Markets

In per­form­ing its role, the Cent­ral Bank of Ice­land may need to con­duct trans­ac­tions in spe­cified fin­an­cial mar­kets or su­per­vise them.

The ex­change rate of the Icelandic króna is de­term­ined in the in­ter­b­ank for­eign ex­change mar­ket, which is open from 9:15 hrs. to 16:00 hrs. on busi­ness days. In ad­di­tion to the Cent­ral Bank of Iceland, three fin­an­cial in­sti­tu­tions are au­thor­ised to par­ti­cip­ate in the in­ter­b­ank for­eign ex­change mar­ket and are des­ig­nated as mar­ket makers. The for­eign ex­change mar­ket is gov­erned by the Cent­ral Bank of Iceland’s Rules on the For­eign Ex­change Mar­ket, no. 600/2020 (Iceland­ic).

Mar­ket makers are ob­lig­ated to sub­mit bind­ing bid/ask quotes for euros against Icelandic króna. The quotes are pub­lished in the Bloomberg in­form­a­tion sys­tem. The Cent­ral Bank keeps re­cords on mar­ket turnover and pub­lishes the fig­ures in its Databank.

• The mar­ket is open from 09:15 hrs. to 16:00 hrs. on week­days.
• The fol­low­ing fin­an­cial in­sti­tu­tions act as mar­ket makers in the mar­ket:
  • Arion Bank hf.
  • Ís­lands­banki hf.
  • Lands­bankinn hf.
• The trad­ing cur­rency is the euro.
• Each quote is sub­mit­ted by mar­ket makers in units of one mil­lion euros.
• Mar­ket makers have com­mit­ted to up­date act­ive bid/ask quotes at least every 30 seconds.

• Is a par­ti­cipant in the mar­ket.
• Is not a mar­ket maker and there­fore is not re­quired to main­tain act­ive bid/ask quotes.
• May con­duct trans­ac­tions with mar­ket makers at any time dur­ing the mar­ket’s open­ing hours.
• Per­forms a su­per­vis­ory role.

The Cent­ral Bank lists the ex­change rate of the Icelandic króna against for­eign cur­ren­cies at ap­prox­im­ately 14:15 hrs. Cent­ral European Time. The list­ing provides a snap­shot of the mar­ket at the time the list­ing is pos­ted. The ref­er­ence ex­change rate is pub­lished on the Bank’s web­site each busi­ness day around 16:00 hrs. Icelandic time.

The in­ter­b­ank mar­ket for krónur is a mar­ket for un­se­cured short-term de­pos­its and lend­ing between credit in­sti­tu­tions. It op­er­ates on the basis of the Rules on In­ter­b­ank Mar­ket Trans­ac­tions with Icelandic Krónur, no. 1196/2019 (Iceland­ic), set by the Cent­ral Bank in co­oper­a­tion with mar­ket par­ti­cipants.

The Cent­ral Bank’s role is solely to or­gan­ise and op­er­ate the mar­ket. The Bank is not a par­ti­cipant in the mar­ket, as it is not au­thor­ised to grant un­se­cured loans. The mar­ket for krónur is also known as the REIBOR mar­ket, and in­terest rates in the mar­ket are called REIBOR rates.  REIBOR is an ab­bre­vi­ation of Reyk­javík in­ter­b­ank offered rate.

• The mar­ket is open from 09:15 hrs. to 16:00 hrs.
• The fol­low­ing fin­an­cial in­sti­tu­tions are par­ti­cipants in the mar­ket:
  • Arion Bank hf.
  • Ís­lands­banki hf.
  • Lands­bankinn hf.
  • Kvika banki hf.
• Mar­ket par­ti­cipants ne­go­ti­ate credit lines among them­selves.
• Mar­ket par­ti­cipants are ob­liged to is­sue bind­ing quotes for de­posit and lend­ing rates for the fol­low­ing ma­tur­it­ies: overnight (ON), one week (SW), one month (1M), three months (3M), and six months (6M).
• Mar­ket agents pledge to up­date their bind­ing in­terest rate quotes on in­ter­b­ank de­posit and lend­ing rates at in­ter­vals of no more than 10 minutes.
• The max­imum in­terest rate spread between de­pos­its and loans in mar­ket par­ti­cipants’ quotes for peri­ods of one month or longer is 100 basis points.  Quotes for shorter peri­ods are not sub­ject to defined max­imum in­terest rate spreads.

• Is not a par­ti­cipant in the mar­ket.
• Per­forms a su­per­vis­ory role and keeps re­cords on mar­ket trans­ac­tions.
• Lists daily in­terest rates in the in­ter­b­ank mar­ket for krónur for ma­tur­it­ies ran­ging from overnight to six months. The list­ing takes place at 11:15 hrs. and is pub­lished on the Cent­ral Bank web­site shortly there­after.

Fur­ther in­form­a­tion on turnover in the in­ter­b­ank mar­ket for krónur can be found in the Bank’s Databank.

The Cent­ral Bank cal­cu­lates and pub­lishes the ref­er­ence in­terest rate for the Icelandic krónur (Icelandic krónur overnight, or IKON) on its web­site. IKON is cal­cu­lated as the weighted av­er­age of in­terest rates on un­se­cured overnight de­pos­its held by ob­liged en­tit­ies. The amount, in­terest rate, and com­mit­ment period are ne­go­ti­ated in each in­stance. In­terest rates are pos­ted on the web­site be­fore 11:00 hrs. If a cor­rec­tion to pre­vi­ously cal­cu­lated in­terest rates is re­quired, the cor­rec­tion is pub­lished at 13:00 hr­s., but only if the cor­rec­tion causes in­terest rates to change by 2 basis points or more.

Data for the IKON in­terest rate ref­er­ence is sub­mit­ted by the com­mer­cial banks. The ref­er­ence rate for Icelandic krónur is gov­erned by the Rules on a Ref­er­ence In­terest Rate for Un­se­cured De­pos­its in Icelandic krónur, no. 370/2022 (Iceland­ic).

The cal­cu­la­tion and pub­lic­a­tion of the weighted ref­er­ence in­terest rate (IKON) are in com­pli­ance with the Prin­ciples for Fin­an­cial Bench­marks is­sued by the In­ter­na­tional Or­gan­iz­a­tion of Se­cur­it­ies Com­mis­sions (IO­SCO).

At the end of each quarter, the Cent­ral Bank pub­lishes a sum­mary of er­rors and de­vi­ations in re­port­ing, ir­re­spect­ive of whether or not they have given rise to changes in the pub­lished ref­er­ence in­terest rate.