Nordic Business Report-March 17, 2006-Talk of Icelandic bank crisis "preposterous" - central bank chief
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Iceland's central bank chairman and former prime minister David Oddsson said on Friday (17 March) that all talk of a banking crisis in Iceland was "preposterous". "I don't think this is a crisis - not even an indication of a crisis," he said in an interview with Icelandic Financial News (IFN). Oddsson said that the Icelandic banks must face the debate head-on, adding that their position is strong and that the banks have shown strong profits in recent years. He also added that Iceland's largest banks must present the facts as they are. "Speaking the truth is essential and we have nothing to hide - quite on the contrary," Oddson said. "The Icelandic banks have become relatively dependent upon foreign capital and therefore they must work hard on gaining the trust of the market and maintaining it," he added. Oddsson expressed disappointment in the recent coverage of Icelandic economic affairs in certain Scandinavian media. "Some of the things I've seen there have been rather hard to fathom - even in media I had previously held in rather high regard. The fact that their coverage is based on such ignorance, unwariness and even partly on animosity is peculiar," he said. Fitch Ratings recently cut the outlook on Iceland's AA- rating to "negative" from "stable", creating turmoil on Iceland's equity and currency markets. Moreover, recent reports by Royal Bank of Scotland, Dresdner Kleinwort Wasserstein, Credit Sights, Merrill Lynch and Barclays Capital have cast doubt on the alleged heavy borrowing of Icelandic banks. However, Standard & Poor's Ratings Services on Thursday affirmed its 'AA-' long-term foreign currency and 'AA+' long-term local currency sovereign credit ratings on the Republic of Iceland. At the same time, the 'A-1+' short-term foreign and local currency ratings on Iceland were affirmed. The outlook is stable, according to Standard & Poor's.
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