Pension funds

Trade credit is a claim gen­er­ated when a pro­vider of goods or ser­vices grants a cus­tomer an ex­ten­sion of time to pay or re­ceive ad­vance pay­ment for goods or ser­vices. The trade-credit and ad­vances de­rive from the fact that pay­ment for the goods or ser­vices is not re­mit­ted at the time the goods are de­livered or the ser­vice provided.

Bonds are trans­fer­able fin­an­cial in­stru­ments that are valid proof of a debt and are offered for sale in an of­fer­ing in which all the main fea­tures of the bonds in each class are the same, in­clud­ing the name of the is­suer (debt­or), first in­terest date and pro­vi­sions on re­pay­ment, in­terest rate and call­ing as ap­pro­pri­ate. Mar­ket­able bonds are made to be bought and sold in the mar­ket, either on a stock ex­change or dir­ectly over the counter between parties.

Types of bonds in Cent­ral Bank stat­ist­ics:

In­dexed mar­ket bonds
The prin­cipal changes in ac­cord­ance with a cer­tain in­dex and is usu­ally is­sued in Icelandic krónur. This in­cludes, for ex­ample, hous­ing bonds, hous­ing fund bonds, HFF bonds, in­dexed Treas­ury bonds (RIKS) and in­dexed bonds is­sued by com­mer­cial en­ter­prises, fin­an­cial un­der­tak­ings and mu­ni­cip­al­it­ies.

Other mar­ket­able bonds and bills
The prin­cipal is not linked to any in­dex - is non-in­dexed. These bonds can be is­sued in Icelandic krónur or for­eign cur­ren­cies. These in­clude, for ex­ample, non-in­dexed Treas­ury bonds (RIKB), Treas­ury bills (RIKV) and bonds is­sued by com­mer­cial en­ter­prises, fin­an­cial un­der­tak­ings, mu­ni­cip­al­it­ies and for­eign en­tit­ies.

Equity
A share­hold­er’s claim on a given share­hold­ing in a com­pany. A pub­lic lim­ited com­pany is­sues spe­cial doc­u­ments (shares) to prove that the owner of the equit­ies (share­hold­er) holds a share in the com­pany’s as­sets and an­nual profits. Shares are usu­ally com­mer­cial pa­pers, i.e. they can be bought and sold as spe­cified in the com­pany’s art­icles of as­so­ci­ation, either on a stock ex­change or dir­ectly over the counter between parties. Upon dis­sol­u­tion of a com­pany, shares be­come pay­able after all other debts of the com­pany in ques­tion have been paid.

When an in­vestor owns less than 10% of a com­pany, it is con­sidered a se­cur­it­ies hold­ing. If the share is lar­ger, it is con­sidered a dir­ect in­vest­ment and is clas­si­fied as a share in an as­so­ci­ated un­der­tak­ing or af­fil­i­ated un­der­tak­ing.

As­so­ci­ated un­der­tak­ing
An un­der­tak­ing where dir­ect and in­dir­ect own­er­ship amounts to between 10-50% of the equity or vot­ing rights.

Af­fil­i­ated un­der­tak­ing
A sub­si­di­ary of an un­der­tak­ing, its par­ent com­pany, or a sis­ter com­pany (i.e. a com­pany un­der the same par­ent com­pany). The con­di­tion is that the own­er­ship stake amounts to > 50%.

In­vest­ment fund shares
Fin­an­cial in­stru­ments con­firm­ing the claim of all own­ers of units in an un­der­tak­ing for col­lect­ive in­vest­ment in trans­fer­able se­cur­it­ies (U­CITS) or in its sep­ar­ate di­vi­sions, to that fun­d’s se­cur­it­ies hold­ing. All hold­ers of units have an equal claim on the in­come and as­sets of the un­der­tak­ing or of its re­spect­ive di­vi­sions, in pro­por­tion to their hold­ings in the total num­ber of is­sued unit shares.

Equity li­ab­ilites
Equity is the en­tire share­hold­ings of the own­ers of an un­der­tak­ing. Equity cor­res­ponds to the dif­fer­ence between as­sets and li­ab­il­it­ies.

