Keflavík Savings Bank Lost ISK 50 Billion in 2008-2010 Skip to content

Keflavík Savings Bank Lost ISK 50 Billion in 2008-2010

By Iceland Review

The Keflavík savings bank SpKef increased its deposits by ISK 8.5 billion (USD 66 million, EUR 53 million) in 2009 after an increase by 9.8 billion in the last months of 2008. The total increase since shortly before the banking collapse in early October 2008 and until the end of 2009 was 30 percent.

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At that time the savings bank didn’t fulfill the minimum requirement made by the Icelandic Financial Supervisory Authority (FME) on equity ratio and operated on an exemption. The cost of the accumulation of deposits must therefore be covered by tax payers, Fréttablaðið reports.

The total loss of SpKef in 2008-2010 was ISK 46.6 billion (USD 362 million, EUR 289 million), according to unpublished drafts to annual accounts the newspaper has access to.

The draft for SpKef’s annual account for 2009 states that the bank’s deposits had amounted to ISK 63.2 billion at the end of that year, up from ISK 44.9 billion in mid-2008. At the same time, the bank’s value depreciated by ISK 17 billion while paying ISK 2.3 billion in salaries, related costs and “other operational costs.”

SpKef operated until April 2010 when a new savings bank under the same name was established. According to the draft of an annual account that year, the bank lost ISK 11.9 billion. It also states that all of the bank’s assets “apart from ISK 100 million were relocated to [the new] SpKef.”

The new savings bank also took over “all general deposits and debts to the Central Bank because of overnight lending, repurchase agreements and other loans with collateral in overtaken assets.”

The new SpKef was taken over by Landsbanki in March 2011.

A ruling committee determined last week that the Icelandic state is to pay Landsbanki ISK 19.2 billion (USD 149 million, EUR 119 million) because of its takeover of SpKef.

Additionally, the estimated cost of interests because of the payment is approximately ISK 6 billion, on top of the state’s contribution of ISK 900 million to new equity when SpKef was reestablished.

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