|
Act on State Guarantees
1997 no. 121, 22 December
Article 1
The Treasury may not undertake a guarantee obligations unless authorised by law. The Treasury may not undertake an unconditional guarantee unless explicitly provided for in the act of law authorising the guarantee. In all other respects, the issue of state guarantees takes place in accordance with the provisions of this Act.
The provisions of this Act shall also apply to Treasury relending, as applicable. However, funds may not be reloaned to entities other than B and C entities of the Treasury, unless explicitly provided for in the act of law authorising the guarantee.
Article 2
A bill presented by the Minister1) regarding the issue of state guarantees shall be accompanied by an appraisal by the State Guarantee Fund, cf. the Act on Government Debt Management, no. 43/1990, regarding the following factors:
1. An assessment of the creditworthiness of the borrower.
2. An assessment of the need for credit provisioning for guarantees granted.
3. An assessment of collateral offered for the guarantee. The Minister1) may set the hypothecation ratio by Regulation.
4. An assessment of the impact of state guarantees on competition in the relevant area.
1) Act no. 126/2011, § 253.
Article 3
The Treasury may not undertake a state guarantee unless the following conditions are met:
1. A state guarantee is authorised by an act of law authorising such a guarantee.
2. The need for credit cannot be met in the general credit market and the activity in question is considered favourable.
3. The guarantee recipient provides no less than 20% of the total financing of the project.
4. The guarantee recipient provides appropriate collateral as assessed by the State Guarantee Fund.
The Treasury guarantee shall not exceed 75% of the credit financing need for which the guarantee is provided.
The Treasury may not provide a guarantee to a party that is in arrears with payments to the Treasury or the State Guarantee Fund.
Article 4
Any party for which the Treasury undertakes a guarantee, the guarantee recipient, shall, upon receiving the guarantee, pay to the Treasury a risk premium amounting to 0.25-4.00% of the principal amount of the guarantee for each year of the credit period. The risk premium shall be paid at the beginning of the credit period and shall accrue to the Treasury. The risk premium shall be determined by the State Guarantee Fund, based upon the risk of the guarantee and whether the guarantee is a guarantee of collection or an unconditional guarantee.
The guarantee recipient shall pay a service charge in accordance with a tariff decided by the Minister1). The service charge shall be based upon the cost of establishing the guarantee and the assessment of its risk. The service charge shall accrue to the State Guarantee Fund.
The provider of the credit shall collect the risk premium and the service charge from the guarantee recipient.
1) Act no. 126/2011, § 253.
Article 5
The State Guarantee Fund shall keep a credit provisioning account for guarantees provided. The credit provisioning account shall at all times reflect a realistic estimate of loan losses on all guarantees granted by the Fund. As soon as decisions are made to provide guarantees, cf. Article 3, the Fund shall make a contribution to the credit provisioning account in the amount of the estimated loan loss.
The State Guarantee Fund’s risk and need for loan loss provisions for guarantees and relending shall be reviewed at least once a year, and the contribution to the credit provisioning account shall be revised on the basis of that review. Should such a review reveal that the reserves of the State Guarantee Fund are insufficient to meet its assessed commitments, the Minister1) shall notify Parliament and propose measures in order to bring the Fund’s finances back into balance.
The State Guarantee Fund shall monitor the operations of entities to which the Treasury has granted a guarantee or a loan. Guarantee recipients are obliged to provide the State Guarantee Fund with annual accounts and any reports and documents deemed necessary for the Fund to carry out such monitoring. Should the delivery of such requested information be delayed, the Minister is authorised to impose per diem fines until the documentation has been delivered. The amount of per diem fines shall be further determined in a tariff decided by the Minister1). Such per diem fines shall be decided by registered letter and may be collected through execution by law.
1) Act no. 126/2011, § 253.
Article 6
Banks, credit funds, credit institutions, corporations, and other entities that by law receive or have received a guarantee from the Treasury, whether through Treasury ownership or for other reasons, shall pay a guarantee fee on their state-guaranteed obligations. General accounts payable as well as pension and annuity obligations shall be exempt from such a premium, however.
[Parties specified in Paragraph 1 shall pay the Treasury a guarantee fee on their state-guaranteed obligations. The guarantee fee shall correspond in full to the concession enjoyed by the guarantee recipient on the basis of the state guarantee, in the form of credit terms more beneficial than those generally available in the market without such a guarantee. The guarantee fee according to this Paragraph shall be determined on the basis of an impartial assessment of credit terms with and without a state guarantee and shall be calculated based on the average principal amount of the obligations subject to such a fee in each fee period; cf. Article 8.]1)
1) Act no. 20/2011, § 1.
Article 7
Loans on which a risk premium according to Article 4 has been paid, obligations due to deposits held in deposit accounts at deposit money banks, and government-guaranteed export guarantees are exempt from payment of the guarantee fee according to Article 6, as are the Central Bank of Iceland, the Housing Financing Fund, and the Icelandic Student Loan Fund.
The guarantee fee for corporations that are part-owned by the Treasury shall be calculated in proportion to the Treasury’s holding. The Treasury’s holding in entities and corporations in which owners’ liability is limited to their holding – i.e., limited liability companies – is not subject to a guarantee fee.
1) Act no. 70/2000, § 1.
Article 8
The State Guarantee Fund shall calculate, impose, and collect the risk premium provided for in Article 4 and the guarantee fee provided for in Article 6. The guarantee recipient shall provide the State Guarantee Fund with all information that the Fund deems necessary in this respect.
Entities subject to a fee according to Article 6 shall submit reports in the form specified by the State Guarantee Fund, showing the gross principal amount of all obligations subject to fees on the 10th, 20th and last day of each month in each fee period. The calculation base of the guarantee fee is the simple average of the above amounts.
The guarantee fee according to Articles 6 and 7 shall be paid quarterly, at the end of the quarter in question, at the same time the report according to Paragraph 2 is submitted. The payment due date for each quarterly fee is the 15th day of the month following the end of each fee period. If the guarantee fee is not paid by the payment due date, penalty interest on the past-due amount shall be paid to the Treasury in accordance with Article 10 of Act no. 25/1987 with subsequent amendments.
Article 9
The Minister1) shall set forth further provisions concerning the implementation of this Act in a Regulation.2)
1) Act no. 126/2011, § 253.
2) Regulation no. 237/1998, cf. 557/2001.
10. Article
This Act enters into force on 1 January 1998. …
Temporary provisions
Following the entry into force of this Act, the financial position of the State Guarantee Fund shall be assessed in order to ascertain the Fund’s risk and determine whether the Treasury must provide the Fund with capital so that its assets meet its liabilities. This assessment shall refer to the date on which this Act enters into force.
|