New Finance Minister Þórdís Kolbrún Moves Forward with Íslandsbanki Sale

Minister of Tourism, Industry, and Innovation Þórdís Kolbrún Reykfjörð Gylfadóttir

Minister of Finance Þórdís Kolbrún Reykfjörð Gylfadóttir has recently expressed support for the continued sale of state-owned Íslandsbanki shares. RÚV reports.

Formerly Minister of Foreign Affairs, Þórdís recently switched places with Bjarni Benediktsson in the wake of his resignation from office.

Þórdís stated to RÚV that although it would be a good move for the state to divest itself of ownership in Íslandsbanki, it may be necessary to change some regulations and guidelines in light of the recent controversy.

Preparatory work underway

It has now been some nine days since Þórdís assumed her new position as Minister of Finance. She discussed the recent government changes and her priorities in the coming weeks and months on the current events talk show Silfurinn last night.

On Silfurinn, she stated that her ministry is currently working to prepare for finalising the Íslandsbanki sale and that nothing has changed regarding the goal of state divestiture in Íslandsbanki.

Þórdís stated that the state-owned shares in Íslandsbanki account for several billion ISK and that the sale is of great importance to the treasury. While not divulging details, she stated that a good price had been obtained for the sale and that the recent opinion of the Parliamentary Ombudsman would be taken into account.

“I am of the opinion that it is simply right to divest the state of its ownership in Íslandsbanki. I know there are voices out there that are concerned that it is done properly and that all the rules are followed,” she said. “Some rules need to be changed or the methodology of selling needs to change as well. It should be a completely public auction, as broad and general as possible, so the public can easily participate.”

Þórdís further stated that she hopes the work will begin as soon as possible.



Minister of Finance, Bjarni Benediktsson, Resigns from Office

bjarni benediktsson

Now-former Minister of Finance, Bjarni Benediktsson, has resigned from office following critique of his role in the March 2022 sale of Íslandsbanki shares.

Report on Íslandsbanki Sale Highlights Lack of Transparency

The Ministry of Finance issued a notice this morning of a press briefing at 10:30. Earlier this morning, the opinion of the parliamentary ombudsman had been published on the government website where it is stated that the Minister of Finance’s preparation for the privatization process of Íslandsbanki did not conform to government guidelines.

Following the 2008 banking collapse, several major banks were taken into state ownership, to later be sold off in a privatization process. The sale of shares in Íslandsbanki was criticized for a lack of transparency at the time, with special attention given to Hafsilfur ehf., a company owned by Benedikt Sveinsson, the father of the Minister of Finance. Hafsilfur was among those who purchased shares in Íslandsbanki when a 22.5 per cent stake in the bank was sold in an auction. Bjarni, now-former Minister of Finance, has stated in the past that he first learned about the company’s purchases when the ministry received a list of buyers from the State Financial Supervisory Authority after the auction had concluded.

FME Believes Íslandsbanki Broke the Law During March Sale

Skúli Magnússon, the parliamentary ombudsman has indicated that there was a lack of clarity in the preparatory documents regarding conflicts of interest. In his official opinion, the parliamentary ombudsman concluded that the Minister of Finance was not qualified to approve the sale. According to the ombudsman, it must be assumed that he had “significant and real interests in the sale.” The ombudsman also stressed that nothing has come to light that would cast doubt on the Minister’s claim of ignorance regarding Hafsilfur’s participation in the auction.

In his response to the ombudsman’s findings, Bjarni expressed his disagreement with some of the conclusions but emphasized the importance of respecting the opinion. He mentioned that the next steps would be determined in consultation with fellow Independence Party members.

Bjarni also reiterated that he had not been aware of his father’s involvement in the auction and defended his actions throughout the auction process. The sale of Íslandsbanki’s stake has had several important consequences, including one of the largest-ever fines levied on an Icelandic financial institution,  and the resignation of Íslandsbanki CEO, Birna Einarsdóttir.

Agreement Reached Between Central Bank and Íslandsbanki

During his press briefing, Bjarni stated that, given the recent opinion given by the ombudsman, he found it impossible to continue working in the Ministry of Finance. He stated that he wanted to bring peace to the ministry and that he would step down as the Minister of Finance and Economic Affairs. Bjarni stated further that he wanted to demonstrate that “responsibility came with positions of power.”

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Íslandsbanki Loses Large Customers Following Scandal

VR Union, the Icelandic Confederation of Labour (ASÍ), and the Consumers’ Association of Iceland have all discontinued their business with Íslandsbanki as a result of the bank’s mishandling of the sale of public assets last year, Vísir reports. Íslandsbanki admitted to breaching procedure and was sentenced to pay a fine of ISK 1.2 billion [$8.8 million, €8.1 million] the highest of any financial institution in Iceland’s history, for breaking regulations in the sale of a 22.5% stake in the bank in March 2022.

VR and ASÍ each made the decision to leave Íslandsbanki independently, Hjördís Þóra Sigurþórsdóttir, second vice president of ASÍ, told Morgunblaðið. She doubts the bank can make up for the breaches it committed. “We’re talking about public assets in Iceland that are being sold to hand-picked parties for less than they’re worth.”

