Riksbank offers help to Icelandic subsidiary

Riksbank offers help to Icelandic subsidiary
The Riksbank on Wednesday announced it was offering loan assistance of up to 5 billion kronor ($695 million) to the Swedish subsidiary of Iceland’s Kaupthing Bank.

“The conditions in the Icelandic bank sector have recently made it difficult also for Kaupthing Sverige AB to meet its payment obligations. In the situation that has arisen there is an imminent risk that the bank may suffer liquidity problems,” said Riksbank Governor Stefan Ingves in a statement.

“To safeguard financial stability in Sweden and ensure the smooth functioning of the financial markets, the Riksbank has therefore decided to grant liquidity assistance to Kaupthing Sverige. The Riksbank is prepared to supply the liquidity necessary.”

The Riksbank added that it and Swedish Financial Supervisory Authority (Finansinspektionen) both view Kaupthing Bank Sverige AB as solvent.

It therefore qualified the measure as a decision based on the need to meet temporary liquidity problems, rather than an effort to save the bank from insolvency.

On Tuesday, Iceland’s central bank offered €500 million ($678 million) in assistance to Kaupthing hf, the Iceland-based parent of Kaupthing Sverige AB.