Plan to lift capital controls: crunching the numbers… again

Posted 08/11/2015 - 18:22 by anrigaut

2015-11-08 (All day)

In the case of Glitnir there was a retrade – the numbers have been renegotiated since the June plan. The government has talked effusively about clarity and transparency in liberalising capital controls but the process of introducing such a plan has been characterised by obfuscation and opacity. The plan seems sensible but earlier promises by the prime minister’s party, the Progressives, of gigantic windfall seem to have pushed the government to play a game of make-believe, smoke and mirrors. Selling the banks will prepare for the coming years: drumming up the fear of foreign investors masks the fact that the greatest danger is the mind-set of the boom years.

The press conference October 28, to introduce the assessment made by the Central Bank of Iceland, CBI of the draft proposals from Glitnir, Kaupthing and LBI, was a very low-key event.............

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Iceland Bank Creditors Strike Deal to Sidestep Capital Controls

Posted 28/10/2015 - 20:30 by anrigaut

2015-10-28 (All day)

Iceland’s Finance Minister Bjarni Benediktsson and the island’s central bank approved proposals from creditors of Kaupthing Bank hf, Glitnir Bank hf and LBI hf that will allow them to sidestep capital controls and avoid a 39 percent tax on all their assets.

The banks’ winding up committees now need to take the accord back to the creditors for approval. The individual composition agreements will then need to be ratified by the court in Reykjavik, Benediktsson told reporters on Wednesday. It’s the "largest economic operation we’ve ever undertaken," he said.

The agreement will need court approval by March 15. Iceland imposed capital controls after its three biggest banks defaulted on a combined $85 billion in October 2008. The collapse forced the north Atlantic island to seek a $4.6 billion emergency package that was led by the International Monetary Fund.

According to central bank Governor Mar Gudmundsson, the deal fulfills Iceland’s condition of not jeopardizing monetary policy, the exchange rate, or financial stability. The krona has gained about 8 percent against the euro in the past year as the central bank has raised rates to guide the economy through the challenges it faces.

Once this stage of the bank creditor settlement is finished, the country can move to the next phase, which is to lift capital controls on the rest of the population and corporations, he said.

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Proposal to improve protection for vulnerable depositors in the event of a local bank insolvency

2015-09-13 23

The Department of Economic Development is consulting on a proposal to change the order in which recovered money is repaid in the event of a local bank becoming insolvent.

The move would give ‘preferred creditor’ status to eligible deposits as defined and covered by the Island’s Depositors’ Compensation Scheme (DCS), ranking them ahead of other creditors in the liquidation process.

This change would mean that vulnerable depositors and, if claim was made to the DCS, the public purse would be reimbursed earlier. For example, when Kaupthing Singer & Friedlander failed, the DCS pay-outs were funded initially by the Government, these would have been repaid earlier (reducing the financing costs) if preferred creditor status was in place.

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Iceland moves on capital controls, to tax money outflows

Posted 08/06/2015 - 16:18 by anrigaut

2015-06-07 23

Iceland said on Monday it would impose a 39 percent tax on creditors wanting to take assets reclaimed from its failed banks out of the country, a first step to lifting capital controls that have been in place since its 2008 crash.

The government hopes the tax will prevent a sudden exodus of capital that could crush the crown currency and hurt the economy as it recovers from the spectacular collapse of the North Atlantic island's bloated banking sector seven years ago.

But creditors with billions of dollars worth of assets frozen in three bankrupt lenders could launch legal proceedings against the country, risking years of action that would keep Iceland locked out of international markets.

The government said investors in Icelandic assets such as government bonds could also get their money out of the country by selling crowns to the central bank. Alternatively, they could reinvest their capital in newer government debt that will be convertible out of crowns at maturity.

Because the central bank controls the exchange rate, investors using its currency auctions to repatriate their money could get a less favourable price for their crowns than in the currency markets.

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A 40% exit tax to be imposed on foreign investors

Posted 05/06/2015 - 14:29 by anrigaut

2015-06-04 23

The Minister of Finance introduced a plan to lift the capital controls at a cabinet meeting Friday morning. According to the sources of DV, which broke the news, the plan is based on a 40% exit tax on foreign investors holding claims on the banks which collapsed in 2008, unless they reach an agreement which ensures the withdrawal of claims does not threaten the financial stability of Iceland.
According to today’s reports the government will impose a 40% exit tax, billed a “financial stability tax” on foreign holders of Icelandic krona, which are overwhelmingly investors who own claims on the fallen banks, unless they reach an agreement with the government about a withdrawal of their claims which ensures the financial stability of Iceland. According to the sources of DV this agreement must be reached “in the next few weeks”, otherwise the tax will be imposed.

