In the November edition of the quarterly Monetary Bulletin the Central Bank of Iceland announced that it would take measures to prevent its currency purchases in the domestic interbank market from causing monetary expansion. In a press release on new Rules on Minimum Reserve Requirements of Financial Undertakings on December 2, the Bank also announced that it would take measures to counter the monetary expansion caused by those changes.

In light of the above, the Central Bank of Iceland has decided to hold an auction of 14-day certificates of deposit on Tuesday, December 30. The issue is aimed at reducing liquidity in circulation and thereby its expansionary effect. The total amount to be auctioned will be announced on Tuesday, December 30. The Central Bank will hold further auctions of certificates of deposit as the circumstances warrant. Credit institutions will also be invited to buy 90-day certificates of deposit. These will not be sold by auction.

The auction is open to credit institutions which are subject to minimum reserve requirements. These transactions are subject to the Central Bank of Iceland's Rules on Facilities with the Central Bank for Institutions Subject to Minimum Reserve Requirements, No. 385, from May 29, 2002.

For further information please contact Mr. Birgir Ísl. Gunnarsson, Chairman of the Board of Governors of the Central Bank of Iceland, or Mr. Tómas Örn Kristinsson, Director of the Monetary Department, tel. (+354) 569- 9600.

No. 31/2003

December 22, 2003