The Settlement Agreement provides that the Bank admits, that in the preparation and execution of the Offer, it did not comply with the certain applicable legal requirements and internal rules of the Bank on the provision of investment services, particularly in relation with recording of telephone communications, disclosures made to purchasers of shares in the Offer, investor classification requirements, and measures to prevent conflicts of interest e.g., segregation of duties and employees transactions. The Settlement Agreement states that the Bank’s implementation of governance and internal controls as well as a risk-based approach to supervision of recordings of telephone communications were insufficient. Furthermore, the Settlement Agreement states that the Bank should have carried out a separate risk assessment regarding its role in the Offer. The Settlement Agreement also states that in executing the Offer the Bank did not, in all respects, satisfy its obligation to act honestly, fairly and professionally and to promote market integrity. The FSA considers the Bank’s execution of the Offer includes serious violations of the relevant laws.

In agreeing to the Settlement Agreement, the Bank has agreed to pay a fine in the amount of ISK 1,160 million and admitted to having violated certain provisions of the Act on Markets in Financial Instruments no. 115/2021 and the Act on Financial Undertakings no. 161/2002 in connection with the Offer. The Settlement Agreement obliges the Bank to carry out certain remedial measures within a specified period. The Bank's internal auditor is required to prepare a report on the Bank’s compliance with the remedial measures for confirmation to the Board of Directors of the Bank and submission to the FSA before 1 November 2023.

The Bank will record a charge of ISK 860 million in the second quarter in connection with this matter and had previously made a provision of ISK 300 million in its 2022 annual accounts. It is estimated that having taken into account the charge relating to the fine, the Bank’s profits for the second quarter of 2023 will be in the range of ISK 5.8-6.5bn, equivalent to an annualised return on equity in the range of 10.7-12.1% for the period.
 
Finnur Árnason, Chairman of the Board of Íslandsbanki
“The board of directors of the Bank considers it important to have been able to conclude the matter with a settlement agreement. The findings of the FSA correspond, in material respects, to those of the Bank’s Group Internal Audit’s report which was requested by the board of directors and submitted to the FSA in May 2022. The board places emphasis on completing the appropriate remedial measures within time limits provided. The Bank has already made changes to its rules and procedures e.g., regarding employee transactions and call recordings. The Bank derives important lessons from this project.”

This announcement is released by Íslandsbanki hf. and contains information that qualified or may have qualified as inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 (MAR), encompassing information relating to the FSA proceedings  described above. For the purposes of MAR and Article 2 of Commission Implementing Regulation (EU) 2016/1055, this announcement is made by Jón Guðni Ómarsson, Chief Financial Officer at Íslandsbanki hf.

For further information please contact:
Investor Relations - Bjarney Anna Bjarnadóttir, ir@islandsbanki.is
Public Relations - Edda Hermannsdóttir, pr@islandsbanki.is

Disclaimer
This press release may contain “forward-looking statements,” involving uncertainty and risks that could cause actual results to differ materially from results expressed or implied by the statements. Íslandsbanki hf. undertakes no obligation and does not intend to update these forward-looking statements to reflect events or circumstances occurring after this press release. It is the investor's responsibility to not place undue reliance on these forward-looking statements which only reflect the date of this press release. Forward-looking statements should not be considered as guarantees or predictions of future events and all forward-looking statements are qualified in their entirety by this cautionary statement.