28 October 2015

Central Bank concludes assessment of preliminary composition proposals

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The winding-up boards of the three largest failed commercial banks, Kaupthing hf., Glitnir hf., and LBI hf., have requested that the Central Bank of Iceland grant them exemptions from the Foreign Exchange Act in connection with the proposed composition agreements with their creditors and the conclusion of the winding-up proceedings of the failed banks’ estates; cf. Article 103(a) of the Act on Financial Undertakings, no. 161/2002. According to Article 7 of the Foreign Exchange Act, exemptions may only be granted from the restrictions provided for in the Act if it is ensured that monetary, exchange rate, and financial stability will not be jeopardised by the winding-up process. In order to ensure that the settlement of the failed commercial and savings banks estates does not cause instability, it is necessary to adopt countervailing measures in order to mitigate the potential adverse effects deriving from distributions of domestic assets to foreign creditors. The Central Bank has now completed its assessment of the preliminary composition proposals. The Bank has concluded that the proposals satisfy the requirements set forth in the Foreign Exchange Act, in that the fulfilment of the composition agreements together with the proposed countervailing measures will not jeopardise monetary, exchange rate, or financial stability. Consultations pursuant to Article 13c of the Foreign Exchange Act have taken place, and the Minister has presented the conclusions before the Parliamentary Economic Affairs and Trade Committee. Further discussion of the Central Bank’s assessment can be found in a report that has been published on the Bank’s website (in Icelandic; English translation of the introduction to the report is here).

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

No. 22/2015
28 October 2015