Found this on Bloomberg.com news:
http://www.bloomberg.com/apps/news?p...d=aEb_jUV5LjZY
"Icelandic Banks to Sell Foreign Assets, Premier Says (Update3)
By Helga Kristin Einarsdottir and Tasneem Brogger
Oct. 6 (Bloomberg) -- Kaupthing Bank hf and Landsbanki hf, Iceland's biggest banks, may sell overseas assets and repatriate the proceeds in a bid to bolster the krona and alleviate the impact of the credit crunch, Prime Minister Geir Haarde said.
``The banks are willing to downsize abroad,'' Haarde told journalists in Reykjavik late yesterday. They ``are very positive about selling foreign assets and I think that is necessary and the right time for them to shrink their balance sheets.''
The krona has plunged 41 percent against the euro this year on concern the government may have to bail out its biggest banks, which rapidly expanded abroad in recent years and had assets worth 14.4 trillion kronur ($126 billion) at the end of June, more than nine times the size of the economy. The government last week took a 75 percent stake in the third-biggest lender, Glitnir Bank hf, which couldn't secure short-term funding.
The island's gross external debt soared to 9.55 trillion kronur in the second quarter, more than seven times the size of gross domestic product. Downgrades of Iceland's ratings by major credit agencies have exacerbated the slump in the currency.
Kaupthing's foreign assets make up about 90 percent of its holdings, while the central bank's foreign reserves were 308 billion kronur in August, making any bailout hard to finance. The bank owns financial services company FIH Erhvervsbank A/S in Denmark and Singer & Friedlander Group in the U.K.
Options Available
``Regarding the asset sale, nothing has been decided yet,'' said Jonas Sigurgeirsson, a spokesman at Kaupthing. ``There are a number of options we can use. We have loan portfolios and various things that we can use before we start selling assets.''
One of the main objectives of the agreement was to reduce the debt reliance of the banks, he said.
A rescue package may also involve a repatriation of foreign assets by Iceland's pension funds, Haarde said.
``The pension funds have been positive towards our request,'' Haarde said. ``Certain important details and technical aspects have to be negotiated and agreed on.''
The krona was down 1.5 percent against the dollar today, trading at 114.36 as of 11:00 .m. in Reykjavik.
The liquidity crisis has sent the currency into a tailspin as a shortage of credit batters economies reliant on debt. Iceland had a current account deficit equal to 34 percent of gross domestic product in the second quarter, with most of the shortfall coming from the cost of sustaining foreign debt payments.
Credit Line
Haarde's comments suggest a rescue package won't involve the use of a liquidity line extended by Nordic central banks. Iceland's central bank in May entered a swap facility with counterparts in Denmark, Norway and Sweden worth 1.5 billion euros ($2.04 billion). Iceland has yet to draw on that agreement.
Sweden's Riksbank has received no approaches from Iceland for additional liquidity lines, spokeswoman Britta von Schoultz said in a phone interview today. The central banks of Norway and Denmark declined to comment.
The ``currency has collapsed,'' Beat Siegenthaler, a senior strategist at TD Securities, said in a phone interview before the announcement. ``Many of our traders are saying they've never seen a currency lose as much in such a short time.''
The slump in the currency threatens to send the inflation rate as high as 20 percent, according to Siegenthaler. Consumer- price growth was 14 percent last month, the statistics office said on Sept. 24.
To contact the reporters on this story: Tasneem Brogger in Copenhagen at
tbrogger@bloomberg.net;
Last Updated: October 6, 2008 09:02 EDT"