15 March 2012

Amendments of the Foreign Exchange Act

On 13 March 2012, Act no. 17/2012 Amending the Foreign Exchange Act, no. 87/1992, with subsequent amendments, entered into force. Because of the changes entailed in the new Act, the Central Bank of Iceland wishes to emphasize the following: 

First, the Act rescinds the exemption for payments from a bankruptcy estate and payments of contractual claims in accordance with composition of creditors agreements (cf. Act no. 21/1991) in domestic currency when payment is disbursed from the payer’s account with a financial institution in Iceland. The intention is to give the Central Bank of Iceland the necessary tool to control the possible outflows from domestic estates so such flows will not threaten the country‘s balance of payment stability nor undermine the strategy for liberalizing the capital controls. 

Second, the Act amends Article 13(j) of the Foreign Exchange Act. According to the amendment, it is no longer permissible to purchase foreign currency for the value of indexation on bond principal; furthermore, it is prohibited to purchase foreign currency for any payment of principal. 

Third, the amendment rescinds the exemption from the statutory prohibition against cross-border movement of foreign currency, which was previously enjoyed by the resolution committees and winding-up committees of the old banks.