Icelandic premier says LBI will not be exempt from restrictions

Iceland Prime Minister Sigmundur Davíð Gunnlaugsson has insisted that failed bank LBI hf will not be exempt to the country’s capital controls.

Speaking to reporters in the capital Reykjavik, he said that relieving the controls for one bank without having a solution that allows a general lifting was “out of the question”. He said it he could not consider lifting the controls if a worse quality of life in Iceland would be the likely consequence.

Landsbankinn hf said on 9 May that it had come to an agreement with LBI – previously called Landsbanki Íslands hf – on extending the maturity date of 226bn kronur in bonds. Extending the loans is viewed as crucial to lifting the country’s capital controls.

The agreement was dependent on LBI being granted a “permanent exemption to the capital controls”, said a summary of the terms amending Landsbankinn’s bonds. The maturity date would be extended from 2018 to 2026, the agreement stated.

The bonds involved in the deal represent around 29 per cent of the $7.2bn the capital controls block from leaving the $16bn economy. Iceland imposed these controls in 2008 in order to protect its currency after three of its biggest banks collapsed and sent the country into its worst recession for 60 years.

Sigmundur Davíð Gunnlaugsson said maybe in the days and weeks ahead there will be a solution that allows the controls to be lifted, but a single party will not be allowed to be exempt from this.