“Consultation between Central Bank and Minister of Finance and Economic Affairs on exemptions for the three failed banks' estates

In the opinion of the Central Bank of Iceland, the draft composition agreements submitted by the estates of the three failed banks satisfy the requirements set forth in the Foreign Exchange Act, in that the implementation of the composition agreements together with the proposed mitigating measures will not jeopardise monetary, exchange rate, or financial stability. This is stated in the Central Bank's report on the settlement of the failed banks' estates on the basis of the stability conditions.

The Minister of Finance and Economic Affairs received a letter from the Central Bank of Iceland dated 26 October 2015, requesting a consultation with the Minister about exemptions from the Foreign Exchange Act, no. 87/1992, for the estates of the three banks, Landsbanki Íslands, Kaupthing, and Glitnir. The exemptions in question pertain to foreign exchange transactions and capital transfers in connection with the composition agreements and final winding-up of the estates.

Any exemption that pertains to a financial institution undergoing winding-up proceedings and authorises foreign exchange transactions and cross-border movement of capital in an amount exceeding ISK 25bn per year requires prior consultation with the Minister, as does any exemption pertaining to a legal entity whose balance sheet is larger than ISK 400bn. If such an exemption could have a substantial impact on Iceland's debt position and affects the ownership of the commercial banks, it may only be granted after consultation with the Minister of Finance and Economic Affairs and after the Minister has made the Parliamentary Economic Affairs and Trade Committee aware of its economic impact.

The Minister of Finance and Economic Affairs and the Governor of the Central Bank presented the Bank's conclusions and the economic impact of granting the exemptions to the Parliamentary Economic Affairs and Trade Committee this morning. The Cabinet and the Committee on Economic Affairs have also discussed the matter.

Following the Minister's presentation to the Economic Affairs and Trade Committee, representatives of the Task Force for Capital Account Liberalisation met with party caucuses and presented a detailed analysis of the impact on the balance of payments and the state of the economy.”

Further information can be found on following website:  http://eng.fjarmalaraduneyti.is/news/nr/20191

Please also find below announcement from CBI from today.

“Central Bank concludes assessment of preliminary composition proposals

The winding-up boards of the three largest failed commercial banks, Kaupthing hf., Glitnir hf., and LBI hf., have requested that the Central Bank of Iceland grant them exemptions from the Foreign Exchange Act in connection with the proposed composition agreements with their creditors and the conclusion of the winding-up proceedings of the failed banks’ estates; cf. Article 103(a) of the Act on Financial Undertakings, no. 161/2002. According to Article 7 of the Foreign Exchange Act, exemptions may only be granted from the restrictions provided for in the Act if it is ensured that monetary, exchange rate, and financial stability will not be jeopardised by the winding-up process. In order to ensure that the settlement of the failed commercial and savings banks estates does not cause instability, it is necessary to adopt countervailing measures in order to mitigate the potential adverse effects deriving from distributions of domestic assets to foreign creditors. The Central Bank has now completed its assessment of the preliminary composition proposals. The Bank has concluded that the proposals satisfy the requirements set forth in the Foreign Exchange Act, in that the fulfilment of the composition agreements together with the proposed countervailing measures will not jeopardise monetary, exchange rate, or financial stability. Consultations pursuant to Article 13c of the Foreign Exchange Act have taken place, and the Minister has presented the conclusions before the Parliamentary Economic Affairs and Trade Committee. Further discussion of the Central Bank’s assessment can be found in a report that has been published on the Bank’s website.”