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Government to Sell State-Owned Íslandsbanki

Iceland’s government will likely sell one of three state-owned banks this coming spring. The bank in question is Íslandsbanki, though it is not clear what percentage of the bank, now fully state-owned, will be put up for sale. The sale is intended to reduce government risk as well as meet the government deficit expected next year as a result of the pandemic.

According to a government notice, Iceland’s Minister of Finance Bjarni Benediktsson has approved a proposal from the state holding company ISFI to sell Íslandsbanki. The Minister will now prepare a report, to be reviewed by Parliamentary committees and the Central Bank of Iceland. After considering their comments, the Minister will make a final decision on whether to begin the sale process, expected by January 20.

What percentage of the bank is to be sold is not yet known, though earlier this year government ministers discussed a possible sale of 25-50% of its shares. The aim is to sell shares in a public offering and subsequently list all shares in the bank on a regulated securities market in Iceland.

Iceland an Outlier in State Ownership of Banks

The Icelandic government owns a bigger proportion of its country’s banks than any other government in Europe. Two of the country’s three largest banks are in state ownership: Íslandsbanki (100%) and Landsbankinn (98.2%). Reducing state ownership of financial institutions has been an aim of Iceland’s financial policy in recent years and is part of the current coalition’s government agreement. The sale of Íslandsbanki has been in discussion for some time.

Read More: Sale of State-Owned Banks in Iceland

The government notice states that market conditions now appear to be favourable for the sale, in addition to which the bank is in a good financial position. Its sale is intended to reduce government risk in the financial system, promote competition in the banking industry, and increase domestic investment opportunities for individuals and professional investors.

The COVID-19 pandemic and the government’s economic response measures are expected to result in a deficit of around ISK 320 billion ($2.5 billion/€2.1 billion) in 2021. “With the sale, we mitigate the blow of the coronavirus crisis considerably, in addition to which it makes it easier for us to finance continued measures for people and businesses,” stated Finance Minister Bjarni Benediktsson.

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