Measures to Improve Conditions for Business and Industry

A working party responsible to the Cabinet, comprised of the Ministers for Foreign Affairs, Finance, Education, Industry and Energy, together with parliamentarians Ólöf Nordal, Illugi Gunnarsson and Steinunn Valdís Óskarsdóttir and General Secretaries of the coalition parties, Skúli Helgason and Andri Óttarsson, has drafted plans for urgent measures to respond to difficulties currently facing the nation. The first measures to assist households have already been approved by the Cabinet. The proposals concerned here are presented with the aim of addressing difficulties encountered by businesses.

1. The government and regulatory authorities are instructing the Boards of the new banks to formulate clear guidelines regarding the assistance to be made available to businesses in the country to protect jobs and help viable businesses to continue operating. The guidelines should cover such options as extension of loan repayment schedules, debt write-offs, conversion of debt into equity, and mergers. Rules must be adopted ensuring transparency and objectivity in bank decisions on assistance and consistency in treatment of enterprises. Banks’ internal checks and controls should be strengthened.
   
2. Separate asset management companies should be set up by the banks to oversee their holdings in companies where the conversion of debt into equity has been decided upon.
   
3. Each bank should appoint an independent customers’ ombudsman. The ombudsman’s role will be to guard against improper discrimination between customers by the bank, to ensure the transparency and documentation of business reorganisation processes and that the bank has regard for competition issues. The Board of Directors of each bank shall appoint its ombudsman and ensure that he/she can perform these functions.
   
4. In restructuring enterprises, those options must be chosen which strengthen competition or at least restrict it as little as possible. Similarly, ways should be sought to reduce oligarchy or market-dominating positions wherever possible. Boards of Directors are to have regard for the competition principles presented in the Opinion of the Competition Authority No. 3/2008.
   
5. The Cabinet will promote the establishment of a “Reconstruction Fund”, an investment fund for business and industry, with the participation of pension funds, banks and other investors, including foreign investors. A bill will be submitted to the Althingi broadening their investment options to enable pension funds to participate in such domestic investment.
   
6. The Cabinet strongly advocates that in its investment strategy the Reconstruction Fund foster good management practices and corporate social responsibility, including an emphasis on maintaining employment and creating jobs. In addition, major consideration should be directed at the wage policy, gender equality policy, environmental strategy, R&D activity, and public service contribution of any business supported etc.
   
7. The Cabinet declares its willingness to expedite settlements with foreign creditors by enabling them to acquire equity in the new banks, which would facilitate refinancing of the banks, create a more diverse banking environment and ensure the provision of credit and financial services to domestic customers by foreign banks.
   
8. Companies that comply in other respects with the conditions set by law will be able to prepare their annual accounts in foreign currency, as provided for by legislation which will have retroactive effect as of 1 January 2008.
   
9. Legislation will be introduced to allow pension funds to hold long-term real property assets against which they have extended credit. Individuals and legal entities whose real estate has been repossessed can thus have the option of remaining in their premises by leasing them from the pension funds.
   
10. Special emphasis will be placed on labour-intensive central government projects. Through co-operation with local government the timing of investment projects will be determined so as to safeguard employment and ensure cost-efficiency.
    
11. The public authorities will review the company legislation (on limited liability companies), tax laws and other administrative provisions in order to aid business managers facing temporary difficulties due to the present economic circumstances.
    
12. The Cabinet will, in co-operation with the social partners, review recent rules on foreign exchange restrictions that are intended to stabilise the ISK exchange rate, in order to limit any negative side effects wherever possible.

Reykjavík, 2 December 2008