Icelandic government proposes legislation to dissolve State Financial Institution following changes in financial management laws

The Icelandic government has proposed legislation to dissolve the State Financial Institution (Bankasýsla ríkisins), citing its limited functions following the repeal of laws governing the sale of state-owned shares in financial companies. The Finance and Economic Minister has put forward a draft bill indicating that the institution has largely completed its intended tasks, which were initially expected to last five years when it was established in 2009.

The draft states that the institution’s role has become restricted after the recent repeal of laws related to the management of state investments in financial institutions. New legislation now allows the Minister of Finance and Economic Affairs to manage the sale of Íslandsbanki, with the state’s stake in the bank to be sold through public offerings.

It is proposed that the responsibility for state investments in financial companies be transferred to the Minister in line with how other state shares are managed. Additionally, the Minister will appoint a three-member nomination committee responsible for recommending candidates for the boards of financial companies and other significant state-owned enterprises. The committee is expected to be composed of qualified individuals and serve terms of three years.

The expected impact of passing this legislation on public interests and key stakeholders is largely seen as positive, aiming to enhance the trust and credibility of the government as a stakeholder in financial companies. It is anticipated that this arrangement will lead to lower costs for the state in the long term.