There have been reports of individual customers also transferring their banking away from Íslandsbanki following the scandal. Íslandsbanki’s new CEO Jón Guðni Ómarsson has stated that he has not noticed a significant drop in the bank’s number of customers.

Background to the sale

In early 2020, Iceland’s government began preparation to sell the state-owned Íslandsbanki in stages. The first partial sale was carried out in June 2021, a successful public stock offering of a 35% stake in the bank. Following that sale, 65% of the bank remained state-owned.

The next stage of the sale took place in March 2022, this time a private stock offering of a 22.5% stake in the bank. Unlike the first offering, it was only open to professional investors. The sale was successful, reducing state ownership in the bank from 65% to 42.5%. The private stock offering was immediately criticised for its lack of transparency and for the discount given to investors despite high demand. As public pressure mounted, the list of investors who took part in the share was published, revealing several who had access to inside information on the sale, such as employees of the consulting company that had been hired to manage the sale as well as the father of Finance Minister Bjarni Benediktsson.

Changes to Payment Processing Over the Weekend Led to Overcharges

digital payment iceland online banking

Updates to digital payment systems caused confusion over the weekend, when some consumers in Iceland were charged excessive amounts for some everyday purchases.

On Saturday, April 15, Íslandsbanki sent out a message to its customers in advance of the change, stating: “This weekend, there will be a global standard change implemented by payment processors that involves the removal of decimal points from Icelandic Króna currency. As a result, Mastercard will be removing decimal points from its transactions starting tomorrow, Saturday, April 15th at 7:05 PM.  Customers of our bank may be alerted to incorrect amounts when making purchases in Icelandic currency during that time, if payment processors do not update their settlements in a timely manner.”

Íslandsbanki warned customer to refrain from making certain purchases if they were uncertain of the charge. However, some Icelanders were unpleasantly surprised on their banking statements, as Morgunblaðið notes.

Among some of the charges include one Icelander who reportedly was charged 176,000 ISK [$1,290, €1,175] at Bæjarins Beztu, a popular hotdog stand, and an Icelander who was charged 642,600 ISK [$4,715, €4,293] for a grocery trip.

Regarding such charges, Íslandsbank stated: “If customers continue with their purchase and are charged the wrong amount, they should wait until the transaction has been settled and then contact the seller for a correction, or submit a refund request to Íslandsbanki.”

Online payment service Paypal likewise suspended ISK transactions between April 14 and 18.

Those experiencing problems with their banking are advised to contact their bank directly.

24,000 Shareholders in Íslandsbanki Following Successful Stock Offering

Íslandsbanki bank’s shareholders now number around 24,000 following a share offering that ended yesterday, more than any other company listed on Nasdaq Iceland. The bank remains 65% in state ownership, with 24% now in the hands of domestic investors and 11% held by foreign investors. Finance Minister Bjarni Benediktsson celebrated the campaign’s success, stating that it reduced state risk and provided funds for upcoming development projects.

“It’s gratifying to see the results of Íslandsbanki’s successful offering,” Bjarni stated. “High demand and participation from the public is particularly gratifying, and Íslandsbanki will have more shareholders than any companies registered on the Icelandic market. This is not least due to the decision to allow subscriptions for as little as ISK 50,000 [$512/€340] and leave individual subscriptions of up to one million krónur [$8,250/€6,800] intact. The sale is profitable for the treasury and will be useful in the development that lies ahead in the coming months. Most importantly, however, we are taking the first step here in reducing the state’s risk in banking and moving closer to a healthier environment as is the case in the Nordic countries and our other neighbouring countries.”

Read More: Sale of State-Owned Banks

One of Iceland’s three largest banks, Íslandsbanki was 100% in state ownership before the share offering. Of the other two, Arion Bank is privately owned and Landsbankinn is 98.2% state-owned. Iceland’s current governing coalition prioritised reducing state ownership of financial institutions in the government agreement made at the beginning of its term.

Up to 35% of State-Owned Íslandsbanki For Sale

Icelandic state-owned bank Íslandsbanki launched its share offering at 9.00am this morning. The bank will sell up to 35% of its share capital in the initiative, which stands until June 15, following which all its shares will be listed on Nasdaq Iceland (the Icelandic stock exchange). Two foreign investment companies and two local pension funds are said to be the cornerstone investors in the initiative. RÚV reported first.

Government Moves to Reduce State Ownership

Of Iceland’s three largest banks, just one (Arion Bank) is privately owned. The other two are in state ownership (Íslandsbanki, currently at 100% and Landsbankinn at 98.2% state ownership). Iceland’s current governing coalition prioritised reducing state ownership of financial institutions in the government agreement made at the beginning of its term. A sale of part of Íslandsbanki was discussed earlier in the term but side-lined during the pandemic as conditions for the sale were not considered favourable. Government officials have argued that the sale could free up funds for investment in essential infrastructure.

