Below, you will find the most frequently asked questions from creditors regarding the Bank’s operations while in a moratorium status, listed by different topics.
1. Why has a Resolution Committee been appointed to manage the affairs of the Bank?
According to the Act on Financial Undertakings the Resolution Committee was appointed over the Bank to manage its operations, including supervising the handling of all its assets and conducting its business operations. The Resolution Committee holds the powers of the Board, is responsible for the Bank’s daily operations and shares the creditors’ desire to maximize the value of the Bank’s estate and recognizes that this may take a significant amount of time to achieve. Therefore, the Resolution Committee has from the outset focused on maintaining and safeguarding the assets of the Bank with the aim of ensuring as high recovery rate of claims as possible.
2. What are the Resolution Committee‘s principal objectives and under what legislation is its role laid down?
The role and duties of the Resolution Committee are laid down in the Act on Financial Undertakings, no. 161/2002, as amended by Act no. 44/2009 and subsequent amendments, (“Act on Financial Undertakings”), also the Act no. 21/1991 on Bankruptcy etc. (the “Bankruptcy Act”). According to Act no. 44/2009 the Resolution Committee was given power by law to represent the Bank in all matters, safeguard its interests and maximise asset value. The provisions of articles 102 and 103 of the Act on Financial Undertakings clearly state that the Resolution Committee has a legal obligation to maximise the value of the Bank's assets and preserving the interests of the creditor body as a whole.
3. What is the role of the Winding-up Committee?
On 25 May 2009, in accordance with a request from the Resolution Committee, the District Court of Reykjavik appointed a Winding-up Committee for the Bank in accordance with latest amendments to the Act on Financial Undertakings.
The Winding-up Committee does not hold any power over the Resolution Committee or vice-versa. Both are however committed to work together in the best interests of the Bank and its creditors. The role of the Winding-up Committee is to, among other things, call upon any creditors who have a claim against the Bank and take a position regarding their recognition. The Winding-up Committee oversees the call for claims and has set the deadline for filing claims which is 30 December 2009. The Winding-up Committee makes a register of filed claims and decides how they are ranked in the order of priority of payment of claims.
4. What is the difference between the Resolution Committee and the Winding-up Committee?
The Resolution Committee and the Winding-up Committee jointly direct the Bank’s affairs, cf. the divisions of tasks provided for in Points 3 and 4 of Temporary Provision V of the Act on Financial Undertakings.
In short, the Resolution Committee is responsible for the asset side of the Bank and its daily operation, but the Winding-up Committee administers the formal process of filing claims, handles all claims against the Bank and makes decisions regarding their recognition.
5. What is the scope of the Bank‘s operations?
The Bank’s collapse in October 2008 is one of the largest bankruptcies in the history and at its collapse the Bank had operations in 15 countries. The scope of the Bank‘s operations is, therefore, large and the valuation of the Bank‘s assets as at YE 2009 amounted to ISK 1,580bn. In comparison, Iceland’s GDP amounted to approx. 1,500bn in year 2009.
6. What is the Bank’s operating cost?
The Bank‘s operating cost, i.e. for both the Resolution Committee and the Winding-up Committee amounted to approx. ISK 4,1bn.
The total operating cost in 2009 was approx. 0.26% of total assets (ISK 1.580bn as at 31 December 2009), despite cost due to forensic investigation.
Fees generated from the loan portfolio amounted to ISK 1,3bn cover the costs of running the asset management division and approx. 1/3 of the Bank‘s total operating cost in 2009.
External advisory cost in restructuring exercises is in many cases borne by the borrower.
Further information on the Bank’s operation can be found in chapter 1.4 Operations of the Bank of the
Creditors' Report.
7. What were the initial tasks of the Resolution Committee?
At the inception, the Resolution Committee had the objectives to maintain the Bank‘s commercial banking operation in Iceland, to ensure cash flow in all currencies both domestically and to/from foreign jurisdictions and to protect depositors in accordance with the Disbursement Act. Further information on the Resolution Committee’s initial tasks can be found in appendix A5 Initial tasks of the ResCom of the Creditors’ Report.
