Iceland: Effective removal of capital control restrictions – customer impacts - Update

16.04.2021

Note: This announcement, originally published on 18 December 2020, has been further updated with extended effective period and a fourth option to support write off of worthless holdings. Changes have been highlighted.

Following previous Announcements A19154A19041 and in particular A19007, Clearstream Banking1 would like to inform customers about the practical procedure supporting the removal of capital control restrictions still in place on their Icelandic assets.

Effective

4 January 2021

and until 31 December 2021, Clearstream Banking invites all customers to actively take part in the process of freeing up their Icelandic assets from capital restrictions by following the steps described in this announcement. 

Background

According to Act no. 14/2019, that came into force last March 2019, and that amends the Foreign Exchange Act, no. 87/1992, and the Act on the Treatment of Króna-Denominated Assets Subject to Special Restrictions, no. 37/2016, capital restrictions in place have been removed.

The rule no. 224/2019, on the Treatment of Króna-Denominated Assets Subject to Special Restrictions, foresees that:

  • It is permissible to withdraw offshore Króna assets held as deposits in accounts subject to special restrictions or to redeem central bank certificates of deposit in order to purchase foreign currency from a financial undertaking in Iceland or an international securities depository, for deposit to an account with a foreign financial undertaking located abroad.
  • It is permissible to withdraw offshore Króna assets from account subject to special restrictions or to lift encumbrances pursuant to Articles 5 and 6 from offshore Króna assets, provided that they have been continuously owned (by the beneficial owner) since 28 November 2008.
  • An individual who is the registered owner of offshore Króna assets is permitted to withdraw from an account subject to special restrictions or to redeem central bank certificates of deposit for a maximum of 100 million Króna, provided that the individual is the beneficial owner of the funds in question.

Impact on customers

Customers of Clearstream Banking willing to release the restrictions in place on their Icelandic assets are invited to proceed in accordance with one of the below procedures:

Conversion of CBI2016 into cash for subsequent Forex

Certificate of Deposit (also revered to as ISIN IS270000027068) can be converted into foreign currencies, by simultaneously instructing a delivery against payment for the chosen position in IS0000027068 (also referred to as CBI2016), and the corresponding Forex, as per indicated guidelines.

Removal of encumbrance on CBI2016

Upon prior authorisation from the Central Bank of Iceland (CBI)2, Certificate of Deposit (also revered to as ISIN IS270000027068) can be converted into ISK cash, at a rate of 100%, by instructing the delivery against payment of the chosen position in IS0000027068.

Removal of encumbrance on offshore ISINs other than IS0000027068

Upon prior authorisation from the Central Bank of Iceland2, restricted securities, other than IS0000027068, can be converted into original unrestricted securities, by instructing a delivery free of payment of the chosen position in restricted assets (temporary ISIN), and an equivalent receipt free of payment of corresponding unrestricted securities (original ISIN).

List of restricted ISINs eligible for conversion into unrestricted original assets:

Temporary ISIN 

Original ISIN  

Icelandic market name

IS0000027316

IS0000000388

MARL B

IS0000027308

IS0000000040

OSSR B

IS0000027282

IS0000020717

RIKB 22 1026 XX

IS0000027233 

IS0000019321 

RIKB 25 0612 XX

IS0000027241 

IS0000020386

RIKB 31 0124 XX

IS0000027175 

IS0000020014

RIKS 21 0414 XX

In addition to the above, a worthless procedure is also made available by the Central Bank of Iceland to customers of Clearstream willing to write off their restricted securities as worthless assets. No prior authorization from Central Bank of Iceland (CBI) is required.

Processes description and specific format requirements

The below table summarises the processes intended to release the restrictions on offshore Króna denominated for each of the above described option.

Conversion of CBI2016 into cash for subsequent Forex

Concurrently instruct:

  • A standard MT543 or Xact Web Portal/CreationOnline equivalent, against CBL counterparty SISLISREXXX (internal transaction)
    • Receiving party: 95R::REAG/CEDE/74002 or CreationOnline equivalent;
    • :95P::BUYR//SISLISREXXX;
    • Narrative text:  "ART 1-1 of 14/2019 - CONVERSION FOR FOREX PURPOSE + FOREX ref (include reference of the corresponding sale instruction)";
    • :90a: :DEAL //Deal price (Deal price is a mandatory. Purchase offer is at 100%);
    • Intended settlement date = T+3.