Read More: Sale of State-Owned Banks

A notice on Íslandsbanki’s website states that the bank’s estimated market value following the offering is ISK 150 billion ($1.24 billion/€1 billion). The aim is to sell over 636 million shares, the suggested retail price of which is between ISK 71 and 79 per share. The offering will take place both through a public offering of shares to institutional investors and retail investors in Iceland and through a private placement to specific institutional investors in various other jurisdictions.

Four Key Investors

Foreign investment funds have already committed to buying in the bank, according to Íslandsbanki. Funds managed by Capital World Investors have committed to purchasing nearly 77 million shares while RWC Asset Management LLP has committed to purchasing nearly 31 million shares. Icelandic pension funds Gildi-lífeyrissjóður and Lífeyrissjóður verzlunarmanna have also committed to buying more than 46 million shares each. These four parties are said to be the cornerstone investors in the offering.

Sky-High Fines for Norwegian Bank that Serviced Samherji

Boat with Samherji Logo

Norwegian bank DNB has been reprimanded by Norway’s Financial Supervisory Authority, which criticised it for failing to regulate the transactions of six companies related to Icelandic seafood magnate Samherji. The bank was fined NOK 400 million ($48.2 million/€40 million) this morning for insufficient surveillance of money laundering. Kjarninn reports that the bank will not appeal the fine.

One of Iceland’s largest seafood companies, Samherji was the centre of an international scandal in late 2019 when an investigation alleged the company’s officials had bribed the Namibian government to gain access to lucrative fishing grounds. Leaked documents suggested the company had also taken advantage of international loopholes to avoid paying taxes.

DNB Terminated Services for Samherji Following Investigation

Most of Samherji’s financial transactions were mediated by DNB, Norway’s largest bank and one-third owned by the country’s Ministry of Trade and Industry. After the Samherji investigation became public, DNB asked the fishing company for documents to clarify their business with the bank and counter allegations of money laundering and tax evasion. The documents provided by Samherji were deemed insufficient to “clear up the issues brought up by the bank,” and DNB subsequently terminated deposit and payment services for several Samherji accounts at the bank.

In December 2020, the bank announced it was facing a fine equivalent to ISK 5.7 billion for poor money laundering protection. DNB was also investigated by the Norwegian Economic Crimes Police after the Samherji documents were made public.

Aim to Sell 25% of State-Owned Íslandsbanki at First

Bjarni Benediktsson kynning fjármálafrumvarp 2021

The Icelandic government plans to sell 25% of shares in Íslandsbanki bank, which is currently fully state-owned, according to a report published by the Ministry of Finance yesterday. Within a longer timeframe, however, the government aims to sell most or all of its shares in the bank. 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.

Iceland Review reported yesterday that Minister of Finance Bjarni Benediktsson had approved a proposal from the state holding company ISFI to sell Íslandsbanki. At the time it was not known what percentage of state’s shares would be put up for sale, but the Ministry’s new report states it will be 25%, to begin with. The shares will be sold in a public offering, after which all shares in the bank will be listed on a regulated securities market in Iceland.

The sale of Íslandsbanki has been in discussion for some time. The sale is intended to reduce government risk as well as help mitigate the treasury deficit expected next year as a result of the pandemic.

Read More: Sale of State-Owned Banks in Iceland

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%). There are no plans to sell Landsbankinn at this point.

Iceland’s three largest banks – Íslandsbanki, Landsbankinn, and Arion Bank, were established as state-owned institutions on the ruins of other banks that became insolvent during the 2008 crash. Arion Bank has since passed into private ownership while the other two are state-owned.

The Minister of Finance has stated that Íslandsbanki’s value is between ISK 130-140 billion ($1.0-1.1 billion/€834-898 million). The sale income will be used to pay down treasury debt and increase the state’s scope for social investment, according to the Ministry’s report.

Íslandsbanki Lays Off 20 Employees

Íslandsbanki laid off 20 employees today, most of whom worked at the bank’s headquarters in Smáralind, Vísir reports. The bank dismissed 20 employees in September and 16 in May.

In an interview with RÚV, Birna Einarsdóttir, CEO of Íslandsbanki, expressed lament. “The days are always sad and tough when we must resort to such measures.” Íslandsbanki’s staff has shrunk by approximately 90 employees, or 10-12% in total, in 2019.

“We cannot guarantee that this will be the last round of lay-offs, but we hope so.” According to Birna, the banking environment is evolving rapidly and Íslandsbanki must evolve as well. “Some of these changes today are organisational in their nature. Job descriptions are changing.”

An earnings report for the third quarter indicated that return on equity was below the bank’s target. “It’s our goal to improve return on equity to the satisfaction of the bank’s owners. To that end, various measures must be taken.”

Terms of notice differ between employees. According to Birna, the term of notice is approximately six months. In most cases, however, the employees will cease work at the end of November.

Íslandsbanki is fully owned by the Icelandic State Treasury. It is not the only bank to have laid off employees this year. In September, Arionbanki laid off approximately 100 employees.