18 September 2015

Exemptions and foreign exchange transactions related to Icesave

Már Gudmundsson and Ingibjörg Gudbjartsdóttir

The Icelandic Depositors’ and Investors’ Guarantee Fund (DIGF) has reached an agreement with the Dutch central bank (De Nederlandsche Bank, DNB) and the British Financial Services Compensation Scheme (FSCS), which entails that a settlement has been reached by the authorities in the three countries in connection with the Icesave deposit accounts held at Landsbanki Íslands (LBI).

As has previously been reported, DNB recovered its capital outlays in full in August 2014. Full payment from LBI to FSCS is expected either concurrent with LBI’s composition agreement on the basis of stability conditions or following payment by LBI of the stability tax provided for in the authorities’ capital account liberalisation strategy. FSCS has already received payment of 84.2% of its claim from the LBI estate.

In order to facilitate the agreement and enable its execution, the Central Bank of Iceland has granted three exemptions from the capital controls. Two of the exemptions pertain to króna-denominated deposits in the amount of 9.5 b.kr., in connection with payments from LBI to DNB and FSCS. One exemption was granted to the DIGS in connection with the payment of 20 b.kr. to DNB and FSCS. In order to finalise settlement, the Central Bank engaged in foreign exchange transactions entailing the conversion of 22.1 b.kr. to foreign currency, which was then paid to DNB and FSCS. DIGF’s foreign currency balance with the Central Bank, in the amount of 7.4 b.kr., was part of the payment to the same parties. The Bank’s foreign exchange reserves were reduced by a total of 29.5 b.kr. as a result of the transactions.

Further information can be obtained from Már Guðmundsson, Governor of the Central Bank of Iceland, at tel: +354 569 9600.

The photograph above shows Mar Gudmundsson, Governor of the Central Bank of Iceland, and Ingibjörg Gudbjartsdottir, Director of the Banks Capital Control Surveillance Unit, signing the exception for the DIGF.

No. 19/2015
18 September 2015