Government of Iceland Agrees to Establish AMC to Take Over Severely Affected Companies

The government of Iceland has approved a bill from the Minister of Finance to establish, as a limited liability company owned by the state, an Asset Management Company (AMC) to promote the restructuring of commercial undertakings of national significance. The limited liability company, which will operate on a provisional basis, is established in accordance with the proposals previously accounted for by the Co-ordination Committee for the banking system.

At present it is not yet clear how many companies will be the object of the AMC, which will only operate for five years from the entry into force of the Act. After that the company will be wound up, as by then all the undertakings which have come under its care are expected to have been sold.

The Co-ordination Committee has overall responsibility for developing, implementing and communicating a comprehensive strategy for bank restructuring. Among its main proposals was the establishment of a special AMC under the auspices of the state to take over undertakings which became owned by banks and financial institutions and were for certain reasons important to Icelandic society. This is done, for instance, to enable the new banks operating domestically to concentrate on supporting households and corporations rather than having to spend their time and energy on dealing with the problems and in fact the operations of large companies which are difficult to rescue.

This method has been applied widely before with good success, for instance, in the Nordic countries during the banking crisis in the early 1990s and in fact also in the US to name two examples.

See the Co-ordination Committee’s Strategy Note, No. 1.