As announced earlier this morning, the Icelandic government has purchased a 75 percent stake in Glitnir Bank to ensure the Bank’s continued stability and to cover a gap in short term funding due to changes on international markets over the last few weeks.
The Icelandic Prime Minister, Geir H. Haarde says the decision will prove very important to the wider Icelandic financial market. He also said that the Bank’s staff and customers can now trust that the bank is as steady and robust as it ever has been.
MBL.is reports that Prime Minister Haarde said at a press conference held at the cabinet office that the Icelandic government involvement in Glitnir is neither a loan nor a grant; but purely an investment.
The Prime Minister said that Glitnir’s short term funding problem is entirely the fault of unforeseeable and unprecedented recent upheavals on international markets, and not the fault of Glitnir staff or owners. The government decision was made due to the importance of eliminating uncertainty surrounding the banking sector.
Haarde reiterated that the bank is not being nationalised and that, if all goes well, the government will not be a major Glitnir shareholder in the long term. The bank is suffering a short term funding problem, but retains strong long term assets. It remains the government’s opinion that the Bank is well-financed, Haarde said. And in that light, CEO Larus Welding has agreed to remain in his post.
The other Icelandic banks are not facing the same problems. Haarde said that in meetings with executives from the other banks over the weekend, no problems were reported. “I spoke with them and there was no indication that they were suffering funding shortfalls,” Haarde said.
Glitnir stocks will begin trading again later today after being frozen all day so far on the OMX I15 index in Reykjavik.
The Prime Minister said that the record-breaking low exchange rates for the Icelandic krona are not helping matters, but he expects that today’s Glitnir announcement will help strengthen the currency.