Restructuring of Íslandsbanki approved by the EFTA Surveillance Authority
The EFTA Surveillance Authority (ESA) has approved the measures taken in 2008, when Íslandsbanki was established on the domestic operations of its predecessor Glitnir and received support from the Icelandic State, as compatible with EEA rules. Íslandsbanki is the first bank in Iceland to receive ESA approval on the Bank's restructuring of the Bank. The approval is based on the fact that Íslandsbanki has demonstrated that the restructuring restores the long-term viability of the bank; that restructuring costs are shared between owners, the bank and the State; that the aid is limited to the minimum necessary; and that the measures introduced limit distortions of competition to a sufficient degree.
In the conclusion it is stated that Íslandsbanki has addressed the weaknesses of its predecessor and has a strong capital ratio today. The Bank has also made progress regarding the restructuring of loans to over-indebted customers. In the first quarter this year around 18,200 individuals and 3,000 corporates had received write offs, debt forgiveness or some form of debt correction since the Bank's establishment, totalling ISK 370 bn.
The Authority has also taken note of numerous legislative amendments that Iceland has made since the collapse of the financial system in 2008. Those amendments have strengthened the regulatory framework for financial institutions in Iceland, and contribute to the resilience of financial institutions. As the previous owners of Glitnir lost their share capital, and its creditors also had to take significant losses, the Authority considers that the criterion of burden sharing is met and moral hazard has been addressed.
Finally, Íslandsbanki has provided a range of commitments that limit distortions of competition. Íslandsbanki will continue to divest of equity holdings gained via financial restructuring of its customers in line with the Bank's strategy. Also, the Bank will provide more accessible information for customers at the Bank's website on the process of switching banking institutions. In addition, Íslandsbanki will not make any acquisitions of financial institutions without the Authority's approval.
Birna Einarsdóttir, CEO of Íslandsbanki:
"It is an important milestone for Íslandsbanki to be the first bank in Iceland to get approval from the Authority on the restructuring of the Bank. We have worked hard to strengthen the infrastructure of the Bank. This conclusion confirms that the Bank is on the right track and has achieved great progress in restructuring the Bank in the last four years. "