Agreement between the Government of Iceland and the Resolution Committee of Glitnir finalised

Press release nr. 62/2009

Following the heads of agreement announced on 20 July 2009, the Government of Iceland announces the signing of definitive agreements with the Resolution Committee of Glitnir regarding the capitalisation of Islandsbanki and the basis for compensation to Glitnir and its creditors following the creation of Islandsbanki in October 2008. As announced on 14 August 2009, the Government of Iceland has now capitalised Islandsbanki with ISK 65 bn of tier 1 capital through the issue of Government bonds, giving the bank a core tier 1 ratio of approximately 12 per cent. This puts Islandsbanki on a secure financial footing for its future operations and development.

As described in the announcement of 20 July 2009, under the agreements, Glitnir has the opportunity to acquire control of Islandsbanki. In this event the Government of Iceland will continue to support the capital of Islandsbanki with ISK25bn in the form of tier 2 capital and a minority ordinary share holding of 5 per cent. Glitnir has until 30 September 2009 to decide whether to acquire control of Islandsbanki.

In the event Glitnir decides not to acquire control of Islandsbanki the Government will continue to own Islandsbanki. In this case, the compensation will take the form of bond instruments to be issued by Islandsbanki and an option over 90% of the Government’s shareholding in Islandsbanki exerciseable between 2011 and 2015 at a price which provides for the Government to receive an appropriate level of return on its investment.

Ministry of Finance, September 13 2009

Press enquiries:

Ministry of Finance:
Elias Gudjonsson, +354 694 1480

Financial Dynamics:
Andrew Walton, +44 7711 264 157
Geoffrey Pelham-Lane, +44 207 269 7194