Fin­an­cial de­riv­at­ives are fin­an­cial in­stru­ments whose value is de­pend­ent on the price of an­other, the un­der­ly­ing as­set. Fin­an­cial de­riv­at­ives are dis­tin­guish­able from other as­set classes be­cause they gen­er­ally in­volve the trans­fer of risk (such as in­terest rate risk, ex­change rate risk, equity, and com­mod­ity price risks, etc.) rather than the pro­vi­sion of cap­ital or other fin­an­cial as­sets. The value of fin­an­cial de­riv­at­ives is sep­ar­ate from the value of the un­der­ly­ing as­sets. Fin­an­cial de­riv­at­ives fall into the fol­low­ing sub­cat­egor­ies: op­tions, for­ward con­tracts, and em­ployee stock op­tions.

Op­tions
Op­tions give the pur­chaser the right to buy or sell the un­der­ly­ing as­set at a spe­cified price (the strike price) by a spe­cified date.

For­ward con­tracts
For­ward con­tracts are un­con­di­tional con­tracts wherein two coun­ter­parties agree to ex­change a spe­cified quant­ity of an un­der­ly­ing as­set at an agreed strike price on a spe­cified date.

Em­ployee Stock Op­tions
Also in­cluded in fin­an­cial de­riv­at­ives are em­ployee stock op­tions, which give em­ploy­ees of a com­pany the right to buy its stock as part of their re­mu­ner­a­tion pack­age. If an em­ployee stock op­tion can be traded on fin­an­cial mar­kets without re­stric­tion, it is clas­si­fied as a fin­an­cial de­riv­at­ive.

Cur­rency and de­pos­its con­sist of bank­notes and coins in cir­cu­la­tion, plus de­pos­its. De­pos­its
Cur­rency and de­pos­its con­sist of bank­notes and coins in cir­cu­la­tion, plus de­pos­its. De­pos­its are stand­ard­ised, non-ne­go­ti­able agree­ments offered by de­pos­it-­tak­ing cor­por­a­tions. The term of de­pos­its can vary, de­pend­ing on the agree­ment. De­pos­its gen­er­ally im­ply that the debtor is ob­liged to re­turn the prin­cipal to the in­vestor. They can be held in cent­ral banks or in de­pos­it-­tak­ing cor­por­a­tions.

Notes and coin
Bank­notes and coins that have a fixed nom­inal value and are is­sued by cent­ral banks or gov­ern­ments.  Notes and coin are cash in hand held by fin­an­cial un­der­tak­ings.

Bank­notes and coins in cir­cu­la­tion
Bank­notes and coins that the Cent­ral Bank has is­sued to credit in­sti­tu­tions, net of the bank­notes and coins that are held by the de­pos­it-­tak­ing cor­por­a­tions them­selves.

De­pos­its are non-trans­fer­able agree­ments between a de­pos­it-­tak­ing cor­por­a­tion and an­other party where funds are de­pos­ited in an ac­count in a de­pos­it-­tak­ing cor­por­a­tion for a long or short term re­turn. De­pos­its can be re­tail de­pos­its or whole­sale de­pos­its. Whole­sale de­pos­its are de­pos­its for which the terms and dur­a­tion of the rel­ev­ant de­pos­its have been spe­cific­ally agreed upon either dir­ectly with the rel­ev­ant de­pos­it-­tak­ing cor­por­a­tion or through a money mar­ket broker. Such de­pos­its are gen­er­ally not avail­able to reg­u­lar savers and their terms are not stand­ard­ised. Re­tail de­pos­its are de­pos­its in stand­ard ac­counts with ad­vert­ised terms and dur­a­tion.

De­mand de­pos­its:
All de­pos­its that can be con­ver­ted into cash without any re­stric­tions and used for pay­ment by debit cards or other pay­ment devices. Elec­tronic money that can be used as a dir­ect pay­ment to a third party meets the cri­teria to be clas­si­fied as a de­mand de­pos­it. Cur­rent ac­counts at the Cent­ral Bank are con­sidered de­mand de­pos­its.

Easy ac­cess de­pos­its:
Sav­ings ac­counts without re­stric­tions or de­posit ac­counts where each de­posit is re­stric­ted for a short period of time but the ac­count is oth­er­wise un­res­tric­ted.

In­dexed de­pos­its
De­pos­its that are re­stric­ted ac­cord­ing to Rules No. 218/2023 on Price In­dex­a­tion of Sav­ings and Loans.

Hol­i­day pay ac­counts
In­dexed de­posit ac­counts for em­ploy­ees’ hol­i­day pay­ments. Va­ca­tion pay­ments are made no later than the be­gin­ning of the va­ca­tion period of each year.

