International reserves

Pursuant to Act no. 92/2019, the Central Bank of Iceland maintains and manages the international reserves in accordance with its objectives and its role as a central bank. The international reserves are foreign-denominated assets held by the Central Bank: foreign bank deposits, bonds, special drawing rights and deposits with the International Monetary Fund (IMF), gold, and other foreign assets.

The Bank’s international reserves have four roles: first, as a tool to mitigate fluctuations in Iceland’s balance of payments, with reference to the Bank’s monetary and exchange rate policies; second, as a means of reducing the likelihood that movement of capital to and from Iceland will compromise financial stability; third, as a part of the Treasury and Central Bank’s management of assets and liabilities, so that the Icelandic Government can service its foreign debt, pay foreign expenses, and honour other international obligations; fourth, as a reserve fund that can be tapped in the event of large, unexpected shocks that undermine foreign currency generation.

The Rules on Reserve Maintenance are adopted with reference to Article 3, Paragraph 3 and Article 30, Paragraph 1 of Act no. 92/2019 and are set by the Governor and Deputy Governors. The Bank’s Financial Risk Committee advises them on reserve maintenance and oversees compliance with the rules. The rules contain provisions on key points concerning reserve maintenance, including purpose, structure, investment authorisations, and outside limits of acceptable risk.

 

Further discussion of the foreign exchange reserves can be found in the Bank’s annual reports.

Further information on the balance of the reserves can be found here.