Iceland will pay 270 billion kronur (US$2.1 billion) to recapitalize its banking system, issuing bonds to the banks that emerged from the collapse of the industry last autumn and handing control to their creditors.
The government has reached agreement in relation to how compensation for the transfer of net assets into the new banks will be achieved, the Finance Ministry said in an e-mailed statement yesterday. For two of the new banks, Islandsbanki and New Kaupthing, this includes a conditional agreement for the old banks to subscribe for majority equity interests.
The agreements “are a major step forward in the re- establishment of a strong banking system,” said Icelandic Finance Minister Steingrimur Sigfusson in the statement. “They allow for the recapitalization of the banks, potentially at a significantly lower cost to the taxpayer than originally envisaged, and we believe will result in a fair and equitable outcome for all stakeholders.”
Iceland’s biggest banks, which went on a borrowing spree and racked up debts in the 1990s, were unable to function after the collapse of Lehman Brothers and the drying up of credit flows. The government seized the three banks in the autumn and the island had to turn to the IMF, World Bank and Nordic countries for a bailout as the economy plunged into recession.
Iceland is relying on the US$5.1 billion IMF-led loan to rebuild its financial industry and protect government finances. The government hopes to unlock the second tranche of the loan, which the IMF indicated would not be released until creditor claims had been resolved.
The Finance Ministry said it conditionally agreed with the resolution committees of Glitnir and Kaupthing, representing the creditors of the failed banks, that they should have majority ownership of the new banks “to facilitate their independent development.”
The creditors will capitalize the new banks, Islandsbanki and New Kaupthing, as part of the agreement.
The government and the creditors of Old Landsbanki “have agreed to a further period to allow completion of due diligence” and “the finalization of the terms of a bond instrument to be issued by New Landsbanki in connection with compensation.”
The capitalization of the new banks will take place on Aug. 14, the ministry said in the statement, and will be achieved by the issue of new government bonds to the new banks. Each bank will be “prudently” capitalized with a core tier 1 ratio of approximately 12 percent, the statement said.
Total capitalization will amount to 270 billion kronur and if Glitnir and Kaupthing complete their subscription agreements, this may be reduced to 200 billion kronur, the ministry said.
“These levels of capital commitment are significantly lower than the estimated commitment of 385 billion kronur at the time of the original transfer in October 2008, leading to lower fiscal cost and impact on gross state debt than that previously envisaged,” the statement said.
RETHINK? The defense ministry and Navy Command Headquarters could take over the indigenous submarine project and change its production timeline, a source said Admiral Huang Shu-kuang’s (黃曙光) resignation as head of the Indigenous Submarine Program and as a member of the National Security Council could affect the production of submarines, a source said yesterday. Huang in a statement last night said he had decided to resign due to national security concerns while expressing the hope that it would put a stop to political wrangling that only undermines the advancement of the nation’s defense capabilities. Taiwan People’s Party Legislator Vivian Huang (黃珊珊) yesterday said that the admiral, her older brother, felt it was time for him to step down and that he had completed what he
Taiwan has experienced its most significant improvement in the QS World University Rankings by Subject, data provided on Sunday by international higher education analyst Quacquarelli Symonds (QS) showed. Compared with last year’s edition of the rankings, which measure academic excellence and influence, Taiwanese universities made great improvements in the H Index metric, which evaluates research productivity and its impact, with a notable 30 percent increase overall, QS said. Taiwanese universities also made notable progress in the Citations per Paper metric, which measures the impact of research, achieving a 13 percent increase. Taiwanese universities gained 10 percent in Academic Reputation, but declined 18 percent
UNDER DISCUSSION: The combatant command would integrate fast attack boat and anti-ship missile groups to defend waters closest to the coastline, a source said The military could establish a new combatant command as early as 2026, which would be tasked with defending Taiwan’s territorial waters 24 nautical miles (44.4km) from the nation’s coastline, a source familiar with the matter said yesterday. The new command, which would fall under the Naval Command Headquarters, would be led by a vice admiral and integrate existing fast attack boat and anti-ship missile groups, along with the Naval Maritime Surveillance and Reconnaissance Command, said the source, who asked to remain anonymous. It could be launched by 2026, but details are being discussed and no final timetable has been announced, the source
CHINA REACTS: The patrol and reconnaissance plane ‘transited the Taiwan Strait in international airspace,’ the 7th Fleet said, while Taipei said it saw nothing unusual The US 7th Fleet yesterday said that a US Navy P-8A Poseidon flew through the Taiwan Strait, a day after US and Chinese defense heads held their first talks since November 2022 in an effort to reduce regional tensions. The patrol and reconnaissance plane “transited the Taiwan Strait in international airspace,” the 7th Fleet said in a news release. “By operating within the Taiwan Strait in accordance with international law, the United States upholds the navigational rights and freedoms of all nations.” In a separate statement, the Ministry of National Defense said that it monitored nearby waters and airspace as the aircraft