Banks to Reimburse Billions Following Supreme Court Ruling

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Banks to Reimburse Billions Following Supreme Court Ruling

Yesterday, the Supreme Court ruled that Frjálsi fjárfestingabankinn bank cannot demand higher interest payments in accordance with the Central Bank’s interest rate of loans tied to foreign currencies, Mbl.is reports.  

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The Supreme Court. Photo by Páll Kjartansson.

It is evident that the people who took currency loans and paid them in full will be refunded tens of billions.  There is however great uncertainty as to how widespread the effect from the Court ruling will be.

According to the Landsbanki’s manager Steinþór Pálsson, it is clear that the bank’s currency loans must now be recalculated.

Íslandsbanki will carefully evaluate the ruling and its effects but points out that no currency loans were to be found in the bank’s portfolio of special bonds. According to the interpretation of the ruling, that would be considered to be least in the bank’s favor, the bank’s asset ratio will continue to be above the limits set by the Financial Supervisory Authority (FSA), the bank said in a statement.

Arion Bank issued a statement saying that the ruling’s precedence value has yet to be determined in light of the currency loans the bank has already recalculated and that the bank’s financial status would remain solid.

The head of the FSA Gunnar Andersen told Morgunblaðið today that the banks should be able to easily handle the ruling’s consequences, adding that in his opinion it does not pose a threat to the country’s financial stability.

The banks will not have a reclaim right to the old banks’ bankruptcy funds as the deadline for issuing claims has run out. The government’s contract with foreign creditors regarding the takeover of the bank’s assets did not contain a clause stipulating that were rulings to change the premises, the contract should be renegotiated.

ÁA