The Icelandic Financial Supervisory Authority (FME) took over the boards of the savings banks SPRON and Sparisjódsbankinn (formerly Icebank) yesterday. Minister of Finance Steingrímur J. Sigfússon said the state will lose up to ISK 180 billion (USD 1.6 billion, EUR 1.2 billion) in the process.
From a SPRON shareholders’ meeting in 2007. Photo by Páll Kjartansson.
According to ruv.is, neither of the two banks had fulfilled legal demands for maintaining a minimum equity ratio since October 2008.
The bankruptcy of Baugur Group brought about the end of SPRON, while Sparisjódsbankinn’s loans to the old commercial banks marked the beginning of its collapse, as is evident in their interim financial reports.
SPRON’s report reveals that revenue from interest and service charges during the first three quarters of last year amounted to ISK 1.4 billion (USD 12 million, EUR 9 million), while the bank’s operating costs exceeded that amount by ISK 200 million (USD 1.8 million, EUR 1.3 million).
SPRON had roughly ISK 13 billion (USD 115 million, EUR 84 million) in equity. However, ISK 6 billion (USD 53 million, EUR 39 million) of that amount was a loan from Kaupthing Bank. With Kaupthing’s fall in October, SPRON lost those billions from its equity.
SPRON granted large loans to Baugur Group. At the point of its bankruptcy earlier this month, SPRON is unlikely to have had much of the remaining ISK 7 billion (USD 62 million, EUR 45 million) left of its equity and Baugur may therefore have brought SPRON down with it.
Five Icelandic banks have now been nationalized since October 2008. The fall of Glitnir, Landsbanki and Kaupthing marked the beginning of the crisis.
Earlier this month, investment bank Straumur-Burdarás was taken over by the state and now SPRON and Sparisjódsbankinn follow.