The Icelandic Financial Supervisory Authority (FME) announced today that it has “decided to transfer a part of Glitnir’s operations to a new bank that has been formed and is fully owned by the Icelandic Government.” The new bank’s name will be New Glitnir Bank hf. The FME took a similar action last week in creating New Lansbanki Islands hf. New Glitnir Bank hf will take over all of Glitnir Bank hf’s deposits in Iceland and the bulk of the former bank’s “assets that relate to its Icelandic operations, such as loans and other claims.” All “domestic branches call centres, ATM’s and internet banking will be open for business as usual,” however, the bank’s “international operations are separated….” FME indicated that an independent valuation of the bank’s assets and liabilities, together with a final settlement, will be made within the next 60 days.

Separately, Iceland’s Central Bank released two decisions relating to its liquidity operations. Today, the Central Bank announced it “has decided to lower the policy interest rate by 3.5% effective immediately.” The new interest rate is 12% and the next interest rate decision will be on November 6, 2008. Yesterday, the Central Bank announced it has drawn on its “swap facility arrangements…with the Central Banks of Denmark and Norway” totaling €400 million.