Íslandsbanki hf. - Company Announcement

Islandsbanki hf. : Restructuring of Íslandsbanki approved by the EFTA Surveillance Authority

The  EFTA Surveillance Authority (ESA) has approved the measures taken in 2008,
when  Íslandsbanki was established on the domestic operations of its predecessor
Glitnir  and received support  from the Icelandic  State, as compatible with EEA
rules.. Íslandsbanki is the first bank in Iceland to receive ESA approval on the
Bank's  restructuring  of  the  Bank.  The  approval  is  based on the fact that
Íslandsbanki  has  demonstrated  that  the  restructuring restores the long-term
viability  of the bank; that restructuring  costs are shared between owners, the
bank  and the State; that the aid is  limited to the minimum necessary; and that
the measures introduced limit distortions of competition to a sufficient degree.

In the conclusion it is stated that Íslandsbanki has addressed the weaknesses of
its  predecessor and has  a strong capital  ratio today. The  Bank has also made
progress regarding the restructuring of loans to over-indebted customers. In the
first  quarter  this  year  around  18,200 individuals  and 3,000 corporates had
received  write offs, debt forgiveness or some form of debt correction since the
Bank's establishment, totalling ISK 370 bn.

The  Authority  has  also  taken  note  of  numerous legislative amendments that
Iceland  has  made  since  the  collapse  of the financial system in 2008. Those
amendments have strengthened the regulatory framework for financial institutions
in  Iceland, and contribute to the  resilience of financial institutions. As the
previous  owners of Glitnir lost their share capital, and its creditors also had
to take significant losses, the Authority considers that the criterion of burden
sharing is met and moral hazard has been addressed.



Finally, Íslandsbanki has provided a range of commitments that limit distortions
of  competition.  Íslandsbanki will continue to divest of equity holdings gained
via  financial restructuring of its customers  in line with the Bank's strategy.
Also,  the Bank  will provide  more accessible  information for customers at the
Bank's  website on the  process of switching  banking institutions. In addition,
Íslandsbanki  will not make  any acquisitions of  financial institutions without
the Authority's approval.


Birna Einarsdóttir, CEO of Íslandsbanki:"It  is an important milestone for Íslandsbanki  to be the first bank in Iceland
to  get approval from  the Authority on  the restructuring of  the Bank. We have
worked  hard  to  strengthen  the  infrastructure  of  the Bank. This conclusion
confirms  that the Bank is on the right track and has achieved great progress in
restructuring the Bank in the last four years. "

[HUG#1622464]