New Supreme Court ruling on illegal loans in foreign currencies

Yesterday, the Supreme Court in Iceland once again ruled that some loans were illegally linked to the value of foreign currencies. The ruling will now be reviewed by the Bank. 

The ruling will affect nearly 1,000 loans, most of which had been extended to companies. Most of these loans had already been recalculated in line with Act 151/2010 that the Icelandic Parliament passed in December 2010 which instructed banks to recalculate FX-linked home mortgages.

Íslandsbanki has now to recalculate, including the the loans captured by this new ruling, a total of 15,000 loans. The bank had previously discontinued three court cases in order to speed up the recalculation of the loans that were ruled to have been illegally linked to foreign currencies. The ruling does not affect the legitimacy of mortgages in foreign currency as they are legal according to the Supreme Court.
The effect of ruling on the balance sheet will now be evaluated and included in the financial statements for the year 2012. The capital ratio will remain strong and above the minimum set by the Financial Supervisory Authority.

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