Iceland’s parliament would support the central bank if it chooses to block composition agreements to ease pressure on the krona, said Helgi Hjorvar, chairman of the legislature’s economy and tax committee.
“Parliament will do anything and everything to assist the central bank’s objective to maintain financial stability in the country,’’ he said yesterday in a telephone interview. If that includes blocking the banks’ composition agreements, “parliament will support the central bank,’’ he said.
Iceland imposed currency restrictions in 2008 following the failure of Kaupthing Bank hf, Glitnir Bank hf and Landsbanki Islands hf, which triggered an 80 percent plunge in the krona against the euro offshore. Arion Bank hf, the state-created successor to Kaupthing, has estimated the controls are stopping as much as $8 billion in offshore krona assets from being sold.
Morgunbladid reported yesterday, without citing where it got the information, that the central bank opposes composition agreements, which could lead the winding-up committees of the failed lenders to undergo bankruptcy proceedings. Finance Minister Katrin Juliusdottir said last month that debt settlements with creditors of Iceland’s failed banks will increase an overhang of offshore krona assets and stoke volatility in the currency.
“The only thing the Governor has said is that the central bank will take as long as it needs to review” any composition agreement “in order to ensure that they don’t threaten financial stability,” said Stefan J. Stefansson, a central bank spokesman
Steinunn Gudbjartsdottir, chairwoman of Glitnir‘s winding-up committee, said she has no “indication” that the central bank won’t approve the group’s proposed plan.
“Both Glitnir and Kaupthing have for some time now been planning to complete the winding-up proceedings with a composition agreement,” she said. “The intention was to send the banks’ creditors composition agreements before the end of the year. That’s completely dependent on the central bank approving the banks’ composition proposals.”
The 2008 banking collapse forced the north Atlantic island to seek a $4.6 billion bailout led by the International Monetary Fund. Iceland emerged from the IMF’s 33-month economic program in August last year.