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State Aid

The Authority gives green light to a rescue scheme for small savings banks in Iceland - PR(10)35


Yesterday the EFTA Surveillance Authority approved for a period of six months a state aid scheme for small savings banks in Iceland.

Norðfjörður Savings Bank, Vestmannaeyjar Savings Bank, Svarfdælir Savings Bank, Bolungarvík Savings Bank and Þórshöfn Savings Bank will benefit from the scheme. Before 21 December 2010, the Icelandic authorities will submit restructuring plans for each savings bank.

The scheme entails recapitalisation measures aimed at enabling Icelandic savings banks to continue operating on the financial market. The measures concern the treatment of public claims on the savings banks that came into the possession of the Central Bank of Iceland as a result of the collapse of Sparisjóðabanki Íslands hf. These claims, amounting in total to 50 million EUR, are partly converted to Tier 1 and Tier 2 equity. Moreover, claims will be written down as a necessary part of the overall package to bring the capital ratios in line with the FME's requirement. Finally, some of the claims will be converted into a general loan agreement for a duration of five years accordingly remunerated.

The Authority has based its approval on its Guidelines on the application of state aid rules to measures taken in relation to financial institutions in the context of the current global financial crisis and its Guidelines on the recapitalisation of financial institutions in the current financial crisis: limitation of aid to the minimum necessary and safeguards against undue distortions of competition. The Authority considers that the measures are appropriate as they meet their objective to ensure that all five savings banks will comply with the regulatory capital ratio requirements. The measures are also considered necessary to achieve their objective and proportional to the problems addressed. Furthermore, the Authority has viewed positively that when the measures have come into force, the State will hold ownership shares in the banks. Thus, it may be able to obtain dividends and in line with the announced policy of the ISFI regarding the sale of State's shares will accrue a gain when selling the shares in the future.

For further information, please contact:


Per Andreas Bjørgan
Competition and State Aid Directorate
tel. (+32)(0)2 286 18 36


Marianne Clayton
Competition and State Aid Directorate
tel. (+32)(0)2 286 18 23


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