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Originally Posted by afc wimbledon
Because the Icelandic goverment took over operations of the Bank in order to protect Icelandic deposits. You take over a private bank you take over all of its obligations not just the local ones who vote for you.
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Is this a principle of international law? Or the domestic law of Iceland?
I'm unaware of any principle in law that limits what action a government can take in furtherance of the interests of its own citizens when a privately owned bank goes under.
Look: the directors of IceSave were crooks, plain and simple. The government of Iceland is guilty of implementing a Milton-Friedman banking regulation scheme that allowed these guys to get rich quick by leveraging their own bank right out of existence in spite of the fact that it had no assets at all. So it's not as if the government is totally innocent here.
But we also need to face facts: it wasn't exactly a secret that IceSave was over-leveraged. A sophisticated investor should know better than to sink money into this kind of scheme, and if they don't... well, they're free to seek a remedy in Icelandic courts against the assets of IceSave, if they can find any. The real question is: why did anybody put money into this thing? And if they did, why are they now asking for additional insurance after the fact? Shouldn't they have done that first?