Iceland's Secret
Insider account by the investigator who built the market-manipulation cases.
Summary
Jared Bibler was an American who worked at Landsbanki before the collapse and then joined the Icelandic Financial Supervisory Authority as an investigator, where he led inquiries into market manipulation by the failed banks. The book combines memoir with a first-hand account of what the investigations found.
The central finding Bibler describes is that Kaupthing, Landsbanki and Glitnir systematically bought their own shares through proprietary trading desks to support their prices, then parked those shares with shell companies financed by loans from the banks themselves. The effect was that the banks' reported capital was partly composed of their own stock, bought with their own money, and that the market prices used to value collateral across the Icelandic system were manufactured. He describes tracing these transactions through trading records, and he covers the resulting prosecutions, including the Al Thani case involving Kaupthing.
Bibler also writes about institutional obstruction: the small size of Icelandic society, the personal connections between regulators, bankers and politicians, and his own conflicts with the FSA leadership. He left Iceland and the account is angry. Readers should weigh that, and should note that this is one investigator's perspective rather than a comprehensive history. The technical description of the share-support mechanism is the book's most valuable content and matches what the Special Investigation Commission reported.
Key takeaways 7
- The three Icelandic banks bought their own shares in volume to support their own prices, which made reported market capitalisation an artefact of their trading.
- Loans to shell companies to buy the lender's own stock convert reported equity into a receivable from the borrower.
- Manufactured share prices corrupted collateral valuation throughout the Icelandic financial system, not only at the banks concerned.
- Trading records, rather than accounting statements, exposed the manipulation, because the pattern was visible only in order flow.
- Iceland's regulators lacked both the staff and the independence to examine institutions whose executives they knew socially.
- Bibler argues that similar share-support practices are detectable elsewhere and are not looked for.
- Criminal convictions followed only because a special prosecutor was created with powers the ordinary supervisor did not have.
Who should read it
Investors and compliance professionals who want a concrete account of how banks manufacture their own share prices and how such manipulation is detected.
Where it sits in the reference 2
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