The Central Bank shall promote the implementation of the Government’s economic policy as long as it does not consider this inconsistent with its main objective of price stability.
In addition, the Central Bank undertakes standard central banking tasks, such as maintaining external reserves and promoting an efficient and safe financial system, including payment systems domestically and with foreign countries. It is also responsible for the issue of notes and coin, exchange rate matters and other duties, as specified in the Central Bank Act. The Central Bank of Iceland shall accept deposits from commercial banks, savings banks and other deposit institutions. The Central Bank may also accept deposits from other credit institutions. The Central Bank trades in foreign currency, acts as an intermediary in foreign exchange transactions, and conducts other foreign transactions.
The Minister of Finance and Economic Affairs appoints the Governor and Deputy Governor of the Central Bank for a five-year term. Decisions on applying the Central Bank's monetary policy control mechanisms shall be taken by the Monetary Policy Committee. In other respects, the Bank's direction shall be in the hands of the Governor.
The Central Bank is ultimately under the administration of the Minister of Finance and Economic Affairs and a Supervisory Board. Parliament elects seven members to the Supervisory Board after each parliamentary election.
The Central Bank of Iceland was established by an act of Parliament in 1961, although the history of central banking in Iceland is much longer. The current Central Bank Act is no. 36/2001, cf. amendments.