Banks Raise Interest on Non-Indexed Loans

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All three of Iceland’s commercial banks announced that they would be raising interest rates on Friday. RÚV reports that Arion Bank, Íslandsbanki, and Landsbankinn are raising interest rates on non-indexed loans, as well as deposits. The hike comes on the heels of a 0.5% increase on key interest rates last week.

Interest rates on most types of non-indexed loans went up by 0.5% at Arion Bank, Íslandsbanki, and Landsbankinn. New non-indexed mortgages offered by Landsbankinn interest rates had a slightly lower hike; those went up 0.25-0.30%.

Read More: Inflation Rate Continues Climb, Now at 9.9% (January 2023)

Non-indexed interest rates on the banks’ home loans are now in the range of 8.0-8.5%, while interest rates on indexed loans remain unchanged.

Deposit rates were also raised, in most cases around 0.5%.

Looking Back: Mortgage Payments Continue Rising in Iceland (August 2022)

Friday’s interest increases come on the heels of the Central Bank’s decision to raise key interest rates by 0.5% last week, bringing it up to 6.5%. This was the Central Bank’s 11th increase on the key interest rate in a row. The lowest this rate has been is 0.75% in the spring of 2021.

Interest rates have not been higher since 2009.

Residents and Local Council Oppose Silicon Plant Reopening

Stakksberg Silicon Plant Helguvík.

Arion Bank has plans to sell the silicon plant in Helguvík, Southwest Iceland, to PCC BakkiSilicon. The two parties have signed a statement of intent for the sale. Kjarninn reports that both residents and municipal authorities oppose the reopening of the plant. The plant opened in 2016, but was quickly plagued by operational troubles and ultimately went bankrupt amidst widespread community outcry over the environmental and health impact it was having on the surrounding communities. 

“The Municipal Council of Reykjanesbær has repeatedly expressed its views on the operation of the silicon plant to Arion Bank,” local councillor Friðjón Einarsson stated, adding that there is opposition both among residents and local councillors to opening the plant. “We have formally requested to work with with the bank to dismantle the plant and start collaborating on developing employment in Helguvík. Unfortunately, that has not happened.”

Arion Bank has drawn up plans to renovate, reopen, and expand the plant. The Icelandic National Planning Agency (Skipulagsstofnun) released a report on those plans on December 31, 2021, which stated that the changes would likely reduce malfunctions at the plant, a repeated issue when the plant was still in operation. The report also stated that while the renovations would lessen the plant’s impact on air quality, the impact would still be negative in the first phase of operation and quite negative if all four ovens were to operate at once.

Read More: Emissions Will Increase by 10% if Plant Reopens

“We will try everything we can to stop the reopening and will continue to ask the bank to halt [its plans],” Friðjón stated. “In my opinion, the bank has no right to do this and it’s really unbelievable that the bank isn’t listening to the area’s residents.” He points out that it was Arion Bank that funded the plant, a project that “failed miserably and [the bank] thus holds a lot of responsibility for how it went.” Friðjón says Reykjanesbær authorities have heard there is interest from abroad in buying the plant, dismantling it and exporting its parts abroad. Friðjón says local authorities have told PCC BakkiSilicon that the local residents have no interest in their purchase and reopening of the plant and will fight against it.

Bank Subsidiary to Build Wellness Community in Capital Area

The capital-area municipality of Garðabær has signed a contract with Arnarland ehf, a subsidiary of Arion Bank, to build a new wellness community, Fréttablaðið reports. The community will “emphasize quality of life, nature, and health-promoting services” and be open to residents who are 50 years and older.

Per its website, Arnarland be designed with the United Nation’s sustainable development goals in mind and feature an on-site center for companies that “specialize in healthcare services, development, and innovation.” The pharmaceutical and medical supply concern Ósar, as well as its subsidiaries Icepharma and Parlogis, will be building their future headquarters within the neighborhood. “The companies and the residences will benefit from one another’s presence and increase the health-related services that are available to nearby communities,” remarked Parlogis CEO Hálfdan Gunnarsson.

Arnarland, which will be approximately 10 ha [24 acres] in size, will be built on a plot of land that has been owned by Landey, an Arion Bank subsidiary, since 2016. Landey recently changed its name to Arnarland ehf. Arion bank holds a 51% share in the neighborhood. The real estate company Fasteignafélagið Akurey, holds the other 49%. The real estate company is owned by father and son Kristján Jóhannsson and Jóhann Ingi Kristjánsson, who together, own a combined majority, or 64%, in Icepharma and Parlogis.

Arnarland ehf CEO Þorgerður Anna Einarsdóttir says the community will fill a real niche in the capital-area housing market.

“In our opinion, there’s a real shortage of high quality and spacious apartments for people who want to downsize when their chicks leave the nest. This neighborhood will place an emphasis on allowing residents to cultivate body and soul in a beautiful and nourishing environment.”

Arion Bank to Ensure 80% of Staff Salaries During Parental Leave

Bicycle

Arion Bank has announced that it will guarantee employees up to 80% of their wages during parental leave. The bank promises to pay employees with salaries upwards of 600,000 ISK per month (€4,015 / $4,643) – which is the salary cap, before taxes, of the Parental-Leave Benefit Fund – an additional benefit so that they can take home close to 80% of their regular wages.

