Glitnir bank capable of covering costs

reported last week that it had sufficient liquid assets to fund its 3.5 billion Euro refinancing costs for 2008, according to Reuters.com

The bank is likely to boost liquidity by tapping markets, after a sudden rise in the cost for insuring against default on Icelandic banks’ debt. The rise was sparked by investment company Gnupur’s restructuring of its finances.

The moves prompted questions about the state of the funding ability of financial services in Iceland. Bjorn Richard Johansen, a spokesman for Glitnir, confirmed that the bank is capable of covering the cost of refinancing.

“It should be emphasised clearly that Glitnir is not an equity investor in Gnupur and Gnupur is not one of Glitnir’s largest exposures,” he said. “Gnupur will not have a significant negative impact on Glitnir’s asset quality and there will not be material impairments related to the Gnupur case.”

“Nonetheless, in order to comply with the bank’s stringent, self-imposed liquidity coverage rules, the bank will top up the liquidity pool through issuance,” Johansen added.

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