RTTNews - The Iceland government on Monday announced a plan to capitalize the three new banks - Islandsbanki, New Kaupthing and New Landsbanki - created following the collapse of the main Icelandic commercial banks in October 2008.

The government said in a statement that the total capitalization will amount to approximately ISK 270 billion, but it would be reduced to ISK 200 billion under a conditional agreement, which says the old banks to have a major subscription of equity stakes in two of the new banks - Islandsbanki and New Kaupthing.

These levels of capital commitment are significantly lower than the estimated commitment of ISK 385 billion at the time of the original transfer in October 2008, leading to lower fiscal cost and impact on gross state debt than that previously envisaged, the government said.

Finance Minister Steingrímur Sigfússon said, Our agreements announced today are a major step forward in the re-establishment of a strong banking system.

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