Encouraged to make full use of their parental leave

In a statement published on the bank’s website on Wednesday, Arion Bank declared that it would henceforth guarantee employees up to 80% of their wages during parental leave. The benefit will be granted in addition to payments from the Parental-Leave Benefit Fund and other compensation negotiated through collective-wage agreements. The statement further encouraged employees to make full use of their right to parental leave.

The salaries of bank employees vary. As reported by Kjarninn, the monthly wages of individuals employed as consultants and brokers, including those working for Arion Bank, exceeded ISK 1.7 million (€11,377 / $13,158) last year. According to the bank’s new parental-compensation package, the average Arion broker would earn approximately ISK 1,360,000 (€9,103 / $10,528) during up to six months of parental leave, or ISK 760,000 (€5,087 / $5,882) more than the expected payment from the Parental-Leave Benefit Fund.

Employees with salaries of ISK 1 million (€6,693 / $7,740) a month receive an additional ISK 200,000 (€1,339 / $1,547) and employees earning ISK 800,000 (€5,355 / $6,192) receive an additional ISK 40,000 (€268 / $310).

Hope to ensure equality of wages in the future

The parental-leave package forms a part of Arion Bank’s endeavour toward gender equality. “The average wages of men, whether in Arion Bank or in society at large, exceed those of women,” the statement from the bank reads – “and fathers are less likely to use their parental leaves than mothers.”

“Guaranteeing employees 80% of their wages during parental leave, regardless of gender or position,” the statement continues, “makes it easier for them to take time off. In this way, this initiative aims to encourage more fathers to make use of their rights. In the future, this step may prove beneficial in ensuring equality of wages between men and women, on the one hand, and increasing the number of women in managerial positions and other positions, on the other hand. Today, women form 44% of the bank’s management.”

The statement ends with a quote from Director Benedikt Gíslason: “We hope to make the bank a more desirable place of employment in the eyes of young and talented people.”

In Focus: Sale of State-Owned Banks

sale of state-owned Icelandic banks

For years, Iceland’s government considered selling 25-50% of Íslandsbanki bank, currently fully owned by the State Treasury. Reducing state ownership of financial institutions was a turnaround in Iceland’s financial policy that had been in development for years. With memories of the banking collapse still strong in the minds of the public, many were opposed to […]

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Three Banks Own Almost 800 of Iceland’s Most Important Artworks

Over 4,500 artworks are owned by Iceland’s three banks—Landsbankinn, Arion Bank, and Íslandsbanki, RÚV reports. The National Gallery of Iceland did an inventory of Icelandic artworks owned by banks in 2009, just after the financial crash, and determined that banks owned nearly 800 “national treasures” that should return to state ownership. Little has changed in regards to the ownership of these cultural artifacts in the intervening decade, however, and the matter is becoming more pressing as the Icelandic government’s option to buy works owned by Arion Bank, at least, will expire in two years.

Taking Inventory

Under the guidance of then-Minister of Culture (now Prime Minister) Katrín Jakobsdóttir, the Ministry of Culture commissioned the National Gallery to oversee an extensive survey of the cultural inventories of Íslandsbanki, Nýja Kaupþing (now Arion Bank), and NBI (now Landsbankinn) just after the economic collapse. Around the same time, there were extensive discussions as to what should be done with these collections, discussions that were even taken up in parliament. The National Gallery established three categories for artworks owned by the banks: works that are considered “national treasures” and should be returned to state ownership (category 1), works that the banks should continue to own but provide public access to (category 2), and works that banks should continue to own, but loan out at will, provided they have the approval of the National Gallery (category 3).

The categorized inventory was submitted to Katrín Jakobsdóttir in the winter of 2009. At the time, the banks collectively owned 4,286 works. Of these, 775 works were categorized as national treasures. Since the initial inventory, all three banks have acquired additional art—either through purchase or acquisitions in bank mergers—but sold very little. The banks have also made a few notable loans of artworks and also given a few artworks away.

Landsbankinn

In 2009, Landsbankinn (NBI) owned 1,953 artworks, 22 of which were protected by law. These protected works included frescoes by Jóhannes Kjarval and Jón Stefánsson, as well as mosaics by Nína Tryggvadóttir. Of the bank’s collection, 460 artworks by 90 artists were categorized as category 1 works, or national treasures. 235 by 85 artists were designated as category 2 works; 35 were designated category 3 works. As of today, the vast majority of these works, or 1,200 pieces, are in storage.

Arion Bank

At the same time, it was determined that Nyjá Kaupþing (now Arion Bank) owned 1,238 artworks. Of these, 195 works by 71 artists were designated category 1 pieces, 170 works by 59 artists category 2, and 29 category 3.

Today, Arion Bank employees seem to share a common love of art, and a few hundred of them pay a monthly fee to take part in a twice-annual drawing, the winners of which receive a work of art from the bank’s collection. Prior to the drawing, the bank displays the prize work for several weeks as a way of introducing employees to the artist. The bank continues to purchase art, with particular emphasis on new works by Icelandic artists.

Íslandsbanki

At the time of inventory, Íslandsbanki owned 1,095 works. Of these, 120 works by 50 artists were designed category 1, 57 works by 32 artists category 2, and 39 category 3. Today, the bank says it owns 668 artworks, 360 of which are paintings. The majority of these, or 440 works, are publicly displayed, while the remainder are in storage.

Time Running Out

Ten years ago, the Icelandic government made an agreement with Nýja Kaupþing in which it would have a twelve-year buying option on the artwork owned by the bank. This agreement, however, is set to expire in two years.