14 June 2016

Explanation of amendments to Terms of Auction

Central Bank of Iceland

The Central Bank of Iceland has amended the Terms of Auction for the Bank’s purchase of Icelandic krónur in exchange for foreign currency. The auction that was announced on 25 May 2016 will be held on 16 June 2016. An amendment was made to the wording in Article 4 of the Terms of Auction so as to emphasise that the combination of non-competitive bids and valid competitive bids will determine the lowest possible purchase price for krónur in exchange for euros in the auction. Furthermore, Article 5 of the Terms of Auction was amended to accord with the amendments to Article 4; furthermore, Article 5 no longer requires that bids below 190 kr. per euro be rejected in full.

This amendment enables the Bank to obtain the best possible indication of offshore króna holders’ ideas about the price of their krónur. The table in Article 4, which covers about half of the volume of known offshore króna assets, sets forth a guaranteed auction price, provided that the volume satisfies the specified conditions. The amendments to the Terms of Auction removes ambiguity about whether, in spite of the auction results, the Bank can decide on a more favourable auction price than is specified in the table. As before, all owners of offshore krónur will receive the same price for their krónur, as the auction has a single-price format, which applies irrespective of whether the price accepted is lower than is specified in the table. It is appropriate to reiterate that as before, the Central Bank reserves the right to accept some or all of the offers submitted, or to reject all of them.

See here: Notes on the Amended Terms of Auction for the purchase of Icelandic krónur by the Central Bank of Iceland in exchange for foreign currency posted 13 June 2016

Further information on the foreign currency auction can be found here.