capital controls

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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Creditors Vote on Deal Setting Iceland Up for Currency Freedom

2015-09-30 23

Iceland is expected to move closer to ending seven years of capital controls on Friday, when the creditors of failed lender Landsbanki Islands hf are due to approve a so-called stability payment.

Under a deal proposed by the Treasury in June, the creditors of Iceland’s failed banks have until the end of the year to either agree to pay a combined contribution of up to $3.8 billion, or face a 39 percent tax equivalent to an estimated $5.1 billion. Landsbanki, now known as LBI hf, is the last of the country’s failed lenders to vote.

The creditors of Glitnir Bank hf and Kaupthing Bank hf have already agreed to pay more than 200 billion kronur ($1.6 billion) and 120 billion kronur, respectively. LBI’s contribution will be "considerably less," Pall Benediktsson, an LBI spokesman, told Bloomberg. He declined to disclose the exact amount.

Central bank Governor Mar Gudmundsson said on Wednesday that technical and legal issues mean the whole process probably won’t be finalized until "the end of the year."

Note: Results of Kaupthing voting are here:

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Kaupthing files an exemption request from capital controls

2015-09-08 23

An exemption application from certain restrictions under the Act on Foreign Exchange (No. 87/1992) was submitted by Kaupthing to the Central Bank of Iceland on Friday, 4 September 2015. The exemption is required in order to make distributions to creditors domiciled outside of Iceland and in order to fulfil the terms of an approved composition agreement. The exemption application is based on a proposal submitted by representatives of certain of the larger creditors of Kaupthing (the “Kaupthing Creditors Proposal”) outlined in the announcement by the Ministry of Finance and Economic Affairs ("Iceland in Continuing Consultations Regarding - Capital Control Liberalization (Kaupthing)") on 8 June 2015. Kaupthing will provide creditors with an update on the progress of the application in due course.

Note: The Ministry of Finance announcement is here:

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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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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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The Landsbanki agreement: a first step towards orderly lifting capital controls or into turmoil?

2014-05-18 23

Last December, Landsbankinn announced it would need to extend its two bonds of December 2009 with maturity 2018. On May 8, Landsbankinn and the LBI, the estate of old Landsbanki, reached an agreement to extend the final maturity from 2018 to 2026. In return, creditors want a pay-out of fx cash funds with the LBI, only possible with an exemption from the Central Bank of Iceland, CBI, with the blessing of the minister of finance. – With a time clause in the new agreement there is now pressure on the government to find the holistic solution to the estates ...

The nature of the estates of the three biggest Icelandic banks, which all failed in October 2008, is not the same. This is also reflected in the ownership of the three new banks. On one hand there is Landsbanki, on the other Glitnir and Kaupthing.


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Capital controls and the on-going blame game on who is blocking their abolition

2014-01-30 (All day)

So far, there is no solution in sight in matters that need to be solved in order to abolish capital controls in Iceland. The government blames creditor of the estates of Glitnir and Kaupthing but unresolved dispute in Landsbanki matters as well though hardly ever mentioned. The government seems to play a waiting game, perhaps to make creditors more forthcoming. Ministers maintain the government cannot interfere in a process of private companies and yet they seem to be contemplating interfering via laws, which would directly expose the government to being sued by creditors. The creditors mostly remain silent but might have more cards up their sleeves than the government seems to believe.

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Iceland Traps Hedge Funds in Refusal to Discuss Bank Claims

2014-01-23 (All day)

More than five years after its biggest banks defaulted on $85 billion, Iceland’s government is refusing to speak to the hedge funds and other creditors that are still trying to get their claims paid out.

The island, which the International Monetary Fund has held up as a model for crisis management, says addressing the needs of bond investors in Kaupthing Bank hf, Glitnir Bank hf and Landsbanki Islands hf isn’t its concern. Instead, Prime Minister Sigmundur D. Gunnlaugsson says he’ll fight to ensure any steps taken protect the nation’s financial markets.

Creditors, represented through winding-up committees, want the government to let them sidestep currency controls that were created back in 2008, when Iceland was hemorrhaging capital. Gunnlaugsson says such a settlement isn’t viable. ...

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