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| The banks equity might be wiped out because of law suits |
| Friday, 11 September 2009 19:33 |
 The owners equity in the new banks might be wiped up if the courts approve the reasons that the currency insured loans were illegal. The banks might have to write off all up to 150 billion króna because of real estate and car loans. There are a few test cases going on against the banks where it is claimed that the currency insured loans because of real estate and car purchases had been illegal. Many thousand individuals took currency insured loans but the loans raised enormously when the króna collapsed last year. Bjorn Thorri Viktorsson lawyer said in a conversation with the newsroom today that if the courts approve the reasons that the currency insured loans had been illegal will the banks have to reduce the loans down to the original capital amount of the loans. The currency insured housing and car loans are at around 300 bllion króna compared to the current exchange rate and these loans are a part of the asset collection of the banks. This amount would be reduced down to 150 billion króna if the loans are ruled to be illegal which will cause the owners equity of the banks will be wiped out. The minister of trades says that they are presuming that the loans were legal. "The result will be dealt with when it comes but as is are we presuming that these loans are legal," says Gylfi Magnusson. The banks have some space to take on a loss like this. "It is a considerable amount on paper. But it may be kept in mind that because of the serious position of many of the loan takers are today have men probably expected that there would be considerable write offs anyways even if the loans were legal," said Gylfi.
News Article by Hoskuldur Kari Schram Translated by Anya Original Article in Icelandic
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