As IMF Praises and Turns from Iceland, Cites Basel, Calls Hungary Anti-Bank

By Matthew Russell Lee

UNITED NATIONS, April 12 -- Has Iceland turned the corner away from financial meltdown? The International Monetary Fund seems to think so. On Thursday the IMF released three reviews of the country and held an embargoed conference call for the press hosted by Julie Kozack, tellingly her last as IMF Mission Chief to Iceland. She will be moving on to Lithuania and Poland.

The IMF has praised Iceland's write-down of debts, while criticizing Hungary's restructuring, complaining that "all losses from the implied debt reduction would be borne by the banks alone."

As previously noted by Inner City Press, the IMF likes bank mergers. Last April, IMF European Department Director Antonio Borges told reporters on Friday that Belgium was smart to have pushed Fortis to being acquired by BNP Paribas. He urged more such mergers.

Inner City Press asked Borges if the IMF proposed any safeguards at all, given that concerns exist that when a local bank is acquired by one based far away, there will be less reinvestment and accountability.

Borges, while calling this an “interesting question,” bragged that the IMF organized a coordinated effort to get large banks to treat communities, particularly in Emerging Europe, fairly, and that this had worked

And so it seems, the IMF likes bank mergers. In Iceland this is footnoted, that "data for Landsbankinn and Islandsbanki reflect the impact of their respective mergers with Sp Kef. and Byr in the second half of 2011."

Only yesterday, the IMF minimized the rushed licensing of nine new banks by political insiders in Bangladesh on the eve of its program with that country, saying that at least they'll be subject to new rules.

Regarding bank regulation in Iceland, the IMF says

"A strong, intrusive, and independent supervisory agency is essential to help avoid the build-up of risks that can lead to crisis... additional examiners with credit risk expertise may be needed in the onsite inspection area and the credit risk bureau may need more resources to become a powerful supervisory tool. Staff underscored that preserving the FME’s independence, and its capacity and willingness to act, is essential to ensure that the needed strengthening of supervision continues, toward full compliance with Basel Core Principles."

But what of bank regulation in countries like the United States, UK, France and Germany? Watch this site.