Banks Raise Interest on Non-Indexed Loans

currency iceland

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.”

Two Icelandic Banks Laid Off 120 Employees Today

Arionbanki

The layoffs of 100 staff members take effect today at Arionbanki bank, while at Íslandsbanki 20 employees were laid off. Both banks state the dismissals are a result of restructuring, and stretch across various branches and departments.

The board of Arionbanki approved a restructuring this morning which takes effect immediately. The changes include laying off 12% of the bank’s staff, 80% of whom work at its headquarters. The other 20% are employed at the bank’s branches across the country. Harladur Guðni Eiðsson, the Arionbanki’s public relations officer, told Vísir there are no plans to close any of the bank’s 21 branches. “The bank is not discontinuing any operations,” Haraldur stated, rather “projects are being moved and simplified.”

A press release about the layoffs at Arionbanki was published before staff themselves were informed. “The bank is registered in the Iceland Stock Exchange and we have to announce such extensive changes there first,” Haraldur explained. Individual interviews with the staff affected have now begun and will continue throughout the day.

Cost cutting is behind the layoffs at Íslandsbanki, according to the bank’s PRO Edda Hermansdóttir. As is the case at Arionbanki, Edda confirms most of the employees who have been dismissed work at the bank’s headquarters. A total of 25 employees will leave the bank this month, though five of those are retiring.