One of the Central Bank of Iceland’s roles is to follow price movements and turnover in domestic financial markets. The Bank intervenes in the interbank foreign exchange market, buying or selling krónur in exchange for euros when warranted. Each day, the Banks lists the official reference exchange rate of the Icelandic króna, the interest rate in the interbank market for krónur (REIBOR), and the reference interest rate for Icelandic krónur (IKON). When the Bank determines the interest rates on its transactions with financial institutions, it affects interest rates in the interbank market for krónur.
The Bank is a member of the Nasdaq Iceland exchange and keeps track of price movements and turnover in the securities market. The Bank is authorised to trade in the secondary market for Treasury bonds if it deems such trading consistent with its objectives.
The Central Bank of Iceland publishes a range of statistics on transactions it undertakes, including term deposits, minimum reserve requirements, collateralised lending, and bond purchases.
The main purposes of the Central Bank’s market activities are to support monetary policy transmission, thereby supporting price stability, and to preserve financial stability. This page contains information on the Bank’s policy instruments, the Rules on Central Bank of Iceland Facilities for Financial Undertakings, and other information.
In performing its role, the Central Bank of Iceland may need to conduct transactions in specified financial markets or supervise them. Information on the interbank markets for foreign currency, the interbank for Icelandic krónur (REIBOR), and the reference interest rate for Icelandic krónur (IKON) can be found here.
Certain rules apply to securities deemed eligible as collateral for Central Bank facilities. These are laid down in Rules no. 1200/2019, with subsequent amendments. Central Bank counterparties and participants in the Bank’s interbank payment system may provide such eligible securities as collateral for authorised limits in payment systems and as security for collateralised loans when these are available.
The Central Bank’s international reserves include deposits with foreign banks and holdings in foreign bonds. The roles of the reserves include mitigating the impact of fluctuations in payments between Iceland and foreign countries – for instance, by intervening in the foreign exchange market with an eye to the Bank’s monetary and exchange rate policies – and to reduce the probability that capital inflows and outflows will jeopardise financial stability. The international reserves also function as a special reserve fund.
The Central Bank is responsible for tasks regarding the management of Government debt, in accordance with an agreement made with the Ministry of Finance and Economic Affairs. Under this agreement, the Bank administers domestic and foreign borrowings for the Treasury and for Government institutions, the issuance and sale of Treasury bonds in the domestic market, and other debt management for the Treasury, such as relending of borrowed funds, Government guarantees, and the State Guarantee Fund.