According to the sources of DV this plan will result in the government receiving “at least” 500 billion ISK (3.8 billion USD/3.4 billion EUR).

The details of the plan will be revealed to the public on Monday.

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Failed Icelandic Bank Debt Said to Gain as Controls May Ease

Posted 30/05/2015 - 06:35 by anrigaut

2015-05-28 23

Trading in debt issued by Iceland’s failed banks is picking up as hedge funds and other investors anticipate a removal of capital controls, according to two people familiar with the matter.

LBI hf and Glitnir hf’s defaulted debt rose about one cent to 11.75 cents and 34 cents on the euro respectively, about two cents higher than in January, said two people who asked not to be identified because trading is private. Kaupthing Bank hf’s claims gained half a point this week to 24 cents, they said.

Trading on debt claims denominated in euros increased this week as new buyers joined the market amid speculation foreign creditors may soon be able to repatriate some of the $6 billion that has been trapped behind capital controls.

Finance Minister Bjarni Benediktsson said on Wednesday the government will propose the law “in the next few days,” paving the way for the repayment of creditors to the nation’s major lenders, which went bust in 2008. The bills will likely be revealed next week, Sigurdur Mar Jonsson, a spokesman for the government, said by telephone on Friday. ...

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Capital controls action… without unleashing the litigation hounds

2015-05-18 23

Will they or won’t they? That is the question regarding how, if and when the Icelandic government will take the long-announced decisive action on easing the capital controls.

The news keeps seeping out in Iceland is that the Icelandic government is just about to present a plan for lifting capital controls. That would then, most likely and uncontroversially, entail the second part of the CBI action from earlier, when investment opportunities for offshore ISK were reined in. Seems, as I mentioned in a blog on earlier CBI action, that this would then be bonds, most likely in FX, with long maturity.

The main interest for foreign creditors will be what measures are chosen regarding the estates of the failed banks, most notably what form of levy or tax will be chosen. Stability tax is the latest jargon to circulate whereas minister of finance Bjarni Benediktsson mentioned an ISK haircut in his March report on capital controls progress.

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Iceland pre-and post-collapse: Small or big steps?

2014-12-05 (All day)

The Winding-up boards of the banks have been waiting to be called to a meeting with the committee overseeing the lifting of the capital controls – and now an invitation has landed on their tables for a meeting next Tuesday. Remains to be seen what the message is.

In the meantime, there is the extension of the Landsbanki bond agreement and a payment of ISK400bn to priority claimants in Landsbanki, announced yesterday, all explained here. The agreement has been changed from what it was originally but at least decisions have been taken and the Brits have had some happy tidings.
The question is if something more will follow, hen’s or horse’s steps.
The last paragraph in the MInFin’s press release is interesting.
The settlement of priority claims marks a major step forward in the winding-up proceedings of the failed banks and will assist the Government in implementing a comprehensive capital account liberalisation strategy.
So is there now a strategy. Not sure yet, more needs to be seen. ...

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Iceland Targets Creditor Writedowns as Accord Sought This Year

Posted 10/07/2014 - 08:11 by anrigaut

2014-07-09 23

The creditors in Iceland’s failed banks will need to accept writedowns of their assets as the government will push for an accord this year to ensure economic stability, Finance Minister Bjarni Benediktsson said.

“We’re trying to maintain stability in Iceland,” he said today in an interview with Bloomberg Television. “Write-offs will need to take place and the market is also showing that this will need to happen if you just look at what’s available in terms of pricing of claims against the estates.”


“We are concerned about the balance of payment going forward,” Benediktsson said. “A solution can be created, the incentives are all here, some people are waiting to gain access to their assets and we are concerned about having the controls for too long.”

Bonds issued by Glitnir last traded at about 29 cents on the dollar, while Kaupthing debt traded at 24 cents, according to website Keldan. Landsbanki bonds traded at just over 5 cents.


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Kaupthing hf 22 Apr 2014: translations of two newspaper articles ...

Posted 23/04/2014 - 10:02 by anrigaut

2014-04-21 23

English translations of two very clear and interesting articles by a member of Kaupthing‘s winding-up committee, recently published in the Icelandic press, are available on the Kaupthing hf website.

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