The government of Iceland announced on Monday that it has determined the basis for the capitalization of three new banks created after the financial crisis, reports from Reykjavik said.

"A 1.5 billion euro (about US$2.1 billion) recapitalization was forced to rescue three major banks of Islandsbanki, New Kaupthing and New Landsbanki following the collapse of the main Icelandic commercial banks in October 2008," the Finance Ministry said in a statement.

Agreements have also been reached with the resolution committees of the old banks on how compensation for the transfer of net assets into the new banks will be achieved, the statement said.

In respect of two of the new banks, Islandsbanki and New Kaupthing, the arrangement includes a conditional agreement for the old banks to subscribe for majority equity interests in the new banks, it added.

"Our agreements announced today are a major step forward in the re-establishment of a strong banking system," Finance Minister Steingrimur J. Sigfusson said in the statement.

He said the newly announced moves have not only provided a firm basis for further progress, but also benefited customers of the new banks and the Icelandic economy in general.

"I look forward to the successful conclusion of this process," he said.

(Xinhua News Agency July 21, 2009)