Sup­ple­ment­ary pen­sion de­pos­its
In­dexed and non-in­dexed de­posit ac­counts with ad­di­tional pen­sion sav­ings for em­ploy­ees. Pay­ment of pen­sion sav­ings and in­terest may not com­mence un­til the be­ne­fi­ciary has reached 60 years of age.

Other term de­pos­its
De­pos­its that are either re­quired to be held for an agreed fixed term, or can only be with­drawn by giv­ing ad­vance no­tice, i.e. do not have an agreed fixed term and can be con­ver­ted into cash after no­ti­fic­a­tion.  This in­cludes money-­mar­ket de­pos­its where in­terest rates and de­posit terms are spe­cific­ally agreed upon and the en­tire de­posit amount is tied up for the en­tire de­posit term.

Cer­ti­fic­ate of de­posit
An elec­tronic cer­ti­fic­ate for a de­posit in the Cent­ral Bank of Iceland, is­sued to a fin­an­cial un­der­tak­ing. Cer­ti­fic­ates of de­posit may be trans­fer­able.

Loans are non-trans­fer­able fin­an­cial in­stru­ments where a lender lends money dir­ectly to a bor­rower and have fixed, pre­dict­able pay­ments. Loans are gen­er­ally non-trans­fer­able, but if loans be­come trans­fer­able from one owner to an­other, their clas­si­fic­a­tion is changed to mar­ket­able bonds. For loans to be re­clas­si­fied, mar­ket trans­ac­tions must take place.

Re­deemed li­ab­il­it­ies
Loans which a fin­an­cial un­der­tak­ing has re­claimed but has not yet de­man­ded pay­ment for from guar­ant­ors.

Over­draft fa­cil­it­ies
Over­draft on a cur­rent ac­count. This also in­cludes debts due to pay­ment cards.

Bills of ex­change  
Writ­ten or­ders in a spe­cific format from an is­suer to a drawee to pay a cer­tain amount to a third party. Bills of ex­change can be bills of ex­change against an­other per­son or an own promis­sory note. A bill can also be an own promis­sory note whereby the is­suer un­der­takes to pay the stated amount on the date of ma­tur­ity. Most bills are non-in­dexed and gen­er­ally used for short-term fin­an­cing (4 months or less). Bills are gen­er­ally not is­sued for a longer term than one year.

In­dexed loans
A bond whose prin­cipal changes in ac­cord­ance with a cer­tain in­dex that en­sures that the bond main­tains its value. Bonds are writ­ten un­der­tak­ings by an is­suer (bor­row­er) to pay an­other party (the lender) a spe­cified amount in­clud­ing in­terest for a cer­tain period of time and to re­pay the loan on its date of ma­tur­ity. In­dexed bonds ac­cord­ing to the Cent­ral Bank of Iceland's rules No. 218/2023 on Price In­dex­a­tion of Sav­ings and Loans are based on the Con­sumer Price In­dex.

Other loans and re­ceiv­ables
Non-in­dexed bonds and re­ceiv­ables other than ac­counts re­ceiv­able. A re­ceiv­able is a leg­ally pro­tec­ted au­thor­isa­tion by one party to de­mand pay­ment from an­other party, i.e. the debt­or. This also in­cludes non-in­dexed in­ter­b­ank loans and claims against sub­si­di­ar­ies.

Pur­chase lease agree­ments
Syn­onym for fin­an­cing lease and hire-pur­chase agree­ments. They dif­fer from dir­ect loans in that they in­volve the lender buy­ing the li­quid­ity or as­set re­ques­ted by the cus­tomer and sub­sequently rent­ing it to the cus­tomer for a pre-ne­go­ti­ated term. Own­er­ship is there­fore the main col­lat­eral for the lender.

Col­lat­eral loan
The Cent­ral Bank can grant loans for both short and long terms, but all loans gran­ted by the Cent­ral Bank are se­cured loans, as the bank may only lend against col­lat­eral that the bank deems eli­gible. The rates on 7-day col­lat­er­al­ised loans form the centre of the in­terest rate range.

Se­cur­it­ies lend­ing
Se­cur­it­ies lend­ing with cash col­lat­eral

Pro­vi­sions
Pro­vi­sions are pre­cau­tion­ary entries made by lenders in con­nec­tion with re­cov­er­ies on loans. Pro­vi­sions are made based on the as­sess­ment of ex­pec­ted loan losses due to spe­cific cus­tom­ers.

