Icesave dispute to the EFTA Court

The European Surveillance Authority (ESA) has announced that Iceland will be taken to the EFTA Court for failing to compensate the Dutch and British depositors in Landsbanki's Icesave accounts following the bank's collapse in 2008. The Icelandic government has argued that the Landsbanki estate would fully cover priority claims and that payments had already begun, but this did not appease ESA. The EFTA court will probably rule in the case mid-to-late 2013. Should the court find Iceland in breach of the EEA agreement, it will remain to be seen if the British and Dutch governments decide to pursue the issue, which by that time will probably revolve mainly about interest due on the amount owed.

For more detail on this, see the ESA's announcement.

Financial system on firmer footing

The Central Bank of Iceland (CBI) says in a new financial stability report it published this morning that the financial system now stands on a firmer footing than it did when it published its last report on this issue in the spring. The report states, among other things, that the financial positions of households and businesses have improved and their debt levels have been reduced, partly as a result of write downs and write offs. The CBI says that the debt of households and businesses as a percentage of the estimated GDP for this year is now 314% and has dropped from its peak in mid 2009. The debt of Icelandic households currently amounts to 107% of the estimated GDP, compared to its peak in the third quarter of 2009 when it reached 120%. The CBI also says that, even though the situation has improved, it is still delicate and debt levels are still high. A new shock, due to, for example, developments in the global economy, could lead to an increase in defaults again.

The full report has not yet been ranslated from Icelandic, but will in due course be found at the Central Bank's website.

For any further information on the above, please contact fi@islandsbanki.is