Interbank payment system

The Cent­ral Bank of Iceland’s in­ter­b­ank pay­ment sys­tem is an in­de­pend­ent sys­tem owned by the Cent­ral Bank. The sys­tem is sub­ject to the Rules on the Central Bank of Iceland Interbank Payment System, no. 1030/2020, dated 22 Oc­to­ber 2020. The in­ter­b­ank sys­tem offers two services, the real time gross set­tle­ment service (MBK-RT­GS) and the instant payment service (MBK-Inst). MBK-RTGS handles large-­value pay­ments of 10 m.kr. or more that are trans­ferred between cus­tom­ers of two fin­an­cial in­sti­tu­tions. In the MBK-RTGS, real-­time gross set­tle­ment is ex­ecuted in Icelandic krónur. Trans­ac­tions settled in MBK-RTGS com­pon­ent in­clude trans­ac­tions between the Cent­ral Bank and de­posit in­sti­tu­tions, on the one hand, and trans­ac­tions in the in­ter­b­ank for­eign ex­change mar­ket, on the oth­er. The com­pon­ent also handles set­tle­ment for other im­port­ant set­tle­ment sys­tems, such as the se­cur­it­ies set­tle­ment and from MBK-Inst.

Pay­ments between fin­an­cial in­sti­tu­tions in amounts of less than 10 m.kr. are routed through MBK-Inst. Pay­ments from MBK-Inst are settled in MBK-RTGS twice a day.

Each com­pon­ent of the in­ter­b­ank sys­tem has its own op­er­at­ing hours. MBK-RTGS com­pon­ent is open for con­ven­tional pay­ment in­ter­me­di­ation between sys­tem par­ti­cipants’ cus­tom­ers between 09:00 hrs. and 16:30 hrs. on busi­ness days. If 31 Decem­ber falls on a busi­ness day, the RTGS com­pon­ent of the sys­tem is open from 09:00-12:00 hrs. on that day.

• MBK-Inst of the sys­tem is open 24 hours a day, seven days a week. Set­tle­ment from MBK-Inst takes place twice a day, at 08:30 hrs. and 16:00 hrs.
• Set­tle­ment of se­cur­it­ies trans­ac­tions is ex­ecuted at the Nas­daq CSD se­cur­it­ies de­pos­it­ory six times a day, at 09:15 hr­s., 10:30 hr­s., 11:45 hr­s., 13:00 hr­s., 14:00 hr­s., and 15:20 hrs.
• Set­tle­ment of se­cur­it­ies trans­ac­tions is ex­ecuted at Ver­ðbré­fam­iðstöð Ís­lands (VBM) three times a day, at 10:00 hr­s., 13:30 hrs. and 15:30 hrs.

Par­ti­cipants in the Cent­ral Bank of Iceland’s in­ter­b­ank pay­ment sys­tem may in­clude do­mestic and for­eign fin­an­cial in­sti­tu­tions ap­proved by the Cent­ral Bank. Cur­rent par­ti­cipants are:

• Arion Bank hf.
• Clearstream Bank­ing S.A. in Lux­em­bourg
• Euroclear Bank SA/NV in Bel­gium
• Ís­lands­banki hf.
• indó spar­is­jóður hf.
• Kvika banki hf.
• Lands­bankinn hf.
• Spar­is­jóður Aus­tur­lands (East Ice­land Sav­ings Bank) hf.
• Spar­is­jóður Höfðhverfinga hf.
• Spar­is­jóður Stran­dam­anna  hf.
• Spar­is­jóður Suður-Þingeyinga ses.
• Cent­ral Bank of Iceland.

Chapter II of the Rules on the Cent­ral Bank of Ice­land In­ter­b­ank Pay­ment Sys­tem dis­cusses par­ti­cipants and re­quire­ments for sys­tem par­ti­cip­a­tion.

