A turning point in work by public authorities on rebuilding the financial system
A cabinet meeting this morning dealt with questions concerning the reconstruction of the financial system and endorsed a work programme for the Co-ordination Committee appointed to work on this task pursuant to the agreement with the International Monetary Fund (IMF). This programme is based on the primary objective of building up a banking and financial system which can satisfy international requirements.
The Prime Minister briefed the cabinet on the project. Working under the auspices of the Prime Minster, the Co-ordination Committee is comprised of representatives of the Ministries which have played the major roles in resolving the economic difficulties, the Office of the Prime Minister, Ministry of Foreign Affairs, Ministry of Commerce and Ministry of Finance. Chairing the committee is Swedish banking expert Mats Josefsson.
Among the measures included in the work programme is the establishment of an asset administration company, to take over assets from the banks, and the appointment of international consultants to present claims by the state to the Resolution Committees of the former banks.
The asset administration company will take over various assets of the banks, i.e. companies they own or supervise, whose operations are in fact bankrupt. The objective here is, firstly, to ensure that industrial operations essential to keep the wheels of society in motion can continue and, secondly, to prevent the loss of value wherever possible. This route has been followed in other countries hit by financial collapse with good results. The Minister of Commerce and Minister of Finance will draft legislation providing for the establishment of such a company; once this is complete the government will take a final decision on the matter.
The cabinet also approved a proposal to engage international consultants to assist the state in negotiations with the Resolution Committees of the former banks and their advisors concerning the claims on the state’s behalf for a share in those assets and valuables which have been transferred from the old banks to the new.
The measures approved by the government today mark at turning point in efforts by public authorities to build up the Icelandic financial system anew. Valuation of the banks’ assets is expected to conclude at the end of next month and their recapitalisation should be concluded soon afterwards.