Iceland lied about bank woes - Wellink

Dutch central bank President Nout Wellink accused Iceland's government Thursday of lying about the health of the country's banks before their collapse in October 2008.

Wellink, in televised testimony before a Dutch commission investigating the credit crisis, said he had spoken to the head of Iceland's central bank in early September 2008.

At that time, Wellink said, he was told that the Icelandic central bank had warned its government about six months previously about potential dangers for the banks.

"I've been hoping for a long time that they just didn't see it, but to be honest after the words of my colleague that it was several months before that he had warned them, I thought they have lied to us" Wellink said.

The effects of the collapse of Iceland's banking system in October 2008 rippled round the world. One bank, Landsbanki, had an online arm, Icesave, that attracted hundreds of thousands of customers in Britain and the Netherlands by offering rates of more than 5 percent on deposits.

The two countries lent Iceland $5 billion (3.1 billion pounds) to compensate customers who lost their savings when Icesave collapsed, but the terms for repayment of that loan have caused a big political dispute.

Iceland's parliament passed a repayment law last August, but the British and Dutch governments rejected it because of its restrictions. Iceland's parliament passed a new law in December but the president refused to sign it, triggering a national referendum on the law, set for March 6.