The Central Bank of Iceland, on behalf of itself and the National Treasury of Iceland, concluded an agreement yesterday with the Banque centrale du Luxembourg (BCL) and the liquidator of Landsbanki Luxembourg S.A., concerning the purchase of 98 percent of outstanding Avens B.V. bonds.
The Central Bank of Iceland. Copyright: Icelandic Photo Agency.
The bonds were owned by Landsbanki Luxembourg S.A. and pledged to BCL as collateral for a liquidity facility provided in 2008. Landsbanki Luxembourg S.A. is a subsidiary of Landsbanki Íslands hf, as stated on the website of the Central Bank of Iceland.
Governor of the Central Bank of Iceland Már Gudmundsson and Yves Mersch, governor of the BCL, signed the agreement in Luxembourg yesterday.
“This agreement is an important milestone in the settlement following the collapse of the Icelandic banks. It will reduce the Icelandic economy’s external debt by more than 3.5 percent of GDP and will reduce non-resident ISK holdings by nearly one-fourth, or about 8 percent of GDP. This agreement is an important premise for capital account liberalization in Iceland,” Gudmundsson said at the occasion.
According to the agreement, the Central Bank of Iceland will gain full control over the assets of Avens B.V., which is the largest single owner of króna-denominated assets outside Iceland, with ISK holdings amounting to around 120 b.kr., or one-fourth of all króna-denominated assets owned by non-residents.
About one-third of this amount is in bank deposits, while the remaining two-thirds are in bonds issued by the Treasury or with a Treasury guarantee.