New Kaupthing and Islandsbanki recapitalisation announced

banksFurther to the announcement of 20 July 2009 and following shareholder meetings of Islandsbanki and New Kaupthing today, the Government of Iceland is pleased to announce that it has committed to capitalise Islandsbanki and New Kaupthing on the basis of compensation agreements which are in the process of being finalised with the Resolution Committees of Glitnir and Kaupthing. Islandsbanki and New Kaupthing are being capitalised with ISK 65 bn and ISK 72 bn of tier 1 capital respectively in the form of Government bonds, giving each bank a core tier 1 ratio of approximately 12 per cent.

In relation to Landsbanki, the Government and the Resolution Committee of Old Landsbanki have agreed to seek a short extension from the FME in order to reach final agreement on capitalisation and compensation arrangements. Negotiations between the two parties continue in a satisfactory manner.

Commenting on today´s announcement, Steingrímur J. Sigfússon, the Minister of Finance of Iceland said:

“The capitalisation of Islandsbanki and New Kaupthing represents another step in the re-establishment of a stable banking system for Iceland. Negotiations in respect of Landsbanki continue and we expect to be able to capitalise Landsbanki shortly.”

Ministry of Finance, August 14 2009

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