24.01.2012

Decision by ESÍ ehf. Board regarding loans to holders of guarantee capital in Sparisjóður Svarfdæla

The Board of the Central Bank of Iceland Holding Company ehf. (ESÍ) has decided to cancel claims against holders of guarantee capital in Sparisjóður Svarfdæla, which ESÍ owns through Hilda hf.

The claims in question are loans granted by Saga Investment Bank to over 100 parties at the end of 2007 in connection with an increase in Sparisjóður Svarfdæla guarantee capital. The claims were subsequently sold to the bank’s affiliate, Hilda hf. ESÍ took over Hilda in mid-2011 and has had custody of the loans since that time.

To date, a total of 96 lawsuits have been filed against Hilda, in which it is demanded that the loans be deemed unlawful with reference to the Supreme Court judgment of 24 November 2011, in the so-called Byr cases, and the precedent set by Landsbanki’s cancellation of loans for the purchase of guarantee capital in Sparisjóður Keflavíkur.

In the opinion of the ESÍ Board, there is doubt about whether the legitimacy of the claims due to loans for the purchase of Sparisjóður Svarfdæla guarantee capital is fully comparable to that of the claims in the Byr cases and those cancelled by Landsbanki. With this decision, the Board is not taking any direct position on that issue, but it is not ignoring the fact that these claims and the occasion for them are comparable in many ways. Following the decision by Landsbanki to cancel loans granted in connection with increases in guarantee capital in a number of savings banks at roughly the same time as the above-mentioned loans, the question of equal treatment suggests that the loans for purchases of guarantee capital in Sparisjóður Svarfdæla should be cancelled. The combined financial interests of the Central Bank and the Government in this case are relatively small, and protracted legal disputes on this matter could greatly delay the Government’s reclamation of its holding in Sparisjóður Svarfdæla and disturb the restructuring of financial services in the local community.

In the opinion of the ESÍ Board, the public interest is best served by cancelling the above-described claims.

The cancellation of the claims is subject to the requirement that the guarantee capital used as collateral for the loans be delivered to Hilda/ESÍ and that Landsbanki’s proposed purchase of the operations of Sparisjóður Svarfdæla be approved by an adequate number of guarantee capital holders.

Further information can be obtained from Már Guðmundsson, Governor of the Central Bank of Iceland, at tel: +354 569-9600.


No. 3/2012
23 January 2012

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