Draft Bill for Íslandsbanki Stake Sale Published

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

The Icelandic Ministry of Finance and Economic Affairs has published a draft bill for the sale of the state’s 42.5% stake in Íslandsbanki. The bill, necessitating parliamentary approval, aims to reduce the Treasury’s financial risk and debt ratio.

Íslandsbanki prohibited from direct participation

Yesterday, the Ministry of Finance and Economic Affairs published a draft bill regarding the disposition of the state’s share in the Íslandsbanki Bank through the government’s online consultation portal. The draft authorises the minister, with Parliament’s approval, to dispose of the state’s share in Íslandsbanki. The state owns a 42.5% stake in Íslandsbanki.

The disposal of the share is planned through one or more tranches in a marketed offering, allowing the general public to participate, with sales to individuals given priority. The draft notes that it is important to consider market conditions for timing the offerings. According to the bill, Íslandsbanki is prohibited from directly participating in the sale, in line with recommendations from the National Audit Office.

“During the sales process, care must be taken to adhere to the fundamental principles of equality, transparency, efficiency, and impartiality. This obligation is specifically imposed on the minister … to ensure transparency in connection with the disposal, among other things, by proactively publishing information,” the memorandum notes.

State Financial Investments not involved

The bill proposes eliminating the role of the State Financial Investments in the sale of the shares. The Ministry states in the bill’s explanatory memorandum that the preferred option is to authorise the sale of Íslandsbanki under the control of the Minister of Finance and Economic Affairs through specific legislation. It will be up to the Parliament to decide which sale methods are authorised.

“The sale of the equity stake is considered quite urgent in order to reduce the financial risk of the treasury and to contribute to the main objectives of the public finance policy regarding the reduction of the treasury’s debt ratio.”

As noted by RÚV, nearly eight months have passed since the release of the Financial Supervisory Authority’s critical report on the state treasury’s sale of shares in Íslandsbanki. There were several issues with the sale process, and Íslandsbanki received a hefty fine for its role in the sale. Bjarni Benediktsson stepped down as Minister of Finance and Economic Affairs after the Parliamentary Ombudsman’s opinion was published and switched ministerial roles with Þórdís Kolbrún Reykfjörð Gylfadóttir.

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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Third Executive to Leave Íslandsbanki Since Last Week

Atli Rafn Björnsson, director of business consulting at Íslandsbanki bank has left his position at the bank, RÚV reports. He is the third executive at the bank to leave his post since the middle of last week. Íslandsbanki was fined around ISK 1.2 billion last month due to breaching regulations in the sale of 22.5% of the bank last year. It is the highest fine on a financial institution in Iceland’s history.

Atli Rafn had been in his position since 2019, and will be replaced by Ellert Hlöðversson. Ásmundur Tryggvason, who was CEO of Íslandsbanki’s Business and Investment Division, also left his position last weekend, and the bank’s CEO Birna Einarsdóttir resigned last week. She was replaced by Jón Guðni Ómarsson, who stated that his priority was to restore trust in the bank following the poorly-handled private stock offering of last year.

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.

Read More: Íslandsbanki Private Stock Offering

Left-Green Movement MP Bjarkey Olsen Gunnarsdóttir who also chairs the parliamentary Budget Committee, has demanded Íslandsbanki publish the employment termination agreement made with former CEO Birna Einarsdóttir. The chairperson of the Íslandsbanki board says the board has not discussed Bjarkey’s demand, but that it will do so. The bank has called a shareholders’ meeting for July 28.

Íslandsbanki CEO Jón Guðni Ómarsson stated that those in charge of the private share offering had now shouldered responsibility by leaving their positions and that there would be no further resignations or layoffs of executives at the bank for the time being.

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.




Debated Íslandsbanki Sale into the Wee Hours

Alþingi parliament

Iceland’s Parliament debated the recent sale of a 22.5% stake in Íslandsbanki until 2:30 AM this morning. It was the first time Alþingi had convened since before the Easter break and most of the discussion centred on the controversial sale.

The government has received harsh criticism 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 investments were permitted in the sale, and that staff of the consulting company that managed the sale were among the investors. The sale is being investigated by the Central Bank and reviewed by the National Audit Office.

Minister of Finance presented report

Minister of Finance Bjarni Benediktsson presented an oral report on the sale during yesterday’s session. While maintaining that the sale had in general been successful, he admitted that it had raised questions regarding three aspects in particular: the possible participation of employees of the consulting company involved in the sale, the possible participation of buyers who did not fulfill the stated requirements of being professional investors, and the dissemination of information to the public.

