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Iceland unveils plans to capitalize new banks
Source: Agencies |
July 20, 2009, Monday
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ICELAND took a step towards clearing the debris of its financial meltdown today, unveiling a deal with creditors of its failed banks and plans to capitalize the new ones.
The government said it expected the capitalization to total about 270 billion Icelandic crowns (US$2.1 billion) but this would be reduced to about 200 billion if the old banks subscribed to equity stakes in two of the new banks -- Islandsbanki and New Kaupthing -- as planned.
Iceland's main commercial banks -- Glitnir, Landsbanki and Kaupthing -- collapsed in the space of a week last October owing more than US$60 billion to foreign lenders.
Restructuring the banking sector and repaying creditors, as well as stabilizing Iceland's currency, are seen as key to reviving an economy in the clutches of a deep recession and placating foreign lenders.
"Our agreements announced today are a major step forward in the re-establishment of a strong banking system," Icelandic Finance Minister Steingrimur Sigfusson said in a statement.
"They allow for the recapitalization of the banks, potentially at a significantly lower cost to the taxpayer than originally envisaged, and we believe will result in a fair and equitable outcome for all stakeholders."
Iceland agreed a US$10 billion rescue programme with the International Monetary Fund and some of its European neighbors last year. The money will mainly go toward building up the country's currency reserves.
The government said it expected the capitalization to total about 270 billion Icelandic crowns (US$2.1 billion) but this would be reduced to about 200 billion if the old banks subscribed to equity stakes in two of the new banks -- Islandsbanki and New Kaupthing -- as planned.
Iceland's main commercial banks -- Glitnir, Landsbanki and Kaupthing -- collapsed in the space of a week last October owing more than US$60 billion to foreign lenders.
Restructuring the banking sector and repaying creditors, as well as stabilizing Iceland's currency, are seen as key to reviving an economy in the clutches of a deep recession and placating foreign lenders.
"Our agreements announced today are a major step forward in the re-establishment of a strong banking system," Icelandic Finance Minister Steingrimur Sigfusson said in a statement.
"They allow for the recapitalization of the banks, potentially at a significantly lower cost to the taxpayer than originally envisaged, and we believe will result in a fair and equitable outcome for all stakeholders."
Iceland agreed a US$10 billion rescue programme with the International Monetary Fund and some of its European neighbors last year. The money will mainly go toward building up the country's currency reserves.
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