8. How much of my claim will I get back and when will I get paid?
At this stage, it is not possible to estimate the value of claims against the Bank and the recoverable value of the Bank’s assets. The aim of the Resolution Committee is to preserve the assets of the Bank and to optimize recovery for the creditor body.
The most recent valuation of the Bank’s assets is as at 30 June 2009 and has been presented in the Creditors’ Reports. As stated in the Creditors’ Report this valuation does not take into account the current strategy of the Resolution Committee to support and protect the assets. No attempts were made at that time to assess the possible future value of assets, nor to estimate likely recovery of creditors’ claims. Details on the timing of asset realization and payments to creditors will be released when they become available.
9. Why has New Kaupthing Bank (now Arion Bank) been established?
On 9 October 2008, the Icelandic Financial Supervisory Authority ("FME") appointed a Resolution Committee of Kaupthing Bank hf. (the "Bank"), in accordance with article 5 of legislative act 125/2008 on the Authority for Treasury Disbursements due to Unusual Financial Market Circumstances etc (the"Act"). The Act was passed by Parliament on 6 October 2008, providing the FME with the authority and power to intervene in the operations of financial undertakings with the aim of responding to the unusual circumstances in the Icelandic financial market.
On 21 October 2008, the FME decided to transfer a part of the Bank's operations to a New Kaupthing Bank (now Arion Bank) that has been incorporated. According to the FME this decision was made to ensure continued banking operations for Icelandic individuals and businesses.
11. Can you please clarify the transfer decison of bank accounts and money market instruments?
According to guidance from the FME, all actual bank accounts are transferred from the Bank to New Kaupthing, regardless of who the customer was (both from credit institutions and customers). In the case of money market agreements, the FME decided to categorise such transfers as deposits, except in instances when the counterparty of the Bank was another financial undertaking. So deposits from financial undertakings transferred to New Kaupthing are only bank accounts that credit institutions have in the Bank.
12. Who are the owners of Arion Bank?
In December 2009, the Bank announced it would acquired 87% of the share capital in Arion Bank but 13% remained under Government ownership. In accordance with the FME‘s Transfer Decision, the Bank‘s subsidiary Kaupskil ehf. holds the Bank‘s shares in Arion Bank.
The Board of Directors of Arion Bank was appointed in accordance with the terms stipulated by the FME on Kaupskil’s ownership of Arion Bank, which stated that the majority of board members, including the Chairman, should be independent of Kaupthing and individual creditors. In addition, one board member may come from the Resolution Committee.
Further information on Arion Bank can be found on Arion Bank's website
14. Is Kaupthing Bank actively selling its assets?
From the outset the Bank has followed a structured process when and how decisions are being made regarding potential asset disposals. The Bank is not actively trying to sell off assets and has strongly refused any fire sale bids; however, all reasonable potential monetization possibilities are examined. To that end, all loan and equity positions managed by the asset management team have a dedicated account- and portfolio manager who constantly monitors the performance and monetization opportunities for each asset.
Further information on the asset disposal process can be found in the
Creditors' Report
chapter 2.2.2 Positions under Asset Management – Process and Procedures.
Interested parties can send enquiries to
creditorcontact@kaupthing.com
16. As a bond holder, what will happen to payments on my bonds?
By order of the District Court of Reykjavik dated 24 November, the Bank was placed into a procedure under Icelandic statutory law which has resulted in a cessation of payments to creditors and a moratorium over claims against the Bank. A short summary of the Icelandic moratorium legislation and the rationale for applying for the moratorium can be found in chapter 4 in the Bank's
Creditors Report .
The moratorium process restricts the payment of claims by the Bank, except to the extent it may be certain that the claim would be paid, considering its rank in the order of preference of claims. Due to the situation, no payments are currently being made by the Bank on any bonds.