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State Aid

State aid: Restructuring aid for Íslandsbanki approved



Today, the EFTA Surveillance Authority has approved the state aid that was granted for the restructuring of the Icelandic bank Íslandsbanki.

The final decision on Íslandsbanki closes one of the main cases that the Authority has dealt with following the collapse of the financial system in Iceland in 2008.

“Challenges remain for the bank in its return to long-term viability, but I am pleased with the progress that has been made. Iceland has to a significant degree overhauled the regulatory and supervisory framework in which its banks operate, and has now provided commitments to the Authority that ensure that the country's financial markets can benefit from effective competition,” Ms Oda Helen Sletnes, president of the EFTA Surveillance Authority, said.

Íslandsbanki was established after its predecessor Glitnir failed in autumn 2008 and most of Glitnir's domestic operations, assets and liabilities, were transferred to the new bank. In this process the Icelandic State granted support in the form of capital injections, a liquidity facility and an unlimited state guarantee of deposits in domestic banks and savings banks.

The compatibility of the aid has been assessed under Article 61.3 (b) of the EEA Agreement, which allows for aid to remedy a serious disturbance in the economy of an EEA State.  In order for such aid to be compatible, a restructuring plan must be submitted. The plan needs to demonstrate that:

  1. the restructuring restores the long-term viability of the bank
  2. the restructuring costs are shared between owners, the bank and the State, and that the aid is limited to the minimum necessary
  3. measures are introduced that limit distortions of competition to a sufficient degree

As the aid granted to Íslandsbanki was implemented before it was notified to the Authority, the Authority later initiated a formal investigation into these measures, on 15 December 2010. Iceland provided a first restructuring plan in March 2011 and an amended restructuring plan was submitted in February 2012.

After thoroughly assessing the final restructuring plan, the Authority today concluded that the aid measures taken in this case constitute state aid compatible with EEA rules.

With regard to the long-term viability of the bank, the Authority emphasises in the decision that while challenges remain for the bank and the Icelandic economy in general, Íslandsbanki has addressed the weaknesses of its predecessor. The bank has today a strong capital ratio and has made progress regarding the restructuring of loans to over-indebted customers. The Authority has also taken note of numerous legislative amendments that Iceland has made since the collapse of the financial system in 2008. Those amendments have strengthened the regulatory framework for financial institutions in Iceland, and contribute to the resilience of financial institutions.

As the previous owners of Glitnir lost their share capital, and its creditors also had to take significant losses, the Authority considers that the criterion of burdensharing is met and moral hazard has been addressed.

Finally, Íslandsbanki and Iceland have provided a range of commitments that limit distortions of competition.  During the restructuring period Íslandsbanki is not permitted to acquire other financial institutions without the Authority´s approval.  Furthermore, the bank will continue to divest a number of businesses and shareholdings. The Bank will also provide information on its website on the process of switching banking services to another financial institution and will make available the necessary documentation thereto.

In assessing the impact of the aid on competition in Iceland, the Authority has cooperated closely with the Icelandic Competition Authority (ICA).

A non-confidential version of the Decision will be published in the register of state aid decisions on the Authority's website, normally within a month from the date of the Decision.


For further information, please contact:


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

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