15 July 2015

Authorization for pension funds to invest abroad this year

Central Bank of Iceland

The Central Bank of Iceland intends to grant pension funds operating under licences as per Sections V or XI of Act no. 129/1997, together with other domestic providers of personal pension savings schemes, an exemption from the Foreign Exchange Act, no. 87/1992, for investments in financial instruments issued in foreign currencies. The total authorised for such investments will amount to ISK 10 billion and the investment mandate will be allocated between parties with regard to size, which will be given a weighting of 70%, and to net inflow, with a weighting of 30%. The calculation will be based on data from the latest Financial Supervisory Authority annual report on the pension funds, viz. the figures for the year 2013. The exemption to each party will expire at the end of the current calendar year.

Recent inflows of foreign currency and reduced uncertainty over the prospects for the balance of payments following Acts passed by the Icelandic parliament regarding the settlement of the estates of failed commercial and savings banks and the announcement of measures regarding so-called offshore kronur later in the current calendar year will create scope for investments by pension funds and other providers of personal savings schemes in financial instruments issued in foreign currencies. Such investments represent a benefit to the national economy in that they will enable the pension funds to achieve a better spread of risk in their asset portfolios while reducing the build-up in pension funds’ foreign investment requirements once capital controls are lifted. By this the risk of instability in the wake of the lifting of capital controls will be reduced.

Pension funds and providers of personal pension savings schemes interested in applying for exemptions outlined above are directed to send their application to the Capital Controls Surveillance Unit of the Central Bank of Iceland. An application form for exemptions can be found online at https://www.cb.is/library/Skraarsafn---EN/Capital-surveillance/Ums%C3%B3kn%20um%20undan%C3%BE%C3%A1gu_Enska.pdf.

Applications should be sent in writing to the Central Bank at the following address:
Central Bank of Iceland
attn. Capital Controls Surveillance Unit
Kalkofnsvegur 1
150 Reykjavík
Iceland

For further information, please contact Már Guðmundsson, Governor of the Central Bank of Iceland, on telephone +354 569 9600.

 

No. 15/2015
15 July 2015

 

16 July 2015
Further to the previous, by 'domestic custodians of personal pension schemes' is meant parties with accreditation from the Minister of Finance on the basis of Article 10 of Act no. 129/1997. To remove all doubt, custodians of personal pension schemes who operate on the basis of the Act on Insurance Activities, no. 56/2010, do not fall within the terms of the mandate.

Back