2008–2012 Icelandic Financial Crisis - Bank Restructuring

Bank Restructuring

The Financial Supervisory Authority (FME) has acted to "ring-fence" the Icelandic operations of Landsbanki and Glitnir, stating its aim of "continued banking operations for Icelandic families and businesses." NBI (originally known as Nýi Landsbanki) was set up on 9 October with 200 billion krónur in equity and 2,300 billion krónur of assets. Nýi Glitnir was set up on 15 October with 110 billion krónur in equity and 1,200 billion krónur of assets.

Talks with Icelandic pension funds to sell Kaupthing as a going concern broke down on 17 October, and Nýja Kaupþing was set up on 22 October with 75 billion krónur in equity and 700 billion krónur of assets.

The equity in all three new banks was supplied by the Icelandic government, and amounted to 30% of Iceland's GDP. The new banks will also have to reimburse their predecessors for the net value of the transferred assets, as determined by "recognised appraisers". As of 14 November 2008, these net values were estimated as: NBI ISK558.1bn (€3.87bn), Nýi Glitnir ISK442.4bn (€2.95bn); Nýja Kaupþing ISK172.3bn (€1.14bn). The total debt of 1173 billion krónur is more than 90% of Iceland's 2007 gross domestic product.

Glitnir and Kaupthing, shorn of their Icelandic operations, obtained moratoria on payments to creditors (similar to Chapter 11 protection) from the District Court of Reykjavík on 24 November.

In April 2009, Gylfi Magnússon, Iceland’s business minister, stated that there are similarities with the country’s banking system and failed US energy company Enron.