Sigrún Davíðsdóttir's Icelog

Extended LBI deadline – and caged-in creditors?

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The LBI has now extended its deadline “for completion of the extension and amendment of the Landsbankinn bonds to December 31, 2014. The new deadline has been determined in further consideration of the Central Bank‘s previous correspondence to LBI by which it had indicated that a final answer regarding LBI´s conditions precedent could be available no later than the end of the year.”

LBI seems to be acknowledging the CBI cannot be pushed to answer earlier although allegedly minister of finance Bjarni Benediktsson was all set to answer earlier but was stopped in his tracks by prime minister Sigmundur Davíð Gunnlaugsson. Or so the rumour goes. The agreement is between Landsbankinn, the new bank owned by the state and the LBI. It seems odd to think that Landsbankinn would have agreed to something its owner would be wholly opposed to but well, who knows (except those in charge)?

In Morgunblaðið today, it is assumed that an exit tax of 35% will only hit creditors of the three bank estates though it is, according to the paper, still unclear if this tax will apply to priority claimants of the LBI, i.e. notably the UK deposit guarantee scheme. There is no mention if this tax will be transparent, i.e. with a preset timeline etc.

An exit tax will contain the problem of ISK but now solve it and the authorities will have little control over how it turns out. With an exit tax the estates will literally be boxed in. Then Iceland is close to a situation described by CBI governor Már Guðmundsson in the following way at a meeting last year: assume the estates are caged in; when new investors come to Iceland they see this cage and ask who is in there; the answer is: foreigners who invested in Iceland last time around.

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Written by Sigrún Davídsdóttir

November 18th, 2014 at 10:02 am

Posted in Iceland

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