Kaupthing Bank

Group Treasury is a central coordination unit responsible for the overall treasury strategy of the Bank located both in Iceland and the UK. Group Treasury activities can be divided into the following four teams: Funding, Financial Institutions, Debt Relations and Asset & Liabilities Management. Group Treasury also maintains an ongoing dialogue with rating agencies.

Funding

The key strategic priority for Kaupthing Bank has been to diversify its funding sources and to strengthen its deposit base.

Issuing Entities

There are three rated entities within the Group: the Parent Company Kaupthing Bank, FIH in Denmark, and Kaupthing Singer & Friedlander in the UK. Most long-term funding is arranged through the Parent Company, but FIH, which operates as a self-funded entity, is the only subsidiary which also actively accesses the debt capital markets with public transactions. Kaupthing Singer & Friedlander primarily funds its operations through customer deposits.

Financial Institutions

The Financial Institutions team is responsible for building relationships with other financial institutions, investors, and credit analysts. The team also oversees the deposit gathering effort of Kaupthing and the aim of increasing the ratio deposits to customer loans up to 50% in 2008.

Funding and Debt Relations

The Funding team focuses on the Bank’s funding activities. The team implements the Bank’s chosen debt strategy of diversifying funding sources and extending the maturity profile. In 2007 a team dedicated to managing relationships with bondholders was established.

Asset and Liability Management

The Asset & Liability Management team focuses on liquidity and capital management for the Group in cooperation with Risk Management and Finance. The team also handles securitisation projects for the Bank, liquidity investments and internal funding to subsidiaries. Most subsidiaries are subject to legal and regulatory capital requirements as well as minimum liquidity thresholds. Therefore, the local Asset & Liability Committees (ALCO) in each country are responsible for managing their local liquidity requirements. Each subsidiary quantifies the secured liquidity measure in a consistent manner and reports its liquidity position to the Group Liquidity Management (GLM) within Group Treasury on a bi-weekly basis. All local ALCOs are under the supervision of the Group ALCO. The Group ALCO is responsible for balancing the Group-wide needs of resource availability such as capital, liquidity and Balance Sheet limits.

Last updated/revised: 2 June 2008