Un­used credit lines are not clas­si­fied as loans as they are not debts but ob­lig­a­tions.

Overnight loans
Loans that coun­ter­parties in trans­ac­tions with the Cent­ral Bank can ap­ply for on their own ini­ti­at­ive, if they can put up col­lat­eral that the Cent­ral Bank deems eli­gible. Overnight loans are loans un­til the next busi­ness day.

Col­lat­eral loans
Loans against col­lat­eral in se­cur­it­ies. The Cent­ral Bank lends against col­lat­eral in se­cur­it­ies and the agree­ment is re­versed after 14 days. Coun­ter­parties sub­mit eli­gible se­cur­it­ies, ac­cord­ing to the bank's list of se­cur­it­ies eli­gible as col­lat­er­al.

The in­sur­ance, pen­sion, and stand­ard­ised guar­an­tee schemes that most strongly af­fect the stat­ist­ics of the Cent­ral Bank of Ice­land Iceland’s are non-life in­sur­ance tech­nical re­serves and pen­sion en­ti­tle­ments. Other cat­egor­ies are life in­sur­ance and an­nu­ity en­ti­tle­ments, en­ti­tle­ments to non-pen­sion be­ne­fits, claims of pen­sion funds on pen­sion man­agers, and pro­vi­sions for calls un­der stand­ard­ised guar­an­tees.

Pen­sion funds
Fund mem­bers’ pen­sion fund as­sets are not ne­ces­sar­ily equi­val­ent to the pen­sion funds’ as­sets be­cause there are dif­fer­ent types of funds. They could be either defined-be­ne­fit funds or defined-­con­tri­bu­tion funds. Defined-be­ne­fit funds are of two types: fun­ded and un­fun­ded. As­sets in defined-be­ne­fit funds are cal­cu­lated in terms of the fun­d’s ac­tu­ar­ial po­s­i­tion. If a defined-be­ne­fit fund is fun­ded, it can be as­sumed that fund mem­bers’ as­sets (their ac­tu­ar­ial
po­s­i­tion) at any given time are equal to the mar­ket value of the fun­d’s as­sets. In the case of un­fun­ded defined-be­ne­fit funds, however, the funds’ as­sets could be less than their ac­tu­ar­ial po­s­i­tion, and the em­ployer is re­spons­ible for bridging the gap that de­vel­ops. Defined con­tri­bu­tion funds are al­ways fun­ded; there­fore, fund mem­bers’ as­sets at any given time are equal to the mar­ket value of the as­sets in the funds.

Non-life in­sur­ance tech­nical re­serves
Non-life in­sur­ance tech­nical re­serves fall into two cat­egor­ies. On the one hand, is a fund for pre­paid premi­ums, and on the other is a fund for out­stand­ing claims that the in­sur­ance com­pan­ies ex­pect to pay for events that have already oc­curred. These funds con­sti­tute the in­sur­ance com­pan­ies’ li­ab­il­it­ies and the in­sured parties’ as­sets. Their im­pact on stat­ist­ics is com­par­able to that of the pen­sion funds, which is de­scribed above.

Other ac­counts re­ceiv­able/pay­able in­clude ac­counts re­ceiv­able or pay­able other than those spe­cified above. They can in­clude tax li­ab­il­it­ies, se­cur­it­ies trans­ac­tions, wages, or di­vidends.

These in­clude real es­tate, prop­er­ty, plant and equip­ment and in­tan­gible as­sets.

A res­id­ent is any in­di­vidual and legal en­tity per­man­ently resid­ing in Iceland, ir­re­spect­ive of na­tion­al­ity. Stu­dents and em­bassy em­ploy­ees are ex­empt from the res­id­ency re­quire­ment. There­fore, Icelandic stu­dents and their fam­il­ies who reside abroad are con­sidered res­id­ents, and for­eign em­bassy em­ploy­ees are con­sidered non-res­id­ents. Non-res­id­ents shall mean all parties ex­cept res­id­ents.

Re­main­ing ma­tur­ity is based on the ori­ginal ma­tur­ity. Long-term loans and re­ceiv­ables there­fore re­main long-term loans/re­ceiv­ables even if the ef­fect­ive re­main­ing term is one year or less. The dur­a­tion of ori­ginal ma­tur­it­ies are either:

Short-term: ≤ 1 year
longer­-term: > 1 year