Norway Lends 500 Million Euros to Iceland

Norway’s Minister of Finance and the Norwegian Central Bank announced that the country will lend the Icelandic Central Bank 500 million euro and that it will expand the current covenant of forex swaps in 2009, reports Reuters.

The loan will be returned within 5 years. In May, the two central banks agreed on the sum allocation of 500 million to central bank of Iceland for swap transactions, from those, Icelandic bank will retract only 200 million.

Iceland has a great need of cash since the fall of its banking system, was affected by the financial crisis. After he obtained a loan of nearly 2 billion dollars, about 1.6 billion euro, from IMF, Iceland hopes to receive another 4 billion dollars from its northern neighbors, the European Central Bank (ECB) and the central bank of U.S. Federal Reserve (Fed).

The proposal comes after the Norwegian government formal request, made by the central bank of Iceland, Sedlabanki, equivalent institution from Norway.