Browse by year:

State Aid

State Aid: Icelandic Mortgage Loan Scheme not in line with the EEA Agreement


Today, the EFTA Surveillance Authority decided that the

Mortgage Loan Scheme, operated by the Housing Financing Fund, entails incompatible state aid to financial institutions in Iceland.

As a result of turmoil in the global financial markets, the Icelandic financial institutions have been faced with shortage of liquidity. In response to this situation, the Icelandic State authorities decided to adopt measures aimed at securing the functioning of financial markets. One of such measures consists of authorising the Housing Financing Fund (HFF) to purchase mortgage loans from financial undertakings.

The Mortgage Loan Scheme takes the form of a permanent asset swap, according to which the financial institution receives the HFF's bonds in exchange for mortgage loans which are transferred to the HFF.

In the market circumstances of financial crisis at the time, it was unlikely that a private market investor would engage in a similar asset swap. Thus, it is the Authority's view that the design of the Mortgage Loan Scheme is such that it may entail state aid to the financial institutions.

Further, the Mortgage Loan Scheme does not fulfill the requirements of the State Aid Guidelines on impaired asset relief, adopted by the Authority for the situation of the current financial crisis.[1]

Consequently, the Authority requires the Icelandic authorities to abolish the Mortgage Loan Scheme with immediate effect and to recover any incompatible aid by end of October 2011.

However, individual aid grants awarded under the Mortgage Loan Scheme may still be compatible with the functioning of the EEA Agreement, if they fulfil the criteria laid down in the Guidelines. In such cases, the Icelandic authorities will have to provide the Authority with the necessary evidence to prove that the individual aid grants given under the Scheme in fact were compatible.


For further information, please contact:


Trygve Mellvang-Berg
Press and Information Officer
tel. (+32)(0)2 286 18 66
mob. (+32)492 900 187




Mr Kjell-Arild Rein
Competition and State Aid Directorate
tel. (+32)(0)2 286 18 86

Other EEA Institutions

This website is built with Eplica CMS