Changes to Currency Restrictions PDF Print E-mail
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Written by Iceland Review   
Tuesday, 13 March 2012 14:15

All political parties were unexpectedly called to a meeting in Parliament just after 4 pm yesterday. A bill was submitted to change the currency restriction law due to a loophole which had recently been discovered. First, a meeting was called at the Economic and Trade Committee, which then proposed the bill at Parliament. The committee was however not involved in the preparation of the bill and first heard about the matter yesterday afternoon. The authorities took great care to ensure that the matter would not become public knowledge until after closing of the financial markets at 4 pm and the bill was passed just after midnight last night with 25 votes against 12.

althingi-parliament_ipa

The Icelandic Parliament, Alþingi. Photo, Copyright the Icelandic Photo Agency.

Representatives of the Central Bank of Iceland were responsible for pointing out to the Economic and Trade Committee that transactions with so-called annuity bonds, issued by the Housing Financing Fund, point to marketing parties trying to go around the restrictions. That in itself was worrying, but there were also signs indicating the preparation of other compatible bonds.

Chairman of the Economic and Trade Committee, Helgi Hjörvar, says that if the restrictions do not hold in a credible manner, it will result in serious and profound difficulties that will not only affect Icelandic society, but also those who have claims.

The changes that were made to the currency restriction law mean that all exemptions were rescinded with one exception; cash deposits in foreign currency balanced by the end of business on March 12th, 2012, owned by a legal party of foreign financial companies or the Central Bank of Iceland, shall be exempted from the clause.

The bill is meant to limit exemptions that involve payments in foreign currencies to foreign claimants of bankrupt estates. The largest amounts are in the bankrupt estates of the fallen banks. The bill also involves limiting foreign currency pouring out from the country due to payments and interest relief from bonds, or the so-called annuity bonds. Foreign parties have been purchasing this category of apartment bonds in order to expedite the process of getting their funds out of the country.

Several members of the Independence Party have been outspoken about their objection to these changes. Tryggvi Þór Herbertsson said that the bill would increase political uncertainty regarding investments in Iceland and it would most likely cause turmoil on the bond market when it opened today. Guðlaugur Þór Þórðarson said that the changes were beneficial but that the matter was nonetheless so bad that it could not be supported. Chairman of the party Bjarni Benediktsson said that this matter must call for a realistic possibility to abolish the currency restrictions. For the second time in five months the restrictions have been tightened in order to prevent ISK hundreds of billions from leaving the country, and according to Bjarni, therefore this is not a credible method for handling the problem.

This story was covered by all the major media in Iceland today and yesterday.

iceland

Last Updated on Tuesday, 13 March 2012 15:56
 

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