Refinancing of Iceland’s New State-Run Banks Delayed? Skip to content

Refinancing of Iceland’s New State-Run Banks Delayed?

It appears that the refinancing of the new state-run banks, New Glitnir (a.k.a. Íslandsbanki), New Kaupthing and NBI (formerly Landsbanki) may not take place within the timeframe set by the Icelandic government and the International Monetary Fund (IMF).

The plan under which Iceland and the IMF are working assume that the estimate of the banks’ assets and debts and how they should be divided between the three banks be completed by the end of February, Morgunbladid reports.

The headquarters of Glitnir in Reykjavík. Copyright: Icelandic Photo Agency.

According to Morgunbladid’s sources, this objective may not be achieved until late April—two months behind schedule. Apparently, completing the estimate is much more extensive and time-consuming than originally believed.

However, it is considered of great importance that the work on the estimate is expedited so that families and companies can receive the best possible banking service during these difficult times and so that the banks can become independent entities again.

International consultancy company Oliver Wyman, which formulated the methodology being used to estimate assets and liabilities, will afterwards review the results before the banks are provided with equity.

According to plans, the banks’ equity ratio should be at least ten percent after they have been refinanced. It is expected that the state will provide the banks with ISK 385 billion (USD 3.3 billion, EUR 2.5 billion).

The final amount will however not be clear until the estimate on the banks’ assets and liabilities has been completed. Share capital will take the form of treasury bonds, which will be issued at market rate.

One of the primary objectives while estimating the banks’ assets and liabilities towards the claimants of the old banks is that no value will be unaccounted for.

The new banks will therefore issue bonds for any assets beyond liabilities, which are appropriated to the new banks, and submit these securities to the old banks.

Click here to read more about Icelandic banks.

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