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ICELAND'S Government has been warned that if it interferes with the country's individually transferable quota system it could tip many fishing companies into bankruptcy.
The system has not been without its critics and the new Government, elected in 2009, plans to phase out these quotas - known as ITQs - over the next 20 years.
The move has met with fierce resistance from the fish catching industry. Now the industry looks to have a powerful ally in the newly created Islandsbanki which has just published a detailed investigation into the country's seafood industry's future prospects.
The Islandsbanki report warns that a quota re-call may not only force some companies into receivership, but it could also hit banks that have heavy investments in fishing.
The report says: "Iceland's seafood industry is internationally competitive and successful, providing employment and important export income.
"There is a strong argument that limiting quotas will inevitably have a negative impact on the financial health of seafood companies that currently hold fishing quotas. It will be harder to achieve revenue growth and profitability if quotas are reduced.
"These changes will also have a negative impact on the banking sector which has partly funded the efficiency achieved in the (fishing) industry in recent decades. The seafood sector as a whole is significantly indebted and many companies have little room for manoeuvre to avoid a bankruptcy scenario.
"Further stress on the sector, as would be introduced by the proposed quota call-in, would result in a significantly increased impact on the loan portfolios of banks.
The report adds that loans to seafood companies "weight heavily" on the balance sheets of the three major banks. For Landsbanki they represent 25 per cent of the total loan portfolio and for Islandsbanki, the figure is around 12 per cent.
Currently, the fishing firm HB Grandi has the biggest quota with a TAC of around 11.1 per cent, follopwed by Samherji which has a TAC representing 7.4 per cent of the total fishing quota. The big fishing companies now hold 54 per cent of the TAC, compared to only 24 per cent in 1992.
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