Iceland passes new capital controls legislation

In a late-nig­ht sessi­on yester­day, Icelandic MPs passed land­mark leg­islati­on paving the way to lift­ing the capital controls in place since No­v­em­ber 2008.

The ‘offs­hore krón­a’ bill is the second stage of a multi-phase stra­tegy to lift Iceland’s capital controls. The bill was mo­ved by Iceland’s Mini­ster for Fin­ance and Economic Affairs, Bjarni Bene­dikts­son.

MORE: Capital controls plan announced

“The first step in that stra­tegy was to sol­ve the problem crea­ted by the fai­led fin­ancial instituti­ons’ esta­tes, and that problem has now been sol­ved in full,” reads a Fin­ance Min­is­try press relea­se.

This new bill addresses the problem of so-cal­led ‘offs­hore krón­a’.

The Finance Minister and former PM announcing the general plan …
The Fin­ance Mini­ster and for­mer PM announc­ing the gener­al plan last June. Photo: Ice­land Monitor/​Golli

“Offs­hore króna as­sets cur­rently total over ISK 300 bill­i­on [app­rox. €2.15 bill­i­on] and are consi­d­ered highly likely to seek an exit from the Icelandic economy with potentially negati­ve con­sequ­ences for the bal­ance of pay­ments and fin­ancial stability,” says the Min­is­try.

“Offs­hore króna as­sets will cont­inue to be su­bj­ect to special restricti­ons, and the main obj­ecti­ve of the bill of leg­islati­on is to segrega­te them more cle­ar­ly and securely than is cur­rently the case.”

MORE: Ice­land to come out of capital controls in 2016

The next step is for Central Bank of Ice­land to hold a for­eign cur­rency aucti­on ena­bling owners of offs­hore króna to exchang­ing their ISK as­sets for euros. Offs­hore króna as­sets not used in the Central Bank aucti­on will be su­bj­ect to the restricti­ons laid down in the new leg­islati­on.

Finance Minister Bjarni Benediktsson.
Fin­ance Mini­ster Bjarni Bene­dikts­son. Photo: Ice­land Monitor/​Eggert

“This phase in the aut­ho­rities' capital account li­ber­alisati­on stra­tegy paves the way for fur­t­her steps, which will focus on hou­seholds and bus­inesses in Ice­land,” conclu­des the press relea­se.

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