Currency Risk for Iceland in New Icesave Deal Skip to content

Currency Risk for Iceland in New Icesave Deal

If the Icelandic króna were to depreciate by ten to 20 percent it could cost the state treasury ISK tens of billions if the state’s responsibility for Icesave is legalized, according to the calculations of mathematician Sigurdur Hannesson.

icesave-pressconference01-091210_go

From the Icesave press conference on Thursday. Photo by Geir Ólafsson.

The claim of the Depositors’ and Investors’ Guarantee Fund and investors to the Landsbanki bankruptcy estate amounts to ISK 674 billion (USD 5.8 billion, EUR 4.4 billion) and is in Icelandic króna, Morgunbladid reports.

However, the fund’s obligations towards the depositors’ guarantee funds in the UK and the Netherlands are in foreign currency.

Hannesson pointed out that if the ISK depreciates, the reclamation of the Depositors’ and Investors’ Guarantee Fund will reach 100 percent. Reclamation in excess of 100 percent, on the other hand, will go to Landsbanki’s general claimants and not the Icelandic state.

“We pointed this issue out when the last Icesave agreement was discussed and that hasn’t changed with the new Icesave agreement presented last week. There is still a significant currency risk which the state treasury accepts with this agreement,” Hannesson said.

Meanwhile, Bjarni Benediktsson, chairman of the Independence Party, the largest opposition party, has announced that he will not present the Icesave bill with the government.

“The government has to stand on its own feet while presenting the issue and if it cannot do that alone we have a government which cannot negotiate with other nations and that is a government that shouldn’t be operating,” Benediktsson said.

“We will take a position on this case when we have heard the reviews, the calculations and have been given space to reflect on the legal risks and been given a good overview of the economic issues which people believe will be prolonged if the Icesave dispute continues,” he added.

The new Icesave agreement has gained widespread attention; the leader in today’s Financial Times begins with the following paragraph:

“Bless the Icelandic people, who in a referendum last March rebelled against being put in a debtor’s prison for the follies of the defunct Landsbanki. Their defiance has forced their British and Dutch jailers to relent a little. Iceland may accept a newly concluded deal to put an end to the dispute. Such a desire is legitimate; the principle underlying the deal less so.”

Click here to read more about the new Icesave agreement.

Sign up for our weekly newsletter

Get news from Iceland, photos, and in-depth stories delivered to your inbox every week!

* indicates required

Subscribe to Iceland Review

In-depth stories and high-quality photography showcasing life in Iceland!

Share article

Facebook
Twitter