Exemptions for derivatives trading for hedging purposes
The Central Bank of Iceland considers premises to exist to grant specific exemptions from the Foreign Exchange Act, no. 87/1992, upon receipt of an application, for derivatives trading for long-term hedging purposes. This change in execution represents another step towards full liberalisation of the capital controls. More specifically, the exemptions in question could facilitate the mitigation of exchange rate risk in connection with both inward and outward payments due to direct investment. Furthermore, they will enable firms to correct foreign exchange imbalances on their balance sheets. Among the objectives of the change is to assess firms’ need for and interest in hedging and to prepare for full liberalisation. The exemptions are also conducive to reducing the risk in companies’ operations and to favourably affecting their borrowing terms and creditworthiness. Exemptions for speculative derivatives trading will not be granted at this time. Such transactions rank lower in priority during the capital account liberalisation process.
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New payment systems
Yesterday the Central Bank of Iceland signed an agreement with Italian software provider SIA concerning the purchase and implementation of new software for interbank payments in Iceland. The new systems will supersede the current real-time gross settlement (RTGS) and netting systems, which have been in use since 2001.
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Minutes of the MPC
Here are the minutes of the Monetary Policy Committee of the Central Bank of Iceland from the meeting held on 6 and 7 February 2017. There, the Committee discussed economic and financial market developments, the interest rate decision on 8 February, and the communication of that decision.
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MPC meeting with a parliamentary committee
Members of the Monetary Policy Committee (MPC) of the Central Bank of Iceland will attend a meeting of the Economic Affairs and Trade Committee of the Parliament (Althingi) today. Attendees will be Governor Már Gudmundsson, Chair of the MPC, Arnór Sighvatsson, Deputy Governor and MPC member, and Katrín Ólafsdóttir, Assistant Professor at Reykjavik University and MPC member. The meeting starts at 09:00 hrs.
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Market expectations survey
The Bank’s market expectations survey was carried out between 30 January and 1 February. A total of 30 agents in the bond market, including banks, pension funds, mutual and investment funds, securities brokers, and licensed asset management firms were invited to participate. Responses were received from 17 market participants, giving a response ratio of 57%.
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