• The Cent­ral Bank of Ice­land makes a de­cision on the mem­ber­ship of new sys­tem par­ti­cipants and ex­clu­sion from sys­tem mem­ber­ship.
• Par­ti­cipants may be in­sti­tu­tions as defined in Art­icle 2, Item 2 of Act no. 90/1999 (Icelandic) and other parties ap­proved by the Cent­ral Bank, provided that they sat­isfy the re­quire­ments for par­ti­cip­a­tion in Art­icle 4 of the Rules on the In­ter­b­ank Sys­tem.
• Fin­an­cial in­sti­tu­tions es­tab­lished and li­censed abroad that have op­er­a­tions in Ice­land may only be gran­ted mem­ber­ship of the in­ter­b­ank sys­tem if they are sub­ject to su­per­vi­sion in their home state that is com­par­able to that provided for in the Act on Of­fi­cial Su­per­vi­sion of Fin­an­cial Activ­it­ies, no. 87/1998 (Icelandic).
• In­ter­me­di­ar­ies, set­tle­ment agents, and clear­ing in­sti­tu­tions as provided for in Art­icle 2, Items 3, 4, and 8 of Act no. 90/1999 may par­ti­cip­ate in the in­ter­b­ank sys­tem upon re­ceiv­ing ap­proval from the Cent­ral Bank of Iceland. Their rights and re­spons­ib­il­it­ies, as well as those of other in­dir­ect par­ti­cipants, shall be in ac­cord­ance with Act no. 90/1999 and Art­icles 3 and 4 of the Rules, as ap­plic­able.
• The Cent­ral Bank of Ice­land is a dir­ect par­ti­cipant in the in­ter­b­ank sys­tem.

Par­ti­cipants enter into a writ­ten con­tract with the Cent­ral Bank con­cern­ing their over­draft limit in the in­ter­b­ank sys­tem. The limit ap­plies to the par­ti­cipant’s com­bined bal­ance in MBK-RTGS and MBK-Inst. To cover the over­draft, the par­ti­cipant shall provide col­lat­eral that the Cent­ral Bank eval­u­ates and ap­proves. The amount of the col­lat­er­al, ad­jus­ted for de­duc­tions, may not fall be­low the amount of the over­draft limit of the par­ti­cipant con­cerned.

In as­sess­ing the value of se­cur­it­ies and other col­lat­eral provided in con­nec­tion with a col­lat­eral agree­ment and deemed sat­is­fact­ory by the Cent­ral Bank, a hair­cut shall be cal­cu­lated on the ref­er­ence price. The hair­cut on se­cur­it­ies and other eli­gible col­lat­eral is pub­lished on the Cent­ral Bank web­site. The Cent­ral Bank may cal­cu­late a hair­cut in ex­cess of that pos­ted on its web­site if the Bank con­siders this ne­ces­sary; for in­stance, due to mar­ket con­di­tions.

A list of in­ter­b­ank sys­tem col­lat­eral deemed eli­gible by the Cent­ral Bank is pos­ted on the Cent­ral Bank web­site.

Spe­cial lim­it­a­tions ap­ply to covered bonds. The lim­it­a­tions are as fol­lows:

• Covered bonds shall be is­sued in ac­cord­ance with Act no. 11/2008 (Icelandic).
• The mar­ket value of the series shall be at least 5 b.kr., and it must be con­firmed that this amount has been sold.
• The col­lat­eral port­fo­lio un­der­ly­ing the covered bonds must con­sist solely of bonds se­cured by res­id­en­tial prop­erty in Iceland.
• Fin­an­cial un­der­tak­ings may provide as col­lat­eral up to 3 b.kr. mar­ket value from their own covered bond is­sues.
• Covered bonds may se­cure a max­imum of 50% of each par­ti­cipant’s over­draft limit in the in­ter­b­ank pay­ment sys­tem.
• The bonds must be sub­ject to act­ive mar­ket mak­ing.

The Cent­ral Bank of Ice­land de­term­ines the tar­iff for in­ter­b­ank sys­tem op­er­a­tions in ac­cord­ance with Art­icle 43 of the Act on the Cent­ral Bank of Iceland, no. 92/2019 (Icelandic). The tar­iff is re­vised an­nu­ally and pub­lished on the Central Bank website. Fur­ther pro­vi­sions on fees shall be in­cluded in par­ti­cipants’ con­trac­tual agree­ments with the Cent­ral Bank of Iceland.

In­form­a­tion on In­ter­b­ank Pay­ment Sys­tem tar­iff Par­ti­cipants pay an an­nual fee that is spread over twelve (12) months and dir­ect-deb­ited from par­ti­cipants’ ac­counts on the second busi­ness day of each month.