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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State Sells 22.5% Stake in Íslandsbanki

Prime Minister Bjarni Benediktsson

The Icelandic government sold a 22.5% stake in Íslandsbanki bank last Tuesday in an offering for professional investors. Opposition MPs have criticised the shares’ low price and the sale’s lack of transparency. Finance Minister Bjarni Benediktsson says the aim was to acquire long-term investors and that Icelandic pension funds were the main purchasers.

Íslandsbanki was fully owned by the Icelandic state until last year, when it sold a 35% stake in the bank, something that had been on the government agenda for years. While last year’s sale was a public offering, this week’s was only open to professional investors, who received an invitation to buy shares, which were then sold at a 5% discount from their market value. The sale was successful, reducing the government’s stake in the bank from 65% to 42.5%.

Investors received insider information

According to information from Icelandic State Financial Investments (ISFI), demand for the shares was high. Both Icelandic and foreign investors showed interest in the sale, though the identity of the investors has not been made public. Investors were required to sign a confidentiality agreement, meaning they were temporarily granted access to inside information. Investors had already made a profit yesterday, when shares in the bank rose by ISK 4-5 billion [$31.1-38.9 million; €28.3-35.4 million] following the sale.

MPs criticised the sale’s lack of transparency in Parliament yesterday, as well as the discount given to investors. Financial expert Ásgeir Brynjar Torfason told RÚV it is unclear how the investors were selected, and that is a question that ISFI and the Ministry of Finance need to answer. He also called on authorities to answer why such a large discount was given, despite high demand for the shares.

Finance Minister responds to criticism

In an interview with RÚV, Minister of Finance Bjarni Benediktsson called the discount on the shares a small one, saying that Icelandic pension funds were the main purchasers in the offering. “We did not go the route of looking for the pension fund or the investor who wanted to offer the highest price and let them have as much as they wanted. We took another route. We wanted to go toward more decentralised ownership and we wanted to consider what the market conditions would be like when the offering ended. That there would be a [financially] healthy group behind the bank.”

Nearly 100 Companies Overdue for Equal Pay Certification

Just under a quarter of the companies that are legally required to obtain equal pay certification still had yet to do so at the end of 2021. This according to new data published by the Directorate of Equality on Friday. A total of 415 companies should have completed certification by the end of 2021, but 94 (22.65%) of them had yet to do so.

The equal pay certification mandate applies to any company that employs 25 or more workers on an annual basis, using the calendar year as a reference period. Per the government’s website, 147,000 employees, or roughly 80% of those who are active on the labour market, are covered by this mandate.

Table on Equal Pay Certification – Status at the end of 2021. Via the Directorate of Equality;

The data shows that it is primarily companies with 90-149 employees that have yet to complete their certification. Fifty-eight of the 98 companies in this bracket, or 59.18%, are currently uncertified. Fifteen of the 54 qualifying municipalities (27.78%) have also yet to complete the certification.

Equal pay certification became a legal mandate in July 2017, with the goal of “combating the gender pay gap and promoting gender equality in the labour market.” As of November 14, 2018, however, the grace period for companies to acquire certification was extended. Companies with an average of 250 employees or more were supposed to complete certification by December 31, 2019. Companies with an average of 150-249 employees were given until December 31, 2020. Companies with 90-142 employees had until December 31, 2021. Companies with 25-89 employees have until the end of this year.

Per Friday’s announcement, however, the Directorate of Equality now believes that those companies that were supposed to complete the certification process by the end of 2019 and 2020 have been given “ample time” to do so. As such, the Directorate is currently preparing to announce its decision on the imposition of daily fines.

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.

Ministry of Finance Opposed Hiring of Icelander for Nordic Editorship

An employee of Iceland’s Ministry of Finance opposed the appointment of Þorvaldur Gylfason, Professor of Economics at the University of Iceland, as editor of the Nordic Economic Policy Review, alleging he was too politically active for the post. Kjarninn reports that Þorvaldur believed he had been hired for the position, only for the offer to be withdrawn following a discussion between Ministries of Finance within the Nordic Council of Ministers.

Emails Suggested Þorvaldur Had Been Hired

Launched in 2009 by the Nordic Ministers of Finance, the Nordic Economic Policy Review is an annual periodical. In early November last year, Þorvaldur received an email from the Nordic Council of Ministers implying he had been hired for the position. “We very much look forward to having you and your expertise with us on the coming editions of the NEPR. And Kjell Nilsson (director at Nordreigo) will help you out with any further practical information for the editorship,” an email stated. In a letter to Þorvaldur, Iceland’s Ministry of Finance claimed he was never officially hired for the position, rather was one of several candidates being considered.

An email exchange later that month between a staff member of Iceland’s Ministry of Finance with a Finnish colleague shows the staff member stated “Iceland is not able to suggest or support Gylfason as editor […] but would rather like to propose an Icelander for the job at a later time than to suggest Gylfason now.” The Finnish colleague replied stating they were “really surprised” by the position Iceland’s Ministry of Finance was taking, adding that public information suggested Þorvaldur “would be a very good candidate.”

Ministry Based Opinion on Wikipedia Article

In their response, the Finance Ministry staff member stated that Þorvaldur was “politically active. He has been, and to the best of our knowledge still is, chairman of the Iceland Democratic Party. We don’t find it appropriate that such a politically active person, particularly someone who chairs a political party, is editor of NEPR.”

Þorvaldur did serve as chairman of the party when it was formed in 2013. It did not win a seat in parliament and he left the position later that same year and has not been active in politics since. Iceland’s Ministry of Finance has since apologised for the mistake, stating in a letter to Kjarninn that the information was based on Þorvaldur’s Wikipedia page, which had been out of date. Minister of Finance Bjarni Benediktsson has stated that he had not been informed about Þorvaldur’s candidacy for the position but “in this case it reflects my desire to neither nominate nor approve Þorvaldur Gylfason for this position. In fact I would have never conceived of the possibility and no one mentioned it to me.”

Þorvaldur has claimed that he still has the right to the editorship as the job offer was never officially revoked in writing. His lawyer has contacted the Nordic Council of Ministers stating Þorvaldur reserves all rights to claim damages from the Council.