Report on Íslandsbanki Sale Highlights Lack of Transparency, Reliance on Outside Consultants

íslandsbanki sale iceland reykjavík

State regulators have released a report on the controversial sale of Íslandsbanki shares that took place this March. Among the considerations of the report are details on the dissemination of information of the sale, the determination of its sale price, and the selection process for determining the qualified investors.

After the 2008 banking collapse, the insolvent banks were restructured, leading to the partial socialisation of Iceland’s three major banks, Landsbankinn, Arion, and Íslandsbanki. Landsbankinn continues to be held by the state with a majority share.

However, Íslandsbanki has been gradually privatized since the restructuring, with an initial 35% of Íslandsbanki shares being sold in June 2021. After a sharp rise in share prices after the sale, some claimed that the shares were undervalued.

In March 2022, a second round of sales was slated, with 22.5% of Íslandsbanki shares to be sold off. This second offering, however, was not a public offering like the first, but was limited to a group of “qualified investors.” Among the qualified investors were the usual suspects, including foreign and domestic investors, and pension funds. However, the list also included some notable individuals such as Benedikt Sveinsson, father of Bjarni Benediktsson, Minister of Finance and the individual legally responsible for the sale.

In Focus: Íslandsbanki Private Stock Offering

The revelations caused widespread critique of Bjarni, the oversight committee, and the coalition government in power. There were also claims of insider trading, as significant numbers of investors sold off their holdings within days and weeks after a climb in price.

In total, the sale involved 450 million shares in the bank to 207 investors. The selling price was ISK 117 per share and the sale proceeds amounted to ISK 52.7 billion (USD 361,000,000; EUR 351,000,000). The state’s share in Íslandsbanki is now 42.5%.

Now, the Icelandic National Audit Office is trying to determine the nature of the sale, how the investors were selected, and how the Íslandsbanki share were valued. The official report can be seen here.

According to the report, the sale could have been better prepared and executed. Outside the scope of the report are the legitimacy and legality of the sale, which are left to the Financial Supervision Authority of the Central Bank of Iceland. Instead, the report focuses on the technical execution of the sale and its valuation of the shares.

According to the report, “the language used in the documents submitted by the Icelandic State Financial Investments (ISFI) to parliament was not suitable for drawing a clear picture of the arrangement of the sale process. Despite the experience and knowledge of the employees and the board of the Banking Authority in the field of administration and sale of the state’s holdings in financial companies, the institution did not have experience in bidding arrangements in the run-up to the sale […] Adequate conditions were not given to supervisors, sales consultants and dealers, and due to shortcomings in the implementation, demand was underestimated when deciding on the indicative final price. Sufficient consideration was not given to possible reputational risks, nor were the principles of transparency observed. As the bidding system was implemented, it could not guarantee full equality for the investors to whom it was directed.”

The report also identifies an over-reliance on external consultants in the private sector.




‘Out with Bjarni’: Íslandsbanki Protesters Continue Calls for Minister of Finance’s Resignation

Bjarni Benediktsson icelandic politics

Protesters gathered in Austurvöllur Square in front of parliament once more on Saturday to voice their anger at the government’s recent sale of shares in Íslandsbanki bank. Hundreds of protesters gathered last week; the exact attendance numbers of Saturday’s event were not available at time of writing. However, Vísir reports that 2,000 people marked themselves as attending on the protest on Facebook, an event entitled “Bjarna Burt, Spillinguna Burt,” or “Out with Bjarni [Benediktsson, Minister of Finance], Out with Corruption.”

The protest was a festive one, and kicked off with a performance by Páll Óskar, and included speeches by former and current MPs, a reading by the “poet of the protest,” Anton Helgi Jónsson, and performances by hip hop acts XXX Rottweiler and Blaffi. Hot chocolate and doughnuts were served before and after the rally itself.

See Also: Hundreds Protest Sale of Íslandsbanki Shares

Íslandsbanki was fully owned by the government until last year, when it sold a 35% stake in the bank, something that had been on the government agenda for years. While that first offering was open to the public, last month’s offering was solely open to professional investors. The second sale was successful, reducing the government’s stake in the bank from 65% to 42.5%. The government has been criticised for the latter share offering’s lack of transparency, and for the 5% discount buyers received on the shares’ market value. The majority of the investors who purchased shares sold their stakes almost immediately for considerable profit.

Days after the first protest at Austurvöllur, the Icelandic government announced that it would be introducing a parliamentary bill to abolish Icelandic State Financial Investments (ISFI), the government’s holding company on the financial market. But protesters are not yet satisfied.

