glitnir Banki hf and Landsbanki Islands hf, the nation's three largest banks, as the global credit crisis deepened. Glitnir filed on Nov 26 for Chapter 15 protection.