18 September 2009

Surveillance of Foreign Exchange Rules tightened

The Central Bank of Iceland has decided to reorganise and fortify the activities of the Capital Controls Surveillance Unit within the Bank. The aim of the changes is to tighten the surveillance of the capital controls currently in effect. The Capital Controls Surveillance Unit will operate hereafter as an independent unit within the Bank and will report directly to the Governor. The head of the Surveillance Unit will be attorney Ingibjörg Guðbjartsdóttir, who will be assisted by a team of at least three other staff members and will have the support of experts from other departments of the Bank.

An advisory committee will provide special support. The advisory committee will comprise the Deputy Governor, the Chief Attorney, and four other experts or directors within the Bank. The advisory committee will monitor the work of the Surveillance Unit, promote effective collaboration with other Bank departments, and formulate policy, including policy related to capital account liberalisation, surveillance, and enforcement of the Rules.

An important element in reinforcing the Surveillance Unit is to improve the Central Bank’s information gathering from both financial undertakings and other parties. Co-operation with public entities will also be enhanced. The Bank works closely with the Financial Supervisory Authority on investigations of violations of the Foreign Exchange Act and the Rules set pursuant to it. In the recent term, a number of cases have been under scrutiny by the Central Bank, and several of them are now being investigated more closely.

The reorganisation of the Surveillance Unit has no effect on the capital account liberalisation strategy announced on August 5, 2009. According to that strategy, the first stage of capital control removal is to take place no later than November 1, 2009, provided that certain conditions are met. An important aspect of the strategy is to strengthen the surveillance of the capital controls that remain and to enforce them more strictly.

Further information can be obtained from Ingibjörg Guðbjartsdóttir, head of the Capital Controls Surveillance Unit of the Central Bank of Iceland, at tel +354 569 9600.

No. 30/2009

September 18, 2009