State aid: Temporary approval of measures to recapitalise the Icelandic bank Byr hf.
The EFTA Surveillance Authority decided today to approve temporarily state aid in support of the Icelandic bank Byr hf.
The Icelandic authorities are requested to submit a restructuring or a liquidation plan for the bank within six months. Only when this plan has been submitted will the Authority be able to take a final position on the aid measures.
Byr is an Icelandic retail and corporate bank and is currently Iceland's fourth biggest bank in the retail and commercial market.
Following the collapse of Byr Savings Bank (Old Byr) in April 2010, the Icelandic State founded Byr hf (New Byr), a fully state-owned limited liability company. New Byr will take over all assets, certain liabilities and operations of Old Byr, which is now in a winding-up procedure.
The aid measures include an initial share capital contribution of ISK 900 million (approximately 5.6 million Euros) to New Byr and a subordinated loan facility agreement of up to ISK 5 billion (approximately 31 million Euros). These measures will enable New Byr to meet the capital adequacy (CAD) requirements of 16% laid down by the Icelandic Financial Supervisory Authority.
The aid measures facilitate the recapitalisation of New Byr and conclusion of a full settlement of claims between the old and the new bank. This will eventually lead to the creditors of Old Byr assuming 95% ownership of New Byr, while the State retains a 5% share. The measures aim to maintain confidence in the Icelandic financial system. The possible collapse of New Byr would be a severe blow in particular to the confidence of deposit holders in Iceland.
In the current situation New Byr does not have access to financial markets to ensure sufficient capital and liquidity. In the Authority's view the measures are appropriate and proportional to the problems with which the new bank is presented as they meet the objective to ensure that New Byr will comply with the regulatory CAD requirements and enable the bank to prepare a restructuring plan aimed to secure its long-term viability.
Possible negative spillover effects on competition are mitigated by the fact, amongst others, that Old Byr's guarantee capital owners have lost their investments in full and will not be compensated. The claims of Old Byr's creditors have also been written down substantially.
For further information, please contact:
Per Andreas Bjørgan, Trygve Mellvang-Berg,
Director Press & Information Officer
Competition and State aid Directorate tel. (+32)(0)2 286 18 66
tel. (+32)(0)2 286 18 36 mobile (+32)(0) 492 900 187