Bjarni stated that the public could have been better informed about the sale. He added that it had taked a long time to access and release information about the sale after the offering and some questions had remained unanswered for too long.

Criticise dismantling of state investment company

Opposition MPs criticised the government’s decision to dismantle Icelandic State Financial Investments (ISFI) in light of how the sale went. They questioned whether that decision had truly been discussed at a cabinet meeting, as as an announcement from the government stated. Chairman of the Centre Party Sigmundur Davíð Gunlaugsson asked whether government ministers had any plan as to what would replace the ISFI.

A controversial sale

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 reduced the government’s stake in the bank from 65% to 42.5%.

Two protests have been held where attendees opposed how the sale was handled, calling for Bjarni Benediktsson’s resignation.

‘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!”

Central Bank Investigating Íslandsbanki Sale

Central Bank Ásgeir Jónsson seðlabankastjóri

The Central Bank of Iceland confirmed to Stundin that it has opened an investigation into the government’s March 22 sale of a 22.5% stake in Íslandsbanki bank. However, what specific matters about the sale are under investigation is not clear.

“In light of the Central Bank of Iceland’s supervisory role, the Bank cannot comment on issues that are directly related to the state’s sale of a holding in Íslandsbanki,” a Central Bank spokesperson told Stundin. “The reason is that individual factors related to the sale may be examined by the Central Bank’s Financial Supervisory Authority, and an examination of certain aspects related to the sale has already begun.”

As previously reported, Íslandsbanki was entirely state-owned until the government sold a 35% stake in 2021. While last year’s sale was a public offering, the March 2022 sale was only open to professional investors, who received an invitation to buy shares, which were then sold for 5% less than market value after markets had closed for the day.

The blowback to the sale was swift once it came to light that, in addition to pension funds, those who purchased shares in March included Jón Ásgeir Jóhannesson, the largest shareholder in Glitnir bank before it went bust in Iceland’s 2008 economic collapse; Samherji CEO and former Glitnir chairman Þorseinn Már Baldvinsson; and Benedikt Sveinsson, the father of Minister of Finance Bjarni Benediktsson.

Stundin raised concerns last week about the status of those invited to the recent sale. The offering was meant to be open exclusively to institutional investors, but, Stundin’s source alleged, some investors who walked away with Íslandsbanki shares were general investors with third party securities firms.

Trouble in parliament

Also voicing concerns over how the recent sale was handled is Minister of Tourism, Trade and Culture Lilja Dögg Alfreðsdóttir, Vísir reports. She said Finance Minister Bjarni Benediktsson must be held responsible. What isn’t clear is whether Lilja is speaking for herself or if her sentiments about the sale and Bjarni are representative of the Progressive Party, of which she is vice-chairperson.

Lilja sits on the Council of Ministers for Economic Affairs and the Restructuring of the Financial System along with Prime Minister Katrín Jakobsdóttir and the Finance Minister. The Prime Minister said that Lilja had not noted her opposition to the sale in any official minutes.

List of Íslandsbanki Buyers Released


In the wake of opposition criticism about low share prices and a general lack of transparency around the government’s March 22 sale of a 22.5% stake in Íslandsbanki bank, the Ministry of Finance has publicly released the list of investors.

Pension funds biggest investors

As Stundin reports, 209 investors participated in the March sale, with a handful of pension funds scooping up a sizeable number of shares.

The largest single buyer was Gildi Pension Fund, followed by the Pension Fund for Icelandic State Employees, Brú Pension Fund and the Pension Fund of Commerce.

All other investors purchased less than 4% each of the total shares available in this offering.

Notable investors include Jón Ásgeir Jóhannesson, the largest shareholder in Glitnir bank before it went bust in Iceland’s 2008 economic collapse; Samherji CEO and former Glitnir chairman Þorseinn Már Baldvinsson; and Benedikt Sveinsson, the father of Minister of Finance Bjarni Benediktsson.

The full list of investors who participated in this round of sales has been published by Stundin.

Rich getting richer

The investment in Íslandsbanki is paying off for those invited to invest. Share prices are up 11% since the sale.

Stundin calculated that the Finance Minister’s father has already made ISK 6 million profit on his newly acquired shares, while the fishing company Jakob Valgeir ehf. has made ISK 102 million.

Invitation-only offering

Íslandsbanki was entirely state-owned until the government sold a 35% stake in 2021. While last year’s sale was a public offering, the recent sale was only open to professional investors, who received an invitation to buy shares, which were then sold for 5% less than market value after markets had closed for the day.

Icelandic State Financial Investments (ISFI) previously said it was not able to publish the data on who purchased shares. ISFI believed it was likely the buyers’ identity falls under bank secrecy regulations.



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.