Iceland receives $6 bln rescue package

A branch of the Icelandic bank Glitnir in Reykjavik on October 8, 2088. The Icelandic state has officially taken control of the country's third largest bank, Glitnir, the Financial Supervisory Authority (IFSA) said today. AFP PHOTO OLIVIER MORIN (Photo credit should read OLIVIER MORIN/AFP/Getty Images)
4:05 p.m. ET, 10/9/08 - Photo courtesy of MSNBC
Iceland is set to receive a US$6-billion IMF-led rescue package soon, Britain's Financial Times reported on Monday. The IMF may provide about $1 billion in emergency cash for Iceland with the balance lent by Norway, Sweden and Denmark and additional money possibly coming from Russia and Japan.

It was not known whether Russia, which has been in talks with Iceland over a loan, would take part in the plan. A first round of negotiations with Russia finished last week without a loan deal. Iceland did, however, tap the central banks of Denmark and Norway for 200 million euros each based on a swap facility previously set up with Nordic central banks.

Iceland has been in dire need of financial help since the government found itself having to take control of the last of the country’s three major banks, Kaupthing. Along with the other two banks, Landsbanki and Glitnir, Kaupthing was brought down by the weight of debts, denominated mainly in foreign currency, that it was unable to refinance.

French government announced today that it will buy 10.5 billion euros, or about $14 billion, of subordinated debt from six major lenders in exchange for a pledge that they will increase lending to businesses and consumers. The announcement was part of the 380 billion euro bailout plan the government announced last week. In the first instalment of that plan, Lagarde said Monday that BNP Paribas would get 2.6 billion euros, Société Générale 1.7 billion and Crédit Agricole 3 billion. Three unlisted savings banks — Caisse d'Epargne, Crédit Mutuel and Banque Populaire — will share the remainder of the funds. European markets edge higher after the bank rescue announcement.

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6. Iceland Meltdowns

Sources :

1. Financial Post: Iceland to receive US$6B IMF rescue package: report, October 20, 2008
2. International Herald Tribune: European markets edge higher after bank rescue, Asia is mixed, October 21, 2008
3. The New York Times: Iceland Poised to Get $6 Billion Rescue Package, October 20, 2008

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