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State Aid

State Aid: Restructuring aid approved for two Icelandic savings banks



Today, the EFTA Surveillance Authority approved restructuring aid to two small savings banks in Iceland, Vestmannaeyjar Savings Bank and Nordfjordur Savings Bank. The aid was granted and temporarily approved in June 2010 and April 2011 as part of a rescue aid scheme in support of five savings banks. However, the finalisation of the restructuring plans has been delayed.

«I regret that it has taken much longer than expected to establish credible restructuring plans for the savings banks. Iceland now has to take a final view on the future of the three savings banks not yet cleared by the Authority. This could be either in the form of  restructuring plans demonstrating the future viability of the banks or plans of orderly winding-up», Ms Oda Helen Sletnes, president of the EFTA Surveillance Authority, said.

Vestmannaeyjar Savings Bank is active in local retail banking in the south and south-eastern part of Iceland. It receives deposits and grants loans to household and small business clients, together with other related financial services. Its total assets at year-end 2012 amounted to ISK 13 billion (EUR 80 million). Nordfjordur Savings Bank performs corresponding financial services in Nordfjordur and the neighbouring communities on the east coast of Iceland. The bank's total assets at year-end 2012 amounted to ISK 5.2 billion (EUR 32 million).

The effect of the financial crisis on savings banks in Iceland
Icelandic savings banks were hard hit by the financial crisis and faced major difficulties in their operations. Most savings banks owned shares in the main commercial banks, including in Sparisjodabanki Islands (SPB), which was founded by and served a fundamental role for the savings banks. Following the collapse of Iceland's three major commercial banks in October 2008, SPB was later submitted to public administration.

By the decision of the Icelandic Financial Supervisory Authority in March 2009 on the allocation of assets and liabilities of SPB, the Central Bank of Iceland was made responsible for the savings banks' deposits in SPB. As compensation, the Central Bank received SPB's claims on the savings banks. The Central Bank thus became a major creditor to the savings banks.

Measures taken to restructure the banks
The aid measures involve:

  • the settlement of the Central Bank's claims on the savings banks. This includes the writing down of claims and their conversion into guarantee capital, subordinated debt and general loans.
  • the responsibility taken by the Central Bank for the banks' deposit previsously held by SPB.
  • additional state backing of deposits in commercial and savings banks.

The aid measures were supplemented by broader financial restructuring, including agreements with other creditors, write-down of the guarantee capital of existing owners and infusion of new capital by new investors.

The Authority has assessed the measures and the restructuring plans under inter alia its financial crisis Restructuring Guidelines. It has taken the view that the measures are likely to lead to the restoration of the banks' long-term viability, ensuring that the banks will comply with the minimum regulatory capital requirements as set by the Icelandic Financial Supervisory Authority.

The Authority also considers that adequate own contribution has been provided by the aid beneficiaries. In view of the limited distortion of competition and minimal effect on intra-EEA trade, the Authority can exceptionally accept that the restructuring plans for the two banks do not include any specific competition remedies.


Non-confidential versions of the decisions will be published in the register of state aid decision on the Authority´s website, normally within a month.


For further information, please contact:

Mr. Andreas Kjeldberg Pihl
Press & Information Officer
tel. (+32)(0)2 286 18 66
mob. (+32)(0)492 900 187


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