See Also: Government to Dismantle State Investment Company

The protesters have three demands: that the sale be rescinded, that Minister of Finance Bjarni Benediktsson resign, and that the board and CEO of the ISFI step down. Now that the latter demand has been achieved with the dismantling of ISFI all together, protesters remain focused on their first two goals.

‘Out with the puppets of capitalism in the government’

Davíð Þór Jónsson speaks at Saturday’s ‘Out with Bjarni!’ rally. Screenshot via Vísir.

“We’re going to learn from this,” said headlining speaker Davíð Þór Jónsson, a pastor and actor who has been an outspoken leader in the Íslandsbanki protests. “We’ll learn to never, never, never again trust these people with a single thing. We’ll learn to never, never, never again trust political parties that form a government that would allow this to happen.” His remarks were met with cheers from the crowd.

“Our demands are unambiguous and reasonable,” Davíð Þór continued. “Out with the psychopaths [amoral people] in our financial system! Out with the puppets of capitalism in the government! Out with an ineffectual, cowardly Alþingi that doesn’t have the guts to affirm its lack of confidence in an unfit government that doesn’t just permit, but rather gives its blessing to the psychopaths plundering their own country!”

Government to Dismantle State Investment Company

government press conference November 2021

The Icelandic government will introduce a parliamentary bill to abolish Icelandic State Financial Investments, the government’s holding company on the financial market. The decision is made in response to widespread criticism of how the government handled the sale of 22.5% of Íslandsbanki bank last month. No further sale of the state’s shares in Íslandsbanki will take place until a new system is in place, a notice from the government states.

The sale of 22.5% of formerly state-owned bank Íslandsbanki last month through a private stock offering has been harshly criticised by opposition MPs as well as the general public. Several hundred gathered in Austurvöllur square last Friday to protest the way the sale was handled. One of the speakers at the event, Pirate Party MP Halldóra Mogensen, called on Minister of Finance Bjarni Benediktsson to resign.

Insiders make short-term profit

The government has been criticised for the share offering’s lack of transparency, and for the 5% discount buyers received on the shares’ market value, despite high demand for the shares. Many have also criticised the fact that smaller, short-term investors were permitted to take part in the sale, and that Íslandsbanki staff and staff of the consulting company that managed the sale were among the investors.

While the government’s stated aim for the share offering was to attract long-term investors, shareholder lists revealed that many smaller investors sold their shares in the bank just days after the sale, for a significant profit. The list of purchasers included a holding company owned by the Finance Minister’s father.

Government ministers lay low

Government ministers have refused interview requests from reporters over the past week to discuss the sale of the bank. The government notice released today states that “It is clear that the implementation of the sale did not fully live up to the government’s expectations, e.g. on transparency and clear dissemination of information.”


Sale of State-Owned Bank Could Begin in Coming Weeks

Bjarni Benediktsson

Minister of Finance Bjarni Benediktsson hopes that the government’s sale of Íslandsbanki can begin in the next few weeks, RÚV reports. Icelandic State Financial Investments (ISFI) is ready with a proposal on how to move forward and is only waiting for a good time to submit it to Parliament.

“I hope that in the next few weeks, we can see if we get a proposal from ISFI and submit to Parliament a proposal on how to go about it. I think it’s important that we get it done,” Bjarni said yesterday.

Bjarni also reiterated that according to the Ministry of Finance’s policy, it’s the role of the Icelandic State Financial Investments to initiate the next steps in selling the bank. Today, Lárus Blöndal, Chairman of the board of ISFI confirmed that a proposal on how to move forward with the sale of Íslandsbanki is ready and awaits only a suitable time to be submitted. According to Lárus, ISFI intends to submit the proposal in the next few days but no assertions can be made. It is important that the proposal will receive proper treatment when it’s presented to Parliament. That is one of the reasons that ISFI waited to submit the proposal until after Parliament met again after the summer.

Íslandsbanki is entirely owned by the Icelandic state, which also owns 98% of Landsbankinn. The current Government Agreement states that the government wishes to find ways to lessen state ownership of financial corporations. Aríon Banki, Íslandsbanki and Valitor laid off 134 people yesterday, and at the same time, the government and capital area municipalities introduced transport construction proposals for ISK 120 billion ($974m/€891m). Road tolls have been mentioned as a way to fund the proposal, but Bjarni had stated that another way to finance the project could be to sell state-owned banks.