The State to guarantee any legal risks of banks participating in the arrangement with Kaupthing
The Government will request authority from Parliament to provide a guarantee for the banks participating in the arrangement with Kaupthing Bank hf for any claims that might involve right of recourse or similar claims. If successful in court, such claims could result in financial sanctions. The guarantee would cover claims for deposits to a maximum of EUR 115 million.
A private sector solution has been reached for the payment of deposits in the Finnish branch of Kaupthing Bank hf. It involves setting up a special purpose company, which will be financially responsible for the deposit stock payment to the depositors. The special purpose company will be pledged or sold credit claims and other assets of Kaupthing Bank hf. To ensure that the special purpose company can settle all the deposit claims, it will be funded by three commercial banks: Nordea Bank Finland plc, OP-Pohjola Group and Sampo Bank plc.
This is a solution where the three commercial banks carry the commercial and credit risks. The condition set by the private sector is in practice that the Finnish State is prepared to guarantee any legal risks incurred by the parties taking part in the arrangement. This settlement does not alter existing deposit protection principles in force in Finland.
This arrangement has been approved by Icelandic authorities and is deemed to fully conform with the legal provisions in force in Iceland. Regardless, the assets might become subject to claims consisting of right of recourse or similar claims, which, if successful in court, could result in financial sanctions for the three banks involved or for the special purpose company. For the arrangement to go ahead, the commercial banks have therefore set the condition that they would not have to incur any legal risks related to claims on the assets resulting from the institution of bankruptcy proceedings.
The guarantee is governed by legislative acts on government lending and government guarantees. The guarantee may be granted without charging retention payments and without financial collateral, though. When granting a State guarantee, the Government will adopt more specific terms and conditions, which the Ministry of Finance must comply with when endorsing the final structure and volume of the guarantee.
Inquiries: Mr Peter Nyberg, Director General, tel. 358 (0)9 160 33055, Mr Pekka Laajanen, Legislative Director, tel. 358 (0)9 160 33040 and Mr Veikko Kantola, Senior Government Adviser, tel. 358 (0)9 160 34953.