The Board of Governors of the Central Bank of Iceland has changed its Rules on Transactions with the Central Bank by Credit Institutions Subject to Minimum Reserve Requirements. Maturities of the Bank's regular market instruments, i.e. repurchase agreements and certificates of deposit, will be shortened from 14 days to 7 days, effective as of June 1, 2004.

For many years, the Central Bank has provided a liquidity facility for credit institutions in the form of weekly auctions of repos. Since the end of 2003 the Bank has also offered certificates of deposits to credit institutions at weekly auctions. Hitherto, the maturity of both instruments has been 14 days. Shortening the maturity to 7 days should facilitate credit institutions in their liquidity management. The European Central Bank made a similar change to its rules at the beginning of this year.

Credit institutions were consulted during preparations for the change.

For further information, contact the Governors of the Central Bank of Iceland and Tómas Örn Kristinsson, Director, Monetary Department, tel. +354 569-9600.

No. 13/2004

May 19, 2004