Today, Iceland's government unveiled a ISK 270 billion ($2.1 billion) recapitalization plan for its three leading banks, Islandsbanki (formerly New Glitnir Bank hf), New Kaupthing (formerly Kaupthing bank hf) and New Landsbanki (formerly Landsbanki), following government rescue of the commercial banks this past October. The following is proposed to take place on August 19:

Islandsbanki - Government contribution of approximately ISK 60 billion ($477 million) in new equity, pending a subscription by Glitnir banki hf for a majority shareholding in Íslandsbanki. Following completion of the subscription, the government will reduce its capital commitment, however the government will continue to support the capital of Islandsbanki with ISK 25 billion ($198 million) in the form of "high quality" tier 1 and/or tier 2 capital instruments, and have the right to nominate a board member. In the event that the subscription is not completed, the government capitalization will remain in place and the government will continue to own Islandsbanki.

New Kaupthing Bank hf - Government contribution of approximately ISK 70 billion ($555 million) in new equity, pending a subscription by Kaupthing for a majority shareholding in New Kaupthing. Following completion of the subscription, the bank's Resolution Committee will contribute 65% of the capital required by New Kaupthing (in ordinary equity) and the Icelandic government will continue to contribute 35% of the total capital (in the form of ordinary equity and tier 2 capital). As a result, New Kaupthing will be owned 87% by Kaupthing and 13% by the Icelandic government, and the government will have the right to nominate one board member. In the event that the subscription is not completed, the government capitalization will remain in place and the government will continue to own New Kaupthing.

New Landsbanki - Government contribution of approximately ISK 140 billion ($1.1 billion). In addition, subject to due diligence by the bank's resolution committee, its advisers and creditor representatives, New Landsbanki will also issue a bond instrument, as compensation payable to the creditors of Landsbanki arising from the creation of New Landsbanki.

Steingrímur J. Sigfússon, the Minister of Finance of Iceland, stated that the government recapitalization agreements "[a]re a major step forward in the re-establishment of a strong banking system," in that they "allow for the recapitalization of the banks, potentially at a significantly lower cost to the taxpayer than originally envisaged, and we believe will result in a fair and equitable outcome for all stakeholders."