The exchange rate of the Icelandic króna is determined in the interbank foreign exchange market, which is open from 9:15 hrs. to 16:00 hrs. on business days. In addition to the Central Bank of Iceland, three financial institutions are authorised to participate in the foreign exchange market and are designated as market makers. The foreign exchange market is governed by the Central Bank of Iceland’s Rules on the Foreign Exchange Market, no. 600/2020.

The price of the Icelandic króna versus the euro is determined in the foreign exchange market, where market makers pledge to submit bid and ask quotes. The quotes are published in the Bloomberg information system. The Central Bank keeps records on market turnover and publishes the figures on its Statistics pages.

Exchange rate listing

The Central Bank lists the exchange rate of the Icelandic króna against foreign currencies at 14:15 hrs. Central European Time. The listing provides a snapshot of the market at the time the listing is posted. The reference exchange rate is published on the Bank’s website each business day at 16:00 hrs. Icelandic time.

General information on the foreign exchange market

• The market is open from 09:15 hrs. to 16:00 hrs. on weekdays.
• Financial institutions act as market makers in the market:
  • Arion Bank hf.
  • Íslandsbanki hf.
  • Landsbankinn hf. 
• The trading currency is the euro.
• Each quote is submitted by market makers in units of one million euros.

The Central Bank of Iceland:

• Is a participant in the market.
• Is not a market maker and therefore is not required to maintain active bid-ask quotes.
• May conduct transactions with market makers at any time during the market’s opening hours.
• Performs a supervisory role.

The interbank market for krónur is a market for unsecured short-term deposits and lending between credit institutions. It was established in June 1998. It operates on the basis of the Rules on Interbank Market Transactions with Icelandic Krónur, no. 1196/2019, set by the Central Bank in cooperation with market participants.  

The Central Bank’s role is solely to organise and operate the market, however. The Bank is not a participant in the market, as it is not authorised to grant unsecured loans. The market for krónur is also known as the REIBOR market, and interest rates in the market are called REIBOR rates. REIBOR is an abbreviation of Reykjavík interbank offered rate. 

General information on the interbank market for krónur

• The market is open from 09:15 hrs. to 16:00 hrs. on weekdays.
• Financial institutions are participants in the market.
  • There are four market participants:
    • Arion Bank hf.
    • Íslandsbanki hf.
    • Landsbankinn hf.
    •  Kvika banki hf.
  • Market participants negotiate credit lines among themselves.
  • Market participants are obliged to issue binding quotes for deposit and lending rates for the following maturities: overnight (ON), one week (SW), one month (1M), three months (3M), and six months (6M).
  • Market agents pledge to update their binding interest rate quotes on interbank deposit and lending rates at intervals of no less than 10 minutes.
• The maximum interest rate spread between deposits and loans in market participants’ quotes for periods of one month or longer is 100 basis points. Quotes for shorter periods are not subject to defined maximum interest rate spreads.

The Central Bank of Iceland:

• Is not a participant in the market.
• Performs a supervisory role and keeps records on market transactions, which are published on the Statistics pages.
• Lists daily interest rates in the interbank market for krónur for maturities ranging from overnight to six months. The listing takes place at 11:15 hrs. and is published on the Central Bank website shortly thereafter. 

Further information on turnover in the interbank market for krónur can be found on the Bank’s Statistics pages.

The Central Bank calculates and publishes the reference interest rate for the Icelandic krónur (Icelandic krónur overnight, or IKON) on its website. IKON is calculated as the weighted average of interest rates on unsecured overnight deposits held by obliged entities. The amount, interest rate, and commitment period are negotiated in each instance. The reference rate is published on the website by 11:00 hrs. each day.

Where:

N = Number of trades
r_k = Interest rate on transaction k
v_k = Amount of transaction k
V_tot = Total amount of trade

Data for the IKON interest rate reference are submitted by the commercial banks. The reference rate for Icelandic krónur is governed by the Rules on a Reference Interest Rate for Unsecured Deposits in Icelandic krónur, no. 370/2022.
The calculation and publication of the weighted reference interest rate (IKON) are in compliance with the Principles for Financial Benchmarks issued by the International Organization of Securities Commissions (IOSCO).

At the end of each quarter, the Central Bank publishes a summary of errors and deviations in reporting, irrespective of whether or not they have given rise to changes in the published reference interest rate.