31 May 2006

Withdrawal of banknotes from circulation

With Regulation No. 1125 of November 25, 2005, the Prime Minister of Iceland decided that banknotes with a denomination of 10, 50 and 100 krónur shall be withdrawn from circulation. The Central Bank of Iceland now announces arrangements for the withdrawal process.

At the beginning of 1981 a currency reform was made in Iceland when new notes and coins were issued and older money was redeemed at one-hundredth of its face value. As part of the reform, banknotes with a denomination of 10, 50 and 100 kr. were put into circulation. The Central Bank ceased to put new 10 kr. banknotes into circulation in 1984, 50 kr. notes in 1987 and 100 kr. notes 1995. They were replaced by coin of the same value. At the end of April 2006, the total value of notes still in circulation with a denomination of 10, 50 and 100 kr. was 119 m.kr.

The deadline for redemption of the above banknotes is 12 months from the publication of this announcement, i.e. June 1, 2007. Over this period, all commercial banks and savings banks are obliged to accept these notes in exchange for other legal Icelandic tender. After the deadline these notes will cease to be valid in business transactions, but the Central Bank of Iceland will redeem them for at least 12 months after the deadline.

An announcement on the withdrawal of banknotes from circulation was published in the newspapers today and will be published in the Legal Gazette on June 1, 2006. Material relating to the withdrawal is also published on the Central Bank of Iceland website (www.sedlabanki.is).

For further information contact Tryggvi Pálsson, Director of the Financial Stability Department of the Central Bank of Iceland, tel. (+354) 569 9600.

No. 20/2006
May 31, 2006