Today, the EFTA Surveillance Authority has concluded on two state aid issues in connection with the merger of the Icelandic banks Byr HF and Islandsbanki.

The Authority has approved a prolongation of the government loan facility for Byr until the merger with Islandsbanki has become effective.
Islandsbanki is authorised to go ahead with the merger, although the bank previously has received state aid.

The loan facility for Byr was originally approved by the Authority in April 2011[1] for a period of 6 months. The aim was to recapitalize Byr, but it later became clear that the bank needed additional capital in order to fulfill the requirements laid down in Icelandic law. An open sales procedure was launched, which ended in the acquisition of Byr by Islandsbanki.

Islandsbanki received state aid in the wake of the financial crisis.[2] Banks that have received aid and are in a process of restructuring – such as Islandsbanki – are normally not allowed to buy competitors – such as Byr.

An exemption from this rule can be granted subject to two main conditions:

the acquisition is necessary and proportionate to safeguard financial stability
it does not entail undue distortions of competition

The Authority is of the opinion that these conditions are met in this case.

However, Islandsbanki needs to submit a restructuring plan for the merged entity to the Authority within three months of the envisaged transaction. This plan will have to include measures that ensure effective competition in the Icelandic banking market after the merger.

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:

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

[1] See the Authority's press release of 13 April 2011

[2] The Authority's formal investigation regarding the aid to Islandsbanki is still pending. See the Authority's press release of 15 December 2010.