And

  • A Forex instruction 3 via MT299, to the attention of: Settlement Prague - PSG , and for the identical amount of the CBI2016 sale’s result
    • Requested execution date = T+5;
    • Narrative “IS0000027068 CONVERSION FOR FOREX, QTY (indicate the quantity of CBI2016 involved in the associated sale transaction), ISD (indicate intended settlement date of the related sale instruction)”.

Removal of encumbrance on CBI20164

Instruct standard MT543 or Xact Web Portal/CreationOnline equivalent, against CBL counterparty SISLISREXXX (internal transaction):

  • Narrative text:  "ART 1-2 of 14/2019 – CBI authorisation ref XXXXXX (include the authorisation reference received from CBI)";
  • Receiving party: 95R::REAG/CEDE/74002 or CreationOnline equivalent;
  • :95P::BUYR//SISLISREXXX;
  • :90a: :DEAL //Deal price (Deal price is a mandatory. Purchase offer is at 100%);
  • Intended settlement date = T+2.

Removal of encumbrance on offshore ISINs other than IS0000027068

Instruct standard MT542 (temporary ISINs) and MT540 (original ISINs), or Xact Web Portal/CreationOnline equivalents, against CBL counterparty SISLISREXXX (internal transaction):

  • Narrative text:  "ART 1-2 of 14/2019 – CBI authorisation ref XXXXXX (include the authorisation reference received from CBI)";
  • Receiving/Delivering party: 95R::REAG(DEAG)/CEDE/74002 or Xact Web Portal/CreationOnline equivalent;
  • :90a: :DEAL //Deal price (Deal price is a mandatory. Purchase offer is at 100%);
  • Intended settlement date = T+2.

Worthless procedure - Offshore securities write off

Concurrently instruct:

Instruct free format message via MT299 to the Central Bank of Iceland (BIC SISLISREXXXX), to request remittance of worthless securities in favour of the Central Bank of Iceland:

TEXT: WE HEREBY CONFIRM OUR REQUEST TO QTY [indicate the quantity of security you wish to write off] OF ISIN [indicate the ISIN reference of securities you wish to write off]  IN FAVOR OF CENTRAL BANK OF ICELAND. ALSO THE OWNER OF THE SHARES WILL NOT RECEIVE ANY MORE FUTURE PAYMENT ON THIS ONE SHARE VIA CLEARSTREAM AFTER THE WRITE OFF. THANK YOU FOR CONFIRMING YOUR ACTION.

Instruct standard MT542, or Xact Web Portal/CreationOnline equivalents, against CBL counterparty SISLISREXXX (internal transaction):

  • Narrative text:  "WRITE OFF – reference XXXXX (include the reference of MT299 sent to CBI)";
  • Receiving: 95R::REAG/CEDE/74002 or Xact Web Portal/CreationOnline equivalent;
  • :90a: :DEAL //Deal price (Deal price is a mandatory. Purchase offer is at 0%);
  • Intended settlement date = T+2.

Timeline

Customers of Clearstream Banking must send their instructions by every Monday 10:00 CET for intended execution within the week, on a best effort basis.

Instructions received after Monday 10:00 will be taken into consideration for the next cycle of the following Monday.

Clearstream Banking will not bear any liability should the transaction not be executed on time due to incorrect, late or invalid instructions, or missing authorisation from CBI.

Should any difficulties arise in participating to the above processes, customers are invited to contact Client Services.

Disclosure and compliance duty

Please note that customers still having encumbered balances of offshore Króna balances that result from missing disclosure on Mandatory Conversion event (see Announcement A16114) are not eligible for the above described release processes. However, customers willing to disclose can still submit their disclosure instruction per procedure in place with above mentioned event. Upon validation and processing of a submitted disclosure, Clearstream Banking will release the encumbered balances, which will then become eligible for one of the above proposed processes.

External links

Further information

Detailed information will be provided as it becomes available.

For further information, customers may contact Clearstream Banking Client Services or their Relationship Officer.

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1. Clearstream Banking refers collectively to Clearstream Banking S.A., registered office at 42, avenue John F. Kennedy, L-1855 Luxembourg, and registered with the Luxembourg Trade and Companies Register under number B-9248, and Clearstream Banking AG (for Clearstream Banking AG customers using Creation Accounts), registered office at 61, Mergenthalerallee, 65760 Eschborn, Germany and registered in Register B of the Amtsgericht Frankfurt am Main, Germany under number HRB 7500.
2. Request for confirmation must be addressed directly to the Central Bank of Iceland by email to offshore@sedlabanki.is.
3. As per procedure described in the CBL Customer Handbook and Announcement A18106.
4.  Prior authorisation from CBI is required.