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 10NC5 Tier 2 bond of SEK 750 million

16.11.2017 - IR Releases
Íslandsbanki has today issued a SEK 750m 10NC5 Tier 2 transaction. The bond pays a quarterly coupon of 3 month STIBOR +200bps.More

New Íslandsbanki housing market report

16.11.2017
If Íslandsbanki Research’s forecasts are borne out, house prices will rise by just over 20% year-on-year in 2017 and just under 12% in 2018. More

Interruption in online banking due to computer system installation at Landsbankinn

16.11.2017
On the weekend of 18-19 November, Landsbankinn and the Icelandic Banks' Data Centre (RB) will be installing a new computer system. Landsbankinn’s...More

Islandsbanki hf. : 9M 2017 Consolidated unaudited interim financial statements

09.11.2017 - IR Releases
Íslandsbanki's consolidated unaudited interim financial statements 9M 2017More

S&P upgrades Íslandsbanki to BBB+/A-2 with stable outlook

25.10.2017 - IR Releases
International credit rating agency S&P Global Ratings (S&P) upgraded Íslandsbanki’s credit ratings from BBB/A-2 to BBB+/A-2 today, with a stable...More

Icelandic Group Agrees Sale of Seachill to Hilton Food Group

18.10.2017
Icelandic Group is pleased to announce the sale for cash of its UK-based subsidiary Icelandic Group UK (“Seachill”), to Hilton Food Group (“Hilton”)...More

Íslandsbanki Reykjavík Marathon 2017 breaks record in pledges to charity

24.08.2017
As of last night’s midnight deadline for pledges to charity in connection with the Íslandsbanki Reykjavík Marathon, the amount pledged on the...More
Netspjall