Act No. 125/2008 on the Authority for Treasury Disbursements due to Unusual Financial Market Circumstances etc.
Act No. 125/2008, on the Authority for Treasury Disbursements due to Unusual Financial Market Circumstances etc. (the Act) was adopted by the Althingi on 6 October 2008. The Act provides the necessary tools for Icelandic authorities to deal with current unusual financial market circumstances, for the purpose of limiting damage or risk of damage. The Act entered into force upon publication. However, according to an interim provision, it shall be revised by 1 January, 2010.
According to Chapter I of the Act, under unusual and extraordinary circumstances cf. Article 1, Paragraph 2, the Minister of Finance on behalf of the Treasury is authorised to disburse funds in order to establish a new financial undertaking or take over a financial undertaking or its bankrupt estate, either wholly or in part. Under such circumstances, the Minister of Finance on behalf of the Treasury also is authorised to contribute to a savings bank an amount up to 20% of the book value of its equity.
Chapter II of the Act holds amendments to Act No. 161/2002 on Financial Undertakings. According to a new Article 100 (a), the Financial Supervisory Authority is authorised to take special measures against financial undertakings, if it considers such measures necessary in view of unusual circumstances or events, for the purpose of limiting damage or the risk of damage in the financial markets. Special measures pursuant to Article 100 (a) include, among other things, the following:
- calling a shareholders´ meeting or a meeting of guarantee capital holders irrespective of the provisions of Articles of Association and the Act respecting Public Limited Companies regarding calls to meetings, advance notice etc.;
- assuming powers of a shareholders´ meeting or meeting of guarantee capital holders for the purpose of taking decisions on necessary actions including limiting the decision-making power of the Board of a financial undertaking, dismissing the Board in whole or in part, taking over the operations of the financial undertaking in whole or in part, or disposing of such an undertaking in whole or in part, including merging it with another undertaking;
- appointing a Resolution Committee, cf. Paragraph 4, parallel to a decision made on dismissing the Board of a financial undertaking;
- limiting or prohibiting the disposal of a financial undertaking’s capital or assets;
- revoking the sale of assets executed within one month prior to special measures taken by the Financial Supervisory Authority subject to Article 100 (a);
- demanding that a financial undertaking applies for a moratorium on payments or requests composition of creditors or that it shall be put into liquidation etc.
Article 100 (a) applies irrespective of whether the financial undertaking in question has requested or been granted a moratorium on payments or composition of creditors, or applied for or been declared bankrupt.
Chapter III of the Act holds amendment to Act No. 87/1998 on Official Supervision of Fincancial Activities. If the Financial Supervisory Authority considers it necessary to intervene by taking special measures against a party other than a financial undertaking, that is subject to official supervision according to Act No. 87/1998, so as to limit damage or risk of damage in the financial markets, Article 100 (a) of Act No. 161/2002 on Financial Undertakings applies.
Chapter IV of the Act holds amendments to Act No. 98/1999 on Deposit Guarantees and Investor-Compensation Scheme. According to its provisions, claims of the Depositors´ and Investors´ Guarantee Fund (DIGF) hereafter shall have priority as provided for in Article 112, Paragraph 1 of the Act on Bankruptcy etc. in dividing the estate of a bankrupt financial undertaking and the DIGF hereafter is authorised to reimburse the value of deposits, securities or cash in Icelandic krónur, even though the original transactions may have been in another currency etc.
Chapter V of the Act holds amendments to Act No. 44/1998 on Housing Affairs. According its provisions, The Housing Financing Fund hereby is authorised to purchase or refinance bonds of financial undertakings which are secured against collateral in residential property.