New Supreme Court ruling on illegal loans in foreign currencies

15.02.2012
  • Significant uncertainty remains on how the ruling should be interpreted
  • Total capital ratio will remain above the minimum requirement of 16% set by Icelandic FSA
  • Only ISK CPI-linked mortgages in underlying covered bond pool listed on NASDAQ OMX Iceland

On 15 February 2012, the Supreme Court in Iceland passed a ruling (No.600/2011) that affects how banks in Iceland have recalculated loans that are illegally linked to the value of foreign currencies. Further, the ruling states that Act 151/2010, that the Icelandic Parliament Althingi passed in December 2010 and instructed banks to recalculate FX-linked home mortgages and how that should be done, violates the provisions of the Icelandic constitution that protects the freedom to hold property, as the legislator cannot pass law that retroactively changes the rules on repayment of claims without adequate compensation.

Significant uncertainty remains on how the ruling should be interpreted and Íslandsbanki is seeking legal counsel in that regard. The Bank will keep its customers and stakeholders well informed when that review has been concluded.

Íslandsbanki's total capital ratio is strong. Given the most unfavourable outcome of the ruling’s effect, Íslandsbanki’s capital ratio would still remain above the minimum requirement of 16% set by the Icelandic Financial Services Authority.

As Íslandsbanki has listed covered bonds on the NASDAQ OMX Iceland, the Bank would like to highlight that the ruling won’t affect the underlying covered bond pool as it consists only of ISK CPI-linked mortgage loans. Furthermore, the cover pool must withstand a weekly stress test and is regulated by the Icelandic Financial Supervisory Authority which additionally appoints an independent inspector to monitor the issue.

Older news

Islandsbanki hf.: Íslandsbanki issues SEK 1 billion callable 4-year bond (4NC3)

19.04.2018 - IR Releases
Íslandsbanki has today issued a SEK 1 billion 4NC3 Floating Rate Note senior unsecured bond, at a spread of 80 basis points over 3-month STIBOR.More

New tourism industry report

17.04.2018
According to Íslandsbanki’s new tourism industry report, Airbnb is now three times larger in the domestic market than all of Iceland’s guest houses...More

Sales process of Iceland Drilling initiated

16.04.2018
A sales process has been initiated for the sale of all shares in Iceland Drilling. Iceland Drilling is owned by SF III, a fund managed by Stefnir...More

Lyf og heilsa acquires constrction company Trésmiðjan Börkur

11.04.2018
The owners of Börkur hf. have come to an agreement on the sale of a 100% stake in the company to Lyf og heilsa hf. Delivery of the company to its new...More

Íslandsbanki Annual General Meeting 2018

22.03.2018 - IR Releases
Íslandsbanki’s Annual General Meeting (AGM) was held today, Thursday 22 March 2018, at 15:00 hrs., at the Bank’s headquarters in Hagasmári 3...More

Year 2017 reports

14.02.2018 - IR Releases
Íslandsbanki released its annual financial results for 2017 this morning. The Bank has now published its Annual Audited Financial Statements, Annual...More

Annual Consolidated Statements 2017

14.02.2018 - IR Releases
Profit after tax was ISK 13.2bn in 2017, compared to ISK 20.2bn in 2016. The profit in 2016 was considerably higher due to one-off